Limited company special purpose vehicles can be powerful tools for stepping up your property investment game; but before you start filling in company formation forms and applying for mortgages, it’s crucial to understand ownership structures.

The way your SPV’s directorship and shareholdings are set out can have a huge impact on your property business; not just in terms of mortgage availability and rates, but also tax efficiencies, family savings, succession planning and more.

Let’s explore some of the more common special purpose vehicle structures; and what they could mean for your investment business.

The standard SPV structure

Different mortgage lenders have different rules on the kinds of special purpose vehicle structures they’ll accept.

Most lenders insist upon no more than four directors; and while you can often have as many shareholders as you like, it’s best to have no more than four of them too in order to get the best rates. (Of course, directors can be shareholders too.)

This means the typical directorship structure for an SPV is two or four partners; each with an equal percentage of the company’s shares.

Lenders will also ask that the majority shareholders are listed on the mortgage application. Of course, the exact percentage that counts as a majority depends on your SPV’s particular circumstances and the lender’s own policy.

When it comes to securing an SPV mortgage, the even split is often the most efficient and straightforward SPV structure to go for; but there’s plenty of ways to structure your limited company to achieve the results you want.

The family structure

Let’s say, for example, you want to get into property investment with your spouse to build savings for your children.

You might choose to structure your SPV directorship and shareholdings like this:

• You and your spouse are each named as SPV directors.
• You each take an equal share of the majority of shares, and give a small non-director share to each of your children.
• For example, a family of 5 might split the shares with 35% going to each parent, and 10% going to each child.

It’s a slightly more complicated approach to SPV shareholdings; but as well as helping you save for your children’s future, it also keeps the mortgage paperwork simple.

Since your children are not named as directors, they don’t need to be named on your mortgage application.

And of course, your non-director shareholders don’t necessarily have to be your children. You can name any family member as a shareholder; grandparents, aunts and uncles, nieces and nephews or even close friends.

So what’s the catch? Well, as we’ve mentioned, some lenders are more fussy about shareholding structures that don’t match their ideal borrower profile, and your access to the best rates may be limited.

That’s not to say you won’t be able to secure a great deal. In fact, the SPV Mortgages team has worked with many clients who have come to us with unusual SPV structures; helping them find and secure the right products at the right prices.

And the family shareholder structure is far from the only structure that might raise eyebrows with lenders…

The holding company structure

Your SPV essentially acts as a corporate ‘wrapper’ for your property investment activities; but did you know you can also wrap the wrapper inside another wrapper?

You can for example, hold your SPV within a holding company structure. The directorship might work like this:

• You might set up your holding company with another director partner, and each take an even split of the holding company’s shares (so you effectively each own half of the business).
• You could then set up an SPV as a division or subsidiary of the holding company, which would be 100% owned by the holding company. This SPV could be used to maintain ownership of your property assets.
• You could then also set up a second limited company under the holding company; perhaps to run your business activities as property investors. Again, this limited company would be 100% owned by the holding company.

As you can see from the above example, running two companies under the holding company enables you to effectively ring-fence your assets and investment activities in each respective company.

This not only shields each side of the business from financial risk, but can also make the business more attractive in the event of a sale.

Buyers may be interested in your property assets, but they don’t want the trading business bundled in, for example; and with this structure, they’re free to buy one division without taking on the other.

You’re also free to set up more than two SPVs within the holding company, which means you could split your portfolio’s ownership across multiple companies if you like. (Keep in mind, though; more companies means more paperwork, more scrutiny from lenders and more potential for things to go wrong.)

And most importantly, if you choose to sell off a subsidiary SPV further down the line, the sale won’t be taxed; instead, the money just goes straight to the holding company.

The joint venture SPV structure

Alternatively, as we’ve discovered recently, your existing SPV can effectively act as a holding company for another SPV; or more accurately, a new SPV can act as a subsidiary for an existing one.

This can be ideal for entering into joint ventures with other SPV limited company owners, as you’ll be splitting ownership of the new subsidiary SPV half-and-half between your current SPV and your partner’s SPV; which means you can invest in new properties together without either of you having to give up ownership of your current business and property assets.

All very useful for growing your wealth; but as with the holding company structure, traditional lenders may be a little more wary of the risk involved.

That’s why it’s always best to speak to a specialist mortgage lender, just like us here at SPV Mortgages.

No matter how complex your SPV directorship and shareholdings structure may be, we negotiate with the country’s top lenders to bring you the very best rates for your circumstances.Let’s Talk