Buy as a company or as an individual?

THE QUESTION

I have a restaurant business, which is a limited company.  A couple of our sites are in places where finding staff can be tough, so offering live-in accommodation could really help us.  I’d like to buy a property to use as staff accommodation, what kind of mortgages are available and how much will I need for a deposit?

THE ANSWER

Staff accommodation seems to be a sensible solution to restaurants in remote places.  There is a prestigious restaurant on the Isle of Skye that does exactly that; and staff accommodation is an attractive perk in the hospitality industry.

Buying a significant asset (especially property) in the name of a trading business leaves the asset available for any potential future creditors of the business to go after.  

The smarter options would be to buy in your personal name or set up a new limited company for owning property.  Deciding which is the smarter of the two is, essentially, a tax question because you will be able to claim the interest only mortgage payments as a business expense in a limited company, but not if you own it personally.  It’s advisable to get advice from an accountant before your make this decision.

Letting people live there rent free would be a barrier to getting a mortgage, so the solution to that is your restaurant business becomes the tenant.  Certainly this arrangement would limit your choice of lenders, but a limited choice beats little or no choice.

If you are already a landlord, this will help, as lenders willing to lend on this kind of project would be very likely to require you to be one.

You’ll need a minimum of 25% if you are going to buy something ready to rent, so your staff can move in without any need to improve the condition of the property first.

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