Mortgaging existing buy-to-let house to purchase a second property

HeatPad

Hello all. Long-term lurker, first-time poster here :-) 

TL;DR: Is it possible to take out a mortgage on a property which I own outright through a limited company, and it already let on an assured shorthold tenancy, then use the mortgage funds to purchase a second property to rent out as a holiday let (Airbnb or similar)? 

More details: 

I currently own outright (no mortgage) a single property through a limited company, of which I am the sole director. 

This property is tenanted, and has had the same tenant for a number of years. The rent I charge is below "market rate" for the property, but the tenants are excellent, and look after the property as though it were their own. They are even prepared to carry out minor repairs to the property themselves (the tenant is a carpenter by trade) when necessary, so I am more than happy with this arrangement and have never increased the rent, and do not plan to. 

I am now considering purchasing a second property, and I would like to try letting it out as a short-term holiday let, through some platform like Airbnb or similar. The plan is to see how that goes for maybe a year or two. 

The logical way to do this to me seems to be to take out a mortgage on the existing property, which already has a steady income coming in, and then use those funds to purchase the second property. I would then effectively be buying the second property outright, and the mortgage would be secured on the original property. 

I have done some reading around, and I'm surprised that this doesn't seem to be a common thing to do, so I'm wondering if there is some reason I've missed why this isn't a good idea? 

Really looking for tips/experiences (not financial advice obviously!) from anyone who's done anything similar, or if there are any potential banana skins to watch out for? 

Thanks in advance! 

poseidon1

Have to question the degree of 'reading around' you have done in this matter.

A simple Google question ' BLT mortgages for Limited Companies'   revealed a vast array of brokers and banks active in this area who you can talk to - example below.

https://www.barclays.co.uk/business-banking/borrow/limited-company-buy-to-let/

kimwp

Pretty sure that's how most career landlords build their empires.

silvercar

You can do this if you intend holding the new property within the limited company. If you intend holding it in your own name, you will have to navigate director’s loans to get the money out of the company into your own name to make the purchase.

HeatPad

poseidon1 said:

Have to question the degree of 'reading around' you have done in this matter.

A simple Google question ' BLT mortgages for Limited Companies'   revealed a vast array of brokers and banks active in this area who you can talk to - example below.

<link deleted to allow me to post the reply below - what a silly rule!>

I don't think you've understood what I'm asking or what I'm proposing to do. Obviously I know you can get BTL mortgages for limited companies. 

Mortgage lenders and brokers will give me factual information about the products they offer, and try to encourage me to take out a mortgage. They won't give me advice/experience/tips on whether this is a sensible course of action, which is what I'm asking for. 

silvercar

HeatPad said:

poseidon1 said:

Have to question the degree of 'reading around' you have done in this matter.

A simple Google question ' BLT mortgages for Limited Companies'   revealed a vast array of brokers and banks active in this area who you can talk to - example below.

<link deleted to allow me to post the reply below - what a silly rule!>

I don't think you've understood what I'm asking or what I'm proposing to do. Obviously I know you can get BTL mortgages for limited companies. 

Mortgage lenders and brokers will give me factual information about the products they offer, and try to encourage me to take out a mortgage. They won't give me advice/experience/tips on whether this is a sensible course of action, which is what I'm asking for. 

I don’t know exactly what you are asking. Are you asking for opinions on whether Airbnb is more profitable than longer term lets? Or whether it is a good idea to borrow the full value of a new property? Or how to borrow efficiently? From your point of view, where the mortgage is secured is irrelevant, it’s a cost you will need to cover. That the borrowing is secured on a let property will give the lender more security than an Airbnb, so the rate will be lower and the mortgage easier to find. Securing the mortgage within a limited company means paying slightly more, but is more tax efficient for you and gives you the protection that if it all goes t1ts up, you are distanced.

mlz1413

A bit off the question posed, but how much more would it cost the OP to rent out as holiday let style?

