Sunny K

Registered with Property118.com
Sunday 17th August 2014


Latest Comments

Total Number of Property118 Comments: 45

Sunny K

8:05 AM, 10th July 2018
About 2 months ago

Buy to Let purchase - financial advisor says No

Hi Nick,
Interesting deal. Assuming a purchase price of 680k (Purchase price + stamp duty + other cost), no mortgage, non tax payer status and rent of 1850 PCM, your gross yield will be 3.2%. This is plausible yield for London and south east market but is quite low. Assuming best case scenario of spending 15% on maintenance, net rent will be 1572 PCM and net yield of 2.8%. Some conservative estimates suggest London property may rise by 10% over next 5 years, you total annual yield (rental + capital growth) might be around 5%. This is quite low and most people look for at least 10% total annual yield. You might get better return of some bonds and crowdfunding platforms. This deal might be lot more worst if you need a mortgage, are a taxpayer, have higher maintenance etc. It will be great to have some more information like mortgage requirement, company/personal purchase, tax payer status etc.
Good lucky.
Sunny... Read More

Sunny K

8:06 AM, 2nd July 2018
About 3 months ago

Structuring BTL portfolio business?

Reply to the comment left by J C at 01/07/2018 - 20:44
Hi JC,

The 80% figure comes from mortgage broker data which are well publish. I believe the personal vs limited company calculation is quite close even for high rate tax payment and once should do all the sum quite diligently.
To give an example: Let say you have net rental return of 100 pounds PCM. For personal names, mortgage interest is 50 pounds and if you are a high rate tax payer you will have 20 pounds profit (100 - 40(40% tax)+10 (mortgage interest relief)-50). For limited company, mortgage interest will be higher (60 pounds) and net profit will be 27 pounds (100-60-8 (corporation tax)-5 (bank account, return etc)). So not a huge difference. The main advantage is that you will be able to borrow 75% LTV in limited company rather than personal name or if you are a large portfolio landlord with high yielding low value properties. I would highly recommended you to start in personal name as you can use no/basic rate tax allowance of partner A. Also for personal outlay of 30k, you will able to buy 100 k property and hence will require 30 properties to achieve 3 mil portfolio size.... Read More

Sunny K

10:37 AM, 1st July 2018
About 3 months ago

Structuring BTL portfolio business?

Reply to the comment left by J C at 01/07/2018 - 09:59
1) private pension for partner A (No salary): Okay. There are other ways e.g. Lifetime ISA.
2) incooperation if needed in the future: Not sure if only some of your properties are in personal name and if you think you might need incorporation in future, why do you go in LTD from start.
3) more credible and 'tidy' with accounts when help managing other JV investments: Most people have a separate bank account and record keeping for properties. I don't know why you would go to hassle of creating a company for that.
4) build up capital to be loaned to another SPV Ltd for solely BTL in the future: I think investing as director's loan is better than loaning company to company.
5) As for the yield, capital growth and building of the portfolio, I am working on properties needing outlays in the region of £25k to £35k, yielding 8% to 12%, and last 5 years' capital growth of about at least 7%. Hence the property portfolio build up over 8 years with capital release. Whether 15 properties will materialise is very much depending on the actual market growth, I used previous records for my growth estimation. Portfolio of about 3 million at 8 years is the aim: Very ambitious. Rental and capital growth are counterbalancing and to achieve both will be fantastic.... Read More

Sunny K

9:24 AM, 1st July 2018
About 3 months ago

Structuring BTL portfolio business?

Hi JC,

Your strategy is sound.

We have followed similar strategy over the last 6 years. A few thoughts:
1. We bought our first four properties in personal name in London over the first 3 years. This keeps the net rental return (gross rental income - running cost) below 50k mark for partner A in your example for us. All the properties have 60% LTV at present due lower yield, affordability, portfolio landlord criteria etc. It's very unlikely to achieve 75% LTV in personal name mortgage in today's market especially in London.
2. We followed up the next 3 properties purchase in SPV LTD company where it is easier to borrow to 75% LTV. However lending rates are higher and yield are lower which makes ROI ((Gross rental return- running cost-mortgage)/(Purchase price + Purchase expense -loan amount))around 3%. We are now looking to add value by refurb, HMO, multi-unit conversion to make a good ROI. Also note our rate of acquiring properties have lowered due to higher capital growth in London.
3. I don't understand the rational of having a managing LTD company. You will pay corporation tax on any profits which will be similar to income tax in personal name properties if net rental return is less than 50k and is similar to SPV LTD company. If you factor in other hassles e.g. bank account fees, returns, VAT etc you might end up losing rather than saving money.
4. I don't foresee us buying 8 properties in next two years and hence we will not achieve 15 properties as per your strategy. In my opinion, rather than setting goal of property number, you should set targets on net property profit which is sum of weighted net rental profit (net rental return- mortgage expense) and capital growth. We weight net rental profit higher as its easier to predict/achieve and less capital growth as its more speculative. This goal setting might mean you achieve better net property profit by having 5 properties rather than 15.

Good Luck.

Sunny... Read More

Sunny K

18:26 PM, 11th May 2018
About 4 months ago

Paragon HMO application?

Reply to the comment left by Yvonne Francis at 11/05/2018 - 14:55
Its not a additional licensing or article 4 zone. The property works as HMO or multi unit and has 4% return on single family let (which is not the worst in zone 4 west London), so plenty of options.... Read More