If you’re a limited company director or SME owner with surplus cash sitting in your business account, you may be wondering how to make that money work harder. One smart, tax-efficient option is to use retained profits to build a buy-to-let property portfolio — especially in the North East of England, where yields remain among the highest in the UK.
Here’s a step-by-step guide to turning retained profits into a thriving, income-generating property portfolio while keeping your main business strong.
Assess Your Financial Position
Start by working out how much of your retained profits you can invest without affecting day-to-day operations. Keep enough liquidity for working capital and an emergency buffer — your trading business always comes first.
Once you’ve agreed a figure with your accountant, you’ll find even a modest sum can go a long way in the North East. Typically, £40,000–£50,000 per property covers a 25% deposit, stamp duty (including the 3% surcharge on additional properties), legal fees, and minor refurbishments.
For example, a £100,000 property might need £40–45k in cash. With £200,000 of surplus profits, you could potentially acquire four to five quality rentals using mortgage finance, or buy two outright for simplicity with negotiation.
- Tip: Review your balance sheet with your accountant to ensure you can comfortably invest without constraining your working capital.
Set Up the Right Structure (SPV)
Before you buy, decide how you’ll hold your investments. For most directors, the best option is a Special Purpose Vehicle (SPV) — a limited company set up purely for property investment.
An accountant or adviser can help you form the SPV correctly, ensuring the right SIC codes, ownership, and inter-company arrangements are in place. Many investors fund their SPV with director’s loans, using retained profits from the trading company. These loans can later be repaid tax-free, since they represent your capital, not income.
At this stage, speak with a mortgage broker experienced in limited company buy-to-let loans and secure financing in principle. This preparation makes the buying process faster and smoother.
Research the Market and Pick Your Targets
The North East property market offers a range of opportunities — from high-yield terraced houses to city-centre flats with strong growth prospects.
Ask yourself whether you’re targeting maximum monthly cashflow or a balance of yield and capital appreciation.
- For yield: Towns like Middlesbrough and Sunderland deliver exceptional rent-to-price ratios of 6.5–6.8% gross yield.
- For growth: Cities such as Newcastle and Durham offer consistent tenant demand and rising property values, typically yielding around 6% but with higher long-term upside.
In 2025, some North East flats saw 15% annual price growth, compared with around 8% for terraced homes — signalling strong demand for affordable, entry-level properties. Prices generally range from £80,000–£150,000, allowing scalable entry.
Partnering with a local expert like Holland Asset Management can help you identify high-growth neighbourhoods and source properties with the best rent-to-value ratios.
Plan Your Investment Strategy (Cash vs 75% LTV)
With your targets set, decide how to fund your purchases.
If you buy outright with cash, the process is simple and your offer more attractive to sellers. Most investors, however, prefer to leverage their capital using buy-to-let mortgages, typically around 75% loan-to-value (LTV).
A £90,000 interest-only loan at 5% costs roughly £375 per month — easily covered by a £650 rent, leaving room for costs and profit.
When planning, always:
- Stress-test for higher interest rates.
- Factor in management, insurance, and maintenance costs.
- Allow for one month’s void period per year.
- Target at least £200–£300 net profit per property after expenses.
The goal is a self-sustaining portfolio that grows without draining your company’s cash reserves.
Execute and Acquire Properties
Once your retained profits plan and structure are in place, it’s time to buy.
Do thorough due diligence: get a survey, engage a solicitor, and ensure your SPV is ready for completion. The mortgage and title will be in the company’s name — a standard process for limited company buy-to-let.
After completion, refurbish and rent promptly. If you prefer a hands-off approach, a letting agent can manage rent collection, maintenance, and tenant screening for roughly 10–12% of rent.
Record rental income and expenses accurately in your company accounts. The advantage here is clear — profits are taxed at corporation tax rates (19–25%), typically far lower than personal income tax.
Monitor, Mitigate, and Grow
Treat your first property as a model for future growth. Track yields, expenses, and performance regularly. Reinvest your rental profits and future retained profits to acquire more properties over time.
Keep an eye on key risks:
- Interest rate changes: Maintain an emergency reserve.
- Regulatory changes: By 2028, all new tenancies will require an EPC rating of C or higher — plan upgrades early.
- Tenant risk: Vet tenants thoroughly and hold comprehensive landlord insurance.
By staying proactive, your assets will remain income-generating and well-managed.
Plan Your Exit (Long-Term Strategy)
Even as you start, think long-term. Investing retained profits can form part of your retirement or business exit strategy. You could one day sell your trading company but keep your property company generating passive income.
Alternatively, transfer ownership to family members or co-directors as part of a succession plan. Some investors later restructure into a Family Investment Company (FIC) or trust for inheritance planning.
By building now, you create flexibility later — turning business profits into enduring personal wealth.
Get Expert Help
You don’t have to do it alone. Property investment involves tax, legal, and financial considerations — but with the right partners, it’s straightforward.
Holland Asset Management can help you:
- Identify and source the right North East properties
- Structure investments tax-efficiently
- Manage and scale your portfolio sustainably
Ready to turn retained profits into a high-yield property portfolio?
Final Thoughts
Turning retained profits into property is more than an investment — it’s a strategy to convert business success into long-term financial security.
With the right structure, guidance, and ongoing management, your company’s profits can fund a tax-efficient, income-producing portfolio that builds wealth year after year.
FAQs
Yes — the SPV records it as a liability and can repay you from future rental profits without additional personal tax.
For higher-rate taxpayers, it often is. Full mortgage interest deductibility and corporation tax rates usually make SPVs more efficient.
£40k–£50k typically covers a 25% deposit plus stamp duty, legal costs, and light refurbishment on a £120k property.
After costs, aim for £200–£300 per month net and ensure each deal still works if rates rise.
Yes — from 2028 new tenancies must meet EPC C. Plan improvements (insulation, heating upgrades) early to protect yield and compliance.
