Buy to let purchase advice
Discussion
Hi all,
I am new to the world of property investing. I would like help and advice about a property purchase I would like to make on which my offer has been accepted.
The property would be bought for the purposes of renting out. The accepted offer on the property was £170k. I have slightly more than £170k in savings and as such I could purchase the property this way but I would prefer to keep some cash in my savings.
I may potentially purchase another 1 or 2 properties and have thus formed a limited company acting as an SPV through my accountant. However my accountant has not really been able to explain to me why this is the best way forwards considering my circumstances and I have also noticed that the SIC of the company only includes 68100 but not 68209. Thus I have come here for some advice and direction/clarification.#
I have son who is studying at university with no income and he has never bought property before. My initial idea was to purchase the property through him which would mean paying no stamp duty and he would be collecting the rent tax free as it would fall below the £11k pa threshold. I would be taking out a small mortgage on my personal home or using most of my savings to transfer £170k to him as a gift and he would purchase the property. I understand the implications of this in terms of him paying stamp duty on his first home when he graduates from university.
My accountant formed a company and suggested that I purchase the property through the company by putting a 25% deposit in as a directors loan and finding a lender for the remaining 75%. I simply don't understand how this is a better option as the interest rate is higher. My strategy is not a long term one in that I would like to get the property paid off asap and be collecting the profits as a salary or dividends asap. Is it not possible for me to put £170k in to the company as a directors loan and purchase the property outright. The interest on a personal mortgage would be almost half.
I am really quite confused as to how to go about this.
In summary I have £120k to play with safely, I have 3 children, 1 with no income, 1 earning £30kpa and one earning £22kpa. I have had an offer of £170k accepted on a property which I would like to purchase and start earning rental income asap. I may purchase more properties in the future. I also have an SPV setup and I am awaiting the business bank account to be setup but I am very confused as to how this would benefit me.
I hope this was not too confusing.
Kind regards,
thirdaddy
I am new to the world of property investing. I would like help and advice about a property purchase I would like to make on which my offer has been accepted.
The property would be bought for the purposes of renting out. The accepted offer on the property was £170k. I have slightly more than £170k in savings and as such I could purchase the property this way but I would prefer to keep some cash in my savings.
I may potentially purchase another 1 or 2 properties and have thus formed a limited company acting as an SPV through my accountant. However my accountant has not really been able to explain to me why this is the best way forwards considering my circumstances and I have also noticed that the SIC of the company only includes 68100 but not 68209. Thus I have come here for some advice and direction/clarification.#
I have son who is studying at university with no income and he has never bought property before. My initial idea was to purchase the property through him which would mean paying no stamp duty and he would be collecting the rent tax free as it would fall below the £11k pa threshold. I would be taking out a small mortgage on my personal home or using most of my savings to transfer £170k to him as a gift and he would purchase the property. I understand the implications of this in terms of him paying stamp duty on his first home when he graduates from university.
My accountant formed a company and suggested that I purchase the property through the company by putting a 25% deposit in as a directors loan and finding a lender for the remaining 75%. I simply don't understand how this is a better option as the interest rate is higher. My strategy is not a long term one in that I would like to get the property paid off asap and be collecting the profits as a salary or dividends asap. Is it not possible for me to put £170k in to the company as a directors loan and purchase the property outright. The interest on a personal mortgage would be almost half.
I am really quite confused as to how to go about this.
In summary I have £120k to play with safely, I have 3 children, 1 with no income, 1 earning £30kpa and one earning £22kpa. I have had an offer of £170k accepted on a property which I would like to purchase and start earning rental income asap. I may purchase more properties in the future. I also have an SPV setup and I am awaiting the business bank account to be setup but I am very confused as to how this would benefit me.
I hope this was not too confusing.
Kind regards,
thirdaddy
Company based loans tend to be more expensive than personal. The new personal tax rules for btl means you can’t include mortgage interest against your rental income....fully effective 2020.
Unless you are going to have lots of btls it’s probably best to buy as normal and pay the taxes.
If you don’t need the income you could gift a house to your son/daughter....or help buy.
All in my opinion.....I’m not an advisor....I have btls and have a company and have looked into all these things in the past.
Unless you are going to have lots of btls it’s probably best to buy as normal and pay the taxes.
If you don’t need the income you could gift a house to your son/daughter....or help buy.
All in my opinion.....I’m not an advisor....I have btls and have a company and have looked into all these things in the past.
What a confusing post op.
You have 170K, you're happy to give it all to your kid to buy a house, then somehow you're going to buy 1 or 2 more properties. With what, thin air?
I cannot imagine your accountant set up a Ltd for the fun of it, I imagine they did in response to your instructions.
