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IT Consultancy to Property Investment Ltd Company?


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Hi,

I own an IT consultancy limited company that I have operated successfully for around 20 years and due to the impending I35 reforms and collapse of the market I’m considering a complete career change and moving into property investment.

I have been an HMO hobbyist landlord for over a decade and potentially looking to make more of a career out of property by firstly liquidating my IT consultancy, triggering the entrepreneurs relief and withdrawing all reserves to be used as capital to fund my portfolio, which would again, be managed via a newly formed limited company.

Question is, can I simply switch the purpose of the IT consultancy to Property management/investment, meaning that I do not need to liquidate and use the capital within the existing IT consultancy to fund my property acquisitions?

Any thoughts on the above would be appreciated,

Gordon

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Hi Gordon, 

I have just started the journey you are about to take. I have a ltd company I used for consulting and wanted to invest the funds it had built up in property.

I'd suggest you speak to an accountant about matters related to winding your existing company up but I was advised against this path for my situation (trading less than 2 years).

What I ended up doing is starting a brand new company (SPV) with all the correct codes for the type of property investment I wanted to do. I then created an inter-company loan agreement and lent the money from my consultancy company to the SPV. I know some mortgage lenders don't like this approach so if financing your properties then you need to seek out those that can overlook it.

From my research prior to this, it was apparent that most lenders don't like to lend to a company that has previously been trading and has simply changed codes. I believe it is possible to get mortgages this way but the requirements are more strict in terms of trading history/accounts, etc. Others on here will know better than me.

Clearly with the route I took above, there will be dual running costs of the companies ongoing.

Hope this helps, good luck.

Floorboards

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Many thanks for your response on this; I wasn't aware that lenders would frown upon a limited company after it had changed it's SIC Code, my IT consultancy has been running for around 20 years and always had healthy reserves.

I think I really need to speak to my accountant again and possibly speak to an accountant who specialised in Property and also an FSA with Limited Company experience who should be able to give me a steer. 

Thanks again @floorboards, you're reply is very much appreciated.

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  • 3 weeks later...

Hi Gordon

What your accountant says and what the lenders like are two different things. Yes you can change your SIC code but 95% of BTL lenders won't lend to you as they still class it as a trading business. A few will but their rates tend to be slightly higher. The longer between the change of SIC code and the mortgage application may mean other lenders may be available.

Reason is trading companies have more baggage than SPV's  eg VAT, creditors,employees and most lenders don't want that.

Regards Simon

Searchlight Finance Ltd

T:01565 654005

 

Landlord and specialist property finance advisor only dealing with investors, landlords and developers throughout the UK and beyond.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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  • 2 weeks later...

Gordon,

 

I came on here to ask the exact same question before viewing this thread. For what it is worth so far I'm leaning towards closing the Contracting Co and starting a new SPV. Interested if you made any decision?

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  • 7 months later...

As far as I know, the company can switch the industry and do another activity. But you need to consult with the accounting company for the best way to do it. I work for one company, and they used to sublet some warehouses to other companies. When the rent price dropped on the market, they started to consider opening another business. After they hired a consulting agency, they started purchasing dead stock from different small stores, and re-sell it to others. But as I remember, they had to change some documents to operate legally.

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