A great question from Paul Hayhurst on Facebook so sharing the response....

When we’re asked to advise on strategies, what we focus on is trying to ensure that we keep similar businesses together, and trying to avoid creating short term difficulties in any business, because it is mixed with another.

An investment strategy – so your typical BTL, HMO etc. is an investment strategy; having access to the right borrowing is important so we ensure that the investments sit in an SPV (we prefer the description of “Single Purpose Vehicle” as that’s easier to understand, the company does a single strategy). What this means is that lenders aren’t put off by the mixing of strategies.

An investment strategy will use the SIC code 68209 – the rental of owned or leased property, so this is where you are the person signing the AST as the landlord, either because you own the property or you’ve leased it (such as in a PLO) and hence you are said to “stand in the shoes of the owner”

The rent to rent strategy is neither owning nor leasing, and would have the SIC code of 68320, which means “Management of real estate on a fee or contract basis”. In the governments eyes, you are not standing in the shoes of the owner, and when you sign the AST, it is as manager/agent, and your business is more closely aligned with a letting agent than it is with a landlord – there is an argument about VAT but that’s for another day.

R2R isn’t an investment strategy, it is trading.

We have had the recent example of a client who choose not to follow our advice, and they combined the investment and R2R in one company, and they’ve been declined a mortgage…. I fully accept that we have other clients that have combined R2R and investment, and had mortgages without any hassle, but my position on this is to avoid the risk of impediment to borrowing…if we can’t borrow for our investments, then you cannot leverage bank's money to accelerate your portfolio's growth