Buy to let through LTD company or partner (not yet wife)

Buy to let through LTD company or partner (not yet wife)

11:26 AM, 21st November 2016, About 6 years ago 16

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I’ve been searching for my first BTL for a while and have found one which I am comfortable getting involved with.btl purchase

Value – £155k.

Now I am in a dilemma as to whether to set up a LTD company to purchase it, or purchase it through my significant other.

At the moment our residence is in my sole name, so technically she owns no property. Therefore can she buy a BTL as a ‘first time buyer’ and therefore not have to pay the SDLT surcharge of 3%?

She is also in the lower tax bracket and probably will be for some time as she is a teacher, therefore much better than it being in my name.

Let me know your thoughts please

Matt



Comments

Mark Alexander - Founder of Property118 View Profile

16:54 PM, 24th November 2016, About 6 years ago

Reply to the comment left by "Paul Temple" at "24/11/2016 - 15:28":

Two different things Paul.

SPV simply means single purpose vehicle. A new company would usually have just a single purpose but might subsequently trade.
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Paul Temple

9:01 AM, 25th November 2016, About 6 years ago

Reply to the comment left by "Glyn Radcliffe-Brine" at "24/11/2016 - 16:43":

Glyn – interesting insight into their thinking, Glyn, thanks for that. As often the case, the fact that a risk is so small (unlikely to happen and already covered by separate insurance) is irrelevant – the fact that it exists at all means they shy away from anything to do with it. In some ways you can understand it but in others you do sometimes wonder how they manage to do any business at all!

Fortunately (unfortunately?) I’m not at the stage of multiple properties at the moment but you provide some useful things to consider if/when I get to that stage. My plan at the moment is to start a company from scratch to cover property investment as its own single purpose thus hopefully avoiding SPVs or multiples of SPVs.

Mark – thanks for the clarification – confirmed my understanding.

John Constant

10:26 AM, 26th November 2016, About 6 years ago

Reply to the comment left by "Glyn Radcliffe-Brine" at "22/11/2016 - 11:21":

Glyn,
there are lenders who will lend on a Ltd Co basis a) down to £50,000, b) Up to 85%LTV c) On a trading Co basis. The trick, as you state is getting a lender who will do all three! Did your broker do a good job for you here? It sounds to me like he hasn't asked the right questions from the get go. Did he really understand his client and what he wanted to achieve? Did he do an Agreement in Principle before risking your money? Did he ask the right questions of the lender regarding the location? It sounds like a no to answer these questions.

Would a lender decline an application for a property just because it is in Margate? No, I find this hard to believe. I live nearby (but not too near) Jaywick in Essex and manage to arrange mortgages for the majority of property there. Lenders do have issues where they perceive that it would be difficult to sell a property due to its specific location - this could be next to a fast food restaurant, late night convenience stores, adult stores etc etc. They are worried that they might have to take a hit financially if they need to repossess and then sell quickly. Again, did your broker ask the right questions?

As for the SPV points, I understand that it is really easy to convert a standard Ltd Co that has just been set up into an SPV. A client of mine did it in just a couple of hours recently. It is also really easy to set up a new Ltd Co to hold your property too. All this easiness comes at a price though - would you lend a few hundred thousand pounds to someone that walked in off the street with no trading record and therefore, no ability to carry out any financial security checks? The reason that lenders ask you for so much information is that they will ask you for a Personal Guarantee, and in order to see if you are good for that, they need to see what you are like financially.

Ltd Co SPV rates are higher than the general BTL market, but this is an evolving market place. If you had come to me around 18 months ago, you would be looking at rates of 5.75% at best, more likely 6%+. However, now we have 2.94% at 65%LTV and 3.24% at 75%LTV.

I do have to take issue with your assertion that "probably all" lenders will not lend where there is already borrowings with another lender. Paragon did fall into this category but changed their criteria, because they were seemingly the only lender doing this. Many lenders will insist on a floating charge to protect their interests, but there is one lender (to my knowledge) who does not do this.

If you find yourself in this situation again (where you are contemplating a Ltd Co purchase) please feel free to give me a call via my member profile. We have worked closely with Property118 for many years now.

Mark Alexander - Founder of Property118 View Profile

10:54 AM, 26th November 2016, About 6 years ago

Thank you for your comments John and I am pleased to confirm that we have had several reports of you providing outstanding service to Property118 members.
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Darren Peters

19:11 PM, 26th November 2016, About 6 years ago

If you had 4 properties in 4 different companies, could you take the £5000 dividend tax free from each Ie £20,000?

Would this count as income in such a way as to put you into a higher tax bracket if you had a £30,000pa salary?

Thanks

Mark Alexander - Founder of Property118 View Profile

19:30 PM, 26th November 2016, About 6 years ago

Reply to the comment left by "dp1 Django" at "26/11/2016 - 19:11":

No, the £5,000 annual zero rate dividend tax allowance is a personal allowance. If it wasn't, nobody would pay dividend tax on their shares portfolios.
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