Company Director Builds London Buy-to-Let Portfolio

David, 51, is the director of a successful logistics company. He draws a personal salary of £45,000, which is tax-efficient given his company's retained profits of £380,000. His existing buy-to-let portfolio includes two properties in East London, both performing well, and he wanted to add a third — a £390,000 flat in Stratford generating rental income of £1,850 per month.

He had a 25% deposit of £97,500 available. When he approached standard buy-to-let lenders, they assessed his application on his personal income of £45,000 and applied personal income stress tests. Most declined outright. One offered a smaller loan than he needed. None were willing to look at his company finances or treat the rental income as the primary basis for lending.

David's situation is very common among tax-efficient company directors. The personal salary is deliberately kept low to minimise income tax and National Insurance, with income instead retained in the company or extracted as dividends. For buy-to-let purposes, this creates a problem: personal income affordability tests produce a very low maximum loan.

Standard BTL lenders also raised concerns about his existing portfolio. Having two existing mortgaged properties moves him into the "portfolio landlord" category, which triggers additional scrutiny under Prudential Regulation Authority guidelines. Lenders need to see a portfolio stress test for all properties, not just the new acquisition.

We identified a specialist buy-to-let lender that assesses BTL applications primarily on the rental income of the property being purchased, using an interest coverage ratio (ICR) rather than personal income. For this lender, the key question was whether the rental income covered the mortgage interest by a sufficient multiple, typically 125% to 145% at a notional stress rate.

The Stratford flat was let at £1,850 per month. At an assumed stress rate of 6.5%, the interest on a £292,500 interest-only loan would be approximately £1,585 per month. The ICR came out at 116.7%, which was just below the lender's standard threshold, but we presented the case with a full portfolio overview showing the strength of David's existing properties, which gave the underwriter confidence to proceed.

We also prepared a full portfolio schedule in the format the lender required, showing all existing mortgage balances, rental incomes, and property values across his two existing properties.