Owner needs to pay for: Rates, gas, electricity, water, broadband.

Insurance... is this specialist? How do you know what voids you might have? How many different let's in a year??

Cleaning between lets, changing bedding. Ensuring fridge is empty/clean etc.

Is AirBnB really better than long term let's?

poseidon1

mlz1413 said:

A bit off the question posed, but how much more would it cost the OP to rent out as holiday let style?

Owner needs to pay for: Rates, gas, electricity, water, broadband.

Insurance... is this specialist? How do you know what voids you might have? How many different let's in a year??

Cleaning between lets, changing bedding. Ensuring fridge is empty/clean etc.

Is AirBnB really better than long term let's?

A friend  of mine who vacated his  conventional buy to let  AST flat to turn it into a supposedly lucrative AirBnB, is finding to his detriment the numbers  simply do not add up.

All the the user costs ordinarily paid by the tenant ( council tax, utilities) are now his burden together with additional agents management costs, cleaning etc. 

 Bookings are no  where near what was predicted ( especially for the supposedly summer high season), and by the end of next month ( his first full year) that flat will have made a ltrading loss for the first time in the 20 years it has been in his portfolio. A bit of a disaster all in all.

kingstreet

silvercar said:

HeatPad said:

poseidon1 said:

Have to question the degree of 'reading around' you have done in this matter.

A simple Google question ' BLT mortgages for Limited Companies'   revealed a vast array of brokers and banks active in this area who you can talk to - example below.

<link deleted to allow me to post the reply below - what a silly rule!>

I don't think you've understood what I'm asking or what I'm proposing to do. Obviously I know you can get BTL mortgages for limited companies. 

Mortgage lenders and brokers will give me factual information about the products they offer, and try to encourage me to take out a mortgage. They won't give me advice/experience/tips on whether this is a sensible course of action, which is what I'm asking for. 

I don’t know exactly what you are asking. Are you asking for opinions on whether Airbnb is more profitable than longer term lets? Or whether it is a good idea to borrow the full value of a new property? Or how to borrow efficiently? From your point of view, where the mortgage is secured is irrelevant, it’s a cost you will need to cover. That the borrowing is secured on a let property will give the lender more security than an Airbnb, so the rate will be lower and the mortgage easier to find. Securing the mortgage within a limited company means paying slightly more, but is more tax efficient for you and gives you the protection that if it all goes t1ts up, you are distanced.

A typical Ltd Co BTL mortgage includes personal guarantees.

silvercar

kingstreet said:

silvercar said:

HeatPad said:

poseidon1 said:

Have to question the degree of 'reading around' you have done in this matter.

A simple Google question ' BLT mortgages for Limited Companies'   revealed a vast array of brokers and banks active in this area who you can talk to - example below.

<link deleted to allow me to post the reply below - what a silly rule!>

I don't think you've understood what I'm asking or what I'm proposing to do. Obviously I know you can get BTL mortgages for limited companies. 

Mortgage lenders and brokers will give me factual information about the products they offer, and try to encourage me to take out a mortgage. They won't give me advice/experience/tips on whether this is a sensible course of action, which is what I'm asking for. 

I don’t know exactly what you are asking. Are you asking for opinions on whether Airbnb is more profitable than longer term lets? Or whether it is a good idea to borrow the full value of a new property? Or how to borrow efficiently? From your point of view, where the mortgage is secured is irrelevant, it’s a cost you will need to cover. That the borrowing is secured on a let property will give the lender more security than an Airbnb, so the rate will be lower and the mortgage easier to find. Securing the mortgage within a limited company means paying slightly more, but is more tax efficient for you and gives you the protection that if it all goes t1ts up, you are distanced.

A typical Ltd Co BTL mortgage includes personal guarantees.

I didn’t know that as mine doesn’t, but mine might not be ‘typical’. In any case, it is more distanced than a mortgage on your residential home, even if the lender can come after you.