8:47 AM, 22nd February 2018, About 4 years ago 3
Can anyone get there head around this for me. An investor wants 3 flats building (Value is £465k) by “giving” me or my company £450k to do a commercial conversion to 6 flats. I keep the other 3.
Worst case scenario, the company needs another £350K to do the work and cover all loan fees to make all 6 flats.
Normally my company uses investor funds as deposit to borrow the remainder from the banks. I fancy this investor will want a good deal of security, who wouldn’t, so a first charge. But then my limited company won’t be able to borrow from the banks! That’s the first hurdle. (Although there probably is a lender somewhere out there, or I might be just about able to find the “cash”).
The second hurdle is keeping the other 3 flats and still getting the money out. Commercial lending is around 60% and repayment, so not ideal on a £465k valuation. Selling them to me is not good for personal tax reasons!
The third hurdle is the SDLT. The investor wont be happy to pay any! – I feel there is a way to reduce this liability but cannot see how.
Normally my company sell the freehold for a nice figure once a few flats have sold, but again I think that could go if it helped reduce the SDLT.
In summary, the goal is use the £450k to borrow £350k development funds. Build 6 flats from a Commercial unit. Give investor 3 instead of money back and no SDLT!, then keep 3 for me or my company. Oh and of course, I have factored in making a healthy profit.
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