Lending to Ltd Company

[zuby84]

Hey guys,

I know the appetite for lending to BTL isn't great at the moment, and lending to Ltd company perhaps even less so. I know there are a few mortgage brokers on here.

Basically (for tax reasons) I want to buy residential property through a new limited company. If I buy a few properties for total of 200k (all paid for in cash); is there a lender who will be able to lend me an additional 200k so I can buy a few more properties? The resulting LTV will be 50% (even less considering the properties will have a bit of an uplift when they're refurbished.)

I'm not asking if going through a ltd company is best or not (I know it is for my situation) but I'm just trying to figure out if anyone would lend to this new company on the basis above. Will the lender take security over individual properties or the whole company?

Thanks

Thanks

[raptor600]

Few lenders will lend to a Ltd company for BTL - there is simply too much risk for them.

[sideways sid]

A suggestion that might get you where you want to be in terms of sector and risk would be to spend your £200k on a combination of resi property and shares in Property Companies &/or Real Estate Investment Trusts REITs.

If you want 50% equity in a GBP400k fund, you could use CFDs instead of shares, as these can be margined so that you typically borrow 80-90% of the value.

In round numbers, you could buy £180k of resi properties, and spend £20k buying £100-200k of CFDs in UK resi companies, or widen the scope to commercial property, ground rents, overseas etc as yuou wish.

This could all be done within your LtdCo.

[Kudos]

zuby84 said:

Hey guys,

Basically (for tax reasons) I want to buy residential property through a new limited company.
Thanks

Bear in mind that there will be additional tax implications for doing this, assuming you can borrow the money (or even if you just buy outright).

[Sarnie]

zuby84 said:

Hey guys,

I know the appetite for lending to BTL isn't great at the moment, and lending to Ltd company perhaps even less so. I know there are a few mortgage brokers on here.

Basically (for tax reasons) I want to buy residential property through a new limited company. If I buy a few properties for total of 200k (all paid for in cash); is there a lender who will be able to lend me an additional 200k so I can buy a few more properties? The resulting LTV will be 50% (even less considering the properties will have a bit of an uplift when they're refurbished.)

I'm not asking if going through a ltd company is best or not (I know it is for my situation) but I'm just trying to figure out if anyone would lend to this new company on the basis above. Will the lender take security over individual properties or the whole company?

Thanks

Thanks

The problem that you'll have is that your trying to borrow £200k against properties that you have just purchased for £200k, therefore it's 100% borrowing.

There are a small number of lenders who will lend to Ltd companies but the criteria is strict;

Rent would have to be 125% of mortgage payment
The lender would insist on being the only lender within the portfolio
The borrower would have to own 80%+ shares of the Ltd company
The borrower would need to evidence an income of £25k or more
Minimum property value of £75k
If you buy the properties for cash, you would have to wait 6 months before you could remortgage them.

Hope that helps?

[zuby84]

Hey,

It won't be 100% borrowing, it'll be 50% (or less). I would buy an additional 200k worth of property (via a loan) in addition to the 200k worth of property I have in the ltd company (fully paid for by cash.)

With a gross yield of 14% (I've just bought somewhere with a 23% yield - already rented!), servicing the mortgages won't be an issue at all. Only snag is that each property will be purchased for about £25,000 to £35,000 which is under the threshold of what Sarnie suggested.

I could do this under my own name rather easily, but as I'm a 40% tax payer and I wish to re-invest all the profits back into further property; a ltd company works best. (I've taken professional tax advice re this and it's best for my circumstances)

[Sarnie]

zuby84 said:

Hey,

It won't be 100% borrowing, it'll be 50% (or less). I would buy an additional 200k worth of property (via a loan) in addition to the 200k worth of property I have in the ltd company (fully paid for by cash.)

I don't think your following me.

If you have £200k of property, purchased outright, and want to borrow another £200k to buy more property in the future, the borrowing would be secured against the initial properties that you have purchased. The new properties would then be the ones that would be owned outright without mortgage.

This would mean that you are trying to borrow £200k against a portfolio that you have purchased for £200k; therefore 100% LTV.

You would be better off just purchasing them all at 50% LTV from the outset.

[zuby84]

Ahh, sorry I follow you now. I suppose, I could just get funding at 75-100k at a time (on the portfolio) so it doesn't approach a 100% LTV at any one point.

I just thought that getting one big lump sum would save on fees and also allow quick cash sales.

Sarnie, do you know anyone who will lend to a ltd company with low property values? (ie average of £35k once refurbished)

Thanks

[Sarnie]

zuby84 said:

Ahh, sorry I follow you now. I suppose, I could just get funding at 75-100k at a time (on the portfolio) so it doesn't approach a 100% LTV at any one point.

I just thought that getting one big lump sum would save on fees and also allow quick cash sales.

Sarnie, do you know anyone who will lend to a ltd company with low property values? (ie average of £35k once refurbished)

Thanks

I think the low values are going to be your main stumbling block.

That, in combination with you wanting a lender to borrow to a Ltd company means that it is going to be tough to find a lender to do all of that.