BTL Ltd company Mortgage and source of Refurb properties

by Readers Question

9:52 AM, 12th April 2016
About 3 years ago

BTL Ltd company Mortgage and source of Refurb properties

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BTL Ltd company Mortgage and source of Refurb properties

I am looking to purchase couple of investment properties. I already owned 2 properties in joint names with my wife ( one our main residential and another BTL). We are looking to purchase properties which require refurbishment so once we get the work done, we can either sell it or release equities for the next project. what now

(i) Would it be better for us to purchase the properties using LTD company structure? I already have one ltd company (for non property purpose) so can we use the same one or it make sense to set up a new one? I am higher tax payer full time employee and wife is house wife – non tax payer.

(ii) Also, is there any particular website where we find ONLY properties which requires refurbishment, repossessed and auction properties? When I searched online, there are many companies which claim to offer such services, but at a very high price.

Is it really worth that sort of fees and has anyone use them? I know that nothing comes up free but don’t mind paying a reasonable amount as long as its worth.

Thank you

Rupang



Comments

andy adewale

13:41 PM, 12th April 2016
About 3 years ago

Hi Rupang

You've posed two great questions.

My suggestions to you are as follows:

1. Purchase structure - Prima facie, and based on the limited information you have provided, the fact that your wife is a non tax payer offers considerable tax benefit for you to purchase the new properties in her name. However, there may be some obstacles to your ability to follow this path if you require mortgage finance for the properties as I would guess she doesn't earn an income. As far as Ltd company structure goes, there are pros and cons to that option too. What is likely to be best for you depends on your full circumstances, whether or not you'd require BTL mortgage finance and your end objective/time scale. As you are an existing investor, I would advice that you take specific advice from an accountant who is very clued up on property investment matters. Yes, that may cost you a few pounds but it may save you thousands down the line.
2. Where to find property - I would suggest you look at repo-list.co.uk I am not promoting them but I do know that many experienced investors have used them profitably. Of course auction houses local to the area(s) where you want to invest, Right Move and Zoopla are also great places to find deals, if you know what you are looking for as well as how to uncover real gems. I use all of these platforms all the time with great success.

Good luck.

rupang shah

15:26 PM, 12th April 2016
About 3 years ago

Reply to the comment left by "andy adewale" at "12/04/2016 - 13:41":

Thank you Andy for your inputs. My wife will be non tax payer just for year 2016-17 only as she has plan to go back to work next year and she will be basic tax payer then.

With regards to finances, yes we will need to borrow up to 75% LTV and hence I'm confused because by using LTd company structure, I can certainly save on new SDLT levy but not sure if the taxation on the rental income would be any different or not. Its very unlikely that we will sell the property immediately.

nathan stark

16:35 PM, 12th April 2016
About 3 years ago

Thats a tough question with lots of info needed.I am not an accountant, so My advise would be to seek one out and ask these questions. But this is my opinion.

You could Start up a new Ltd co. with Memorandum of association specific to property, Purchase using the Ltd co. When you sell, you are only getting rid of a co. asset and will be charged corporation tax accordingly at 18%. Then you can either keep the monies made in the ltd co, for further projects, or take some out as dividends using both your allowances, however, if you made profit of say 100k, then 18% corporation tax is £18k, and then if you wanted to take dividend you would have further tax.

If you made 100k in joint names without the Ltd CGT would only be £15k ish, so much cheaper, speak to accountant to see what you need to entrepreneurs relief as that is what would save you the tax bill. Maybe LLP rather than Ltd.

As to your other questions, auctions and estate agents are the best people to give you details of probates and houses needing works. Or check out, E i Group, register free for 48 hours to see what they have, they covered pretty much every auction house.

good luck.

andy adewale

18:29 PM, 12th April 2016
About 3 years ago

Thanks Rupang

I can certainly assist you further with my knowledge and experience in this arena however, we'll be forever going back and forth in chains of postings.

One quick point for you to bear in mind which is contrary to what our well-meaning colleague Nathan Sharks has said is that When you buy, do up and sell a property, the potential tax liability on your profit in unlikely to be subject to capital gains tax. It is more likely to be subject to income tax as HMRC generally recognise such activity as "trading" rather than as "capital disposals". Therefore you need pinpoint advice and careful thought for your circumstances before you jump in. Nonetheless, please don't let these perceived complexities frighten you. They can be overcome.

Paul Mahoney

10:32 AM, 23rd April 2016
About 3 years ago

Hi Rupang

As with previous comments this is based upon the limited info provided so should not be acted upon but worth considering, given that your partner is currently not earning and when she will be earning will be a basic rate tax payer one option would be to purchase the investment/s as tenant in common 99% in your wife's name and 1% in your name.This will enable you to obtain the mortgage on that back of your income but for tax purposes income will go majority to your wife which may avoid the recent tax changes so long as the property income doesn't push her into the higher tax bracket. Happy to discuss further.

Regarding Property Sourcing, that is a key area of expertise for my company (Nova Financial) and I would be happy to discuss this with you in more detail. Please contact me by clicking my profile to discuss further.


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