SIPP/Commercial Property
Discussion
I will of course seek independent advice from an IFA, but just wondering if anyone can point me in the right direction.
I own a property, am about to start planning application to convert to mixed commercial unit (ground floor) and residential upstairs. Residential units will be on a residential BTL mortgage, aim is to keep them for 10ish years, or longer if required.
I have a tenant already lined up for the commercial unit on a long term lease (he has a successful business next door and wants to expand). He will be renting.
My question is this. I have a decent enough chunk saved in a pension, could I convert this to a SIPP, "buy" the completed commercial unit (at arms length presumably at fair price) via the SIPP?
Can you get a SIPP "mortgage" e.g. the SIPP element pays the deposit etc, the mortgage element makes up the shortfall in purchase price?
I own a property, am about to start planning application to convert to mixed commercial unit (ground floor) and residential upstairs. Residential units will be on a residential BTL mortgage, aim is to keep them for 10ish years, or longer if required.
I have a tenant already lined up for the commercial unit on a long term lease (he has a successful business next door and wants to expand). He will be renting.
My question is this. I have a decent enough chunk saved in a pension, could I convert this to a SIPP, "buy" the completed commercial unit (at arms length presumably at fair price) via the SIPP?
Can you get a SIPP "mortgage" e.g. the SIPP element pays the deposit etc, the mortgage element makes up the shortfall in purchase price?
Residential in a SIPP?
No, not even part resi part commercial.
Not legally anyway.
ETA. Max LTv on a sipp max LTV will be 50%.
And you lose control of the property, it will belong to the pension, not you, so the income form the property also belongs to the pension.
No, not even part resi part commercial.
Not legally anyway.
ETA. Max LTv on a sipp max LTV will be 50%.
And you lose control of the property, it will belong to the pension, not you, so the income form the property also belongs to the pension.
Edited by scotal on Friday 16th September 12:05
Edited by scotal on Friday 16th September 12:07
scotal said:
Residential in a SIPP?
No, not even part resi part commercial.
Not legally anyway.
ETA. Max LTv on a sipp max LTV will be 50%.
And you lose control of the property, it will belong to the pension, not you, so the income form the property also belongs to the pension.
LTV can be 50%, no issue there.No, not even part resi part commercial.
Not legally anyway.
ETA. Max LTv on a sipp max LTV will be 50%.
And you lose control of the property, it will belong to the pension, not you, so the income form the property also belongs to the pension.
Edited by scotal on Friday 16th September 12:05
Edited by scotal on Friday 16th September 12:07
Fully understood and quite happy to accept that the income goes into the SIPP as well.
JPJPJP said:
What is the property now in terms of resi / commercial?
If you already own it, is putting it into a SIPP necessarily the best option anyway?
Property is a residential house. Tried unsuccessfully to get change of use to Business (office) use. I'm told by planners they will accept mixed use development. The business next door is existing for some time (sucessful cafe) and wants to extend into my downstairs.If you already own it, is putting it into a SIPP necessarily the best option anyway?
Upstairs plan is to convert to 4 x apartments or HMO - still undecided on that one
Thanks
Given that you are only looking at a 10 year investment it probabaly isn't worth all the grief that would be involved to achieve what you are after.
If you really want to go for it, try a long leashold on just the commercial part to your SIPP.
The max loan for a SIPP is not 50% LTV of what you are seeking to buy, but max 50% of the net value of the SIPP itself. If you only have cash in the SIPP to be used for the purchase, this in effect means a 33.33% LTV of what you are seeking to buy.
If you really want to go for it, try a long leashold on just the commercial part to your SIPP.
The max loan for a SIPP is not 50% LTV of what you are seeking to buy, but max 50% of the net value of the SIPP itself. If you only have cash in the SIPP to be used for the purchase, this in effect means a 33.33% LTV of what you are seeking to buy.
I've browsed Pistonheads for ages, but registered to just drop a reply to this post. I should make my position clear - I work for Suffolk Life - we're a specialist SIPP provider and own / manage well over 2,000 commercial properties within pensions for over 4,000 of our clients.
There have been some good replies already, covering some of the essential detail of property and SIPPs. I thought it would be useful to just draw those together as well as fill in some of the blanks.
Residential property - absolutely not permitted in the SIPP. Commercial property is of course, and the two should be able to be separated. I thought the comment on the 10 year investment referred to just the residential part, but otherwise you will have to consider whether the costs of separating the properties and then your pension investing in the commercial aspect is indeed worthwhile.
