Buying commercial property through a SIPP
Discussion
This was suggested to me about 10 years ago in passing by my then landlord who was trying to sell the office I was renting plus two more rented offices in the unit. I didn't really understand it at the time then covid came along and I gave up the office all together.
I now need office space again and don't want to rent if the opportunity comes up to buy somewhere so I'm now looking into the SIPP options. I know AI can answer these questions but nothing beats some actual PH Director knowledge.
- Can you use SIPP + mortgage or does it have to be a purely cash purchase?
- Is there a rental cap I can charge to my own LTD company, aim would be to pay back from LTD as quickly as possible.
- Are there any cons I should be aware of before going down this route.
Thanks in advance.
I now need office space again and don't want to rent if the opportunity comes up to buy somewhere so I'm now looking into the SIPP options. I know AI can answer these questions but nothing beats some actual PH Director knowledge.
- Can you use SIPP + mortgage or does it have to be a purely cash purchase?
- Is there a rental cap I can charge to my own LTD company, aim would be to pay back from LTD as quickly as possible.
- Are there any cons I should be aware of before going down this route.
Thanks in advance.
Edited by SDarks on Thursday 29th October 09:39
You can borrow up to 50% of the fund of the pension
The rent has to be market value but you can still have pretty favourable terms for the sipp
You can make contributions up to the annual allowance in addition to the rent
It can work well but equally it's not the most liquid of investments so you need to keep that in mind when it's time to cash in.
The rent has to be market value but you can still have pretty favourable terms for the sipp
You can make contributions up to the annual allowance in addition to the rent
It can work well but equally it's not the most liquid of investments so you need to keep that in mind when it's time to cash in.
Plenty of people do this. Some practical points:
- it seems many SIPP administrators are no longer keen on dealing with commercial property in a SIPP so your choice of administrator is limited.
- administrator fees for doing simple things can be extortionate; or you need to get a formal valuation for something straightforward which means there are extra third party costs to pay.
- they can take ages to do anything.
For a few years now I’ve warned people to look very carefully at whether it’s worthwhile. Having said that, buying into a SSAS can reduce the admin hassles so if that’s an option, that may be the way to go.
- it seems many SIPP administrators are no longer keen on dealing with commercial property in a SIPP so your choice of administrator is limited.
- administrator fees for doing simple things can be extortionate; or you need to get a formal valuation for something straightforward which means there are extra third party costs to pay.
- they can take ages to do anything.
For a few years now I’ve warned people to look very carefully at whether it’s worthwhile. Having said that, buying into a SSAS can reduce the admin hassles so if that’s an option, that may be the way to go.
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