I imagine you talked to your accountant and the option you agreed to is the one that gave you the most flexibility, ie 25% down = you can buy 3 properties at 170K, with headroom for costs.
You have 170K, you're happy to give it all to your kid to buy a house, then somehow you're going to buy 1 or 2 more properties. With what, thin air?
I cannot imagine your accountant set up a Ltd for the fun of it, I imagine they did in response to your instructions.
I imagine you talked to your accountant and the option you agreed to is the one that gave you the most flexibility, ie 25% down = you can buy 3 properties at 170K, with headroom for costs.
thirdaddy said:
Hi all,
I am new to the world of property investing. I would like help and advice about a property purchase I would like to make on which my offer has been accepted.
The property would be bought for the purposes of renting out. The accepted offer on the property was £170k. I have slightly more than £170k in savings and as such I could purchase the property this way but I would prefer to keep some cash in my savings.
I may potentially purchase another 1 or 2 properties and have thus formed a limited company acting as an SPV through my accountant. However my accountant has not really been able to explain to me why this is the best way forwards considering my circumstances and I have also noticed that the SIC of the company only includes 68100 but not 68209. Thus I have come here for some advice and direction/clarification.#
I have son who is studying at university with no income and he has never bought property before. My initial idea was to purchase the property through him which would mean paying no stamp duty and he would be collecting the rent tax free as it would fall below the £11k pa threshold. I would be taking out a small mortgage on my personal home or using most of my savings to transfer £170k to him as a gift and he would purchase the property. I understand the implications of this in terms of him paying stamp duty on his first home when he graduates from university.
My accountant formed a company and suggested that I purchase the property through the company by putting a 25% deposit in as a directors loan and finding a lender for the remaining 75%. I simply don't understand how this is a better option as the interest rate is higher. My strategy is not a long term one in that I would like to get the property paid off asap and be collecting the profits as a salary or dividends asap. Is it not possible for me to put £170k in to the company as a directors loan and purchase the property outright. The interest on a personal mortgage would be almost half.
I am really quite confused as to how to go about this.
In summary I have £120k to play with safely, I have 3 children, 1 with no income, 1 earning £30kpa and one earning £22kpa. I have had an offer of £170k accepted on a property which I would like to purchase and start earning rental income asap. I may purchase more properties in the future. I also have an SPV setup and I am awaiting the business bank account to be setup but I am very confused as to how this would benefit me.
I hope this was not too confusing.
Kind regards,
thirdaddy
1 - Ltd co probably being recommended because you can deduct the mortgage interest from your taxable income, meaning you reduce your tax bill.I am new to the world of property investing. I would like help and advice about a property purchase I would like to make on which my offer has been accepted.
The property would be bought for the purposes of renting out. The accepted offer on the property was £170k. I have slightly more than £170k in savings and as such I could purchase the property this way but I would prefer to keep some cash in my savings.
I may potentially purchase another 1 or 2 properties and have thus formed a limited company acting as an SPV through my accountant. However my accountant has not really been able to explain to me why this is the best way forwards considering my circumstances and I have also noticed that the SIC of the company only includes 68100 but not 68209. Thus I have come here for some advice and direction/clarification.#
I have son who is studying at university with no income and he has never bought property before. My initial idea was to purchase the property through him which would mean paying no stamp duty and he would be collecting the rent tax free as it would fall below the £11k pa threshold. I would be taking out a small mortgage on my personal home or using most of my savings to transfer £170k to him as a gift and he would purchase the property. I understand the implications of this in terms of him paying stamp duty on his first home when he graduates from university.
My accountant formed a company and suggested that I purchase the property through the company by putting a 25% deposit in as a directors loan and finding a lender for the remaining 75%. I simply don't understand how this is a better option as the interest rate is higher. My strategy is not a long term one in that I would like to get the property paid off asap and be collecting the profits as a salary or dividends asap. Is it not possible for me to put £170k in to the company as a directors loan and purchase the property outright. The interest on a personal mortgage would be almost half.
I am really quite confused as to how to go about this.
In summary I have £120k to play with safely, I have 3 children, 1 with no income, 1 earning £30kpa and one earning £22kpa. I have had an offer of £170k accepted on a property which I would like to purchase and start earning rental income asap. I may purchase more properties in the future. I also have an SPV setup and I am awaiting the business bank account to be setup but I am very confused as to how this would benefit me.
I hope this was not too confusing.
Kind regards,
thirdaddy
2 - If SIC codes are wrong you may have trouble getting a lender to lend. I believe you can apply to change these.
3 - Not sure your son can buy the property to rent out and not pay SDLT surcharge. The surcharge is usually for when you own two properties at once, but I would double check.
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