Whilst you 'lose control' of the property, you only cede control to your pension which is of course still yours. You can even choose to buy the property back out of your SIPP in the future if you want, although all transactions must be at a fair market value - this includes the rent that the tenant must pay the SIPP.
The SIPP can borrow, as already hinted - 50% of the SIPP value less any existing borrowing. It sounds like you haven't done this sort of thing before, so probably just 50% of the existing pension value. If this isn't sufficient you can just have your SIPP part purchase the property, and retain partial ownership yourself - it is fairly straightforward to do.
One thing that hasn't been discussed is VAT election - you'll need to give further information on that.
Can I point you in the direction of our SIPP property guide which you can download here http://www.suffolklife.co.uk/HOME/PUBLIC/PSPROPERT...
It covers off quite a few of the general points about property and SIPPs and hopefully should be informative and of some help. This isn't a recommendation to use our SIPP (I'm here as a Pistonhead!), and we only accept business via IFAs anyway. We have an excellent property team though, and whether with or without an IFA they're always happy to answer any questions you may have.
Good luck!
There have been some good replies already, covering some of the essential detail of property and SIPPs. I thought it would be useful to just draw those together as well as fill in some of the blanks.
Residential property - absolutely not permitted in the SIPP. Commercial property is of course, and the two should be able to be separated. I thought the comment on the 10 year investment referred to just the residential part, but otherwise you will have to consider whether the costs of separating the properties and then your pension investing in the commercial aspect is indeed worthwhile.
Whilst you 'lose control' of the property, you only cede control to your pension which is of course still yours. You can even choose to buy the property back out of your SIPP in the future if you want, although all transactions must be at a fair market value - this includes the rent that the tenant must pay the SIPP.
The SIPP can borrow, as already hinted - 50% of the SIPP value less any existing borrowing. It sounds like you haven't done this sort of thing before, so probably just 50% of the existing pension value. If this isn't sufficient you can just have your SIPP part purchase the property, and retain partial ownership yourself - it is fairly straightforward to do.
One thing that hasn't been discussed is VAT election - you'll need to give further information on that.
Can I point you in the direction of our SIPP property guide which you can download here http://www.suffolklife.co.uk/HOME/PUBLIC/PSPROPERT...
It covers off quite a few of the general points about property and SIPPs and hopefully should be informative and of some help. This isn't a recommendation to use our SIPP (I'm here as a Pistonhead!), and we only accept business via IFAs anyway. We have an excellent property team though, and whether with or without an IFA they're always happy to answer any questions you may have.
Good luck!
(Just bumping this old thread because after a Search here, it's directly relevent to me. If any of the above PHers have got updates, I'm all ears.)
My situation is that I (personally) have got some significant cash in the bank from a house sale. Jobwise, I'm sole shareholder of a Ltd and VAT-registered company which owns a business unit (paid for by an inwards director's loan). Coincidentally, the next-door business unit has come up for sale, and I'm thinking about buying it. It has a tenant in place, and earns £9750pa, the asking price being £125000+VAT.
My big Q is whether to simply lend my own business the money to buy it? Or whether to start a SIPP and buy it through that? Supplementary question is whether to get the SIPP to buy my own unit, too (and for my business to pay a market rent back into the SIPP). Also the question of TOCG to avoid VAT.
So any real-world experience would be useful. (I know I should contact my accountant and I will, but as usual, PH has some very useful expertise.)
My situation is that I (personally) have got some significant cash in the bank from a house sale. Jobwise, I'm sole shareholder of a Ltd and VAT-registered company which owns a business unit (paid for by an inwards director's loan). Coincidentally, the next-door business unit has come up for sale, and I'm thinking about buying it. It has a tenant in place, and earns £9750pa, the asking price being £125000+VAT.
My big Q is whether to simply lend my own business the money to buy it? Or whether to start a SIPP and buy it through that? Supplementary question is whether to get the SIPP to buy my own unit, too (and for my business to pay a market rent back into the SIPP). Also the question of TOCG to avoid VAT.
So any real-world experience would be useful. (I know I should contact my accountant and I will, but as usual, PH has some very useful expertise.)
EskimoArapaho said:
My big Q is whether to simply lend my own business the money to buy it? Or whether to start a SIPP and buy it through that? Supplementary question is whether to get the SIPP to buy my own unit, too (and for my business to pay a market rent back into the SIPP)
I enjoyed reading back through that.There's no way anyone can suggest anything based on what you can get across here. But in principle, a suitable pension could achieve either, or both of those loose objectives. Many niche, boutique providers are fussy because the market has evolved quite a lot, and there are some I wouldn't do business with, but you can certainly find a provider out there willing to help.
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