Paying back director Loans with property

[zguy27]

I've thought about most of the downfalls you guys have rightly mentioned before I thought of this idea.

Even though I own quite a number of properties; I concentrate on low value and high yielding properties for the most part; hence I have never yet reached the SDLT threshold for any of my properties I've purchased. So I'm nowhere near as big as I sound with "many properties."

CGT will be minimalistic/nil as the properties I transfer over to the company are the properties I've had for many years and would today not be valued for much more/anything more than I purchased them for (certainly not in real terms anyway)

Professional fees are minimalistic as my brother is also my lawyer.

The properties I will transfer have no lending secured on them.

I can get lending on property through my ltd company to allow me to purchase more property through my Ltd company; yes the interest rate will be a little higher but as I work off such high yields; I still have plenty of profit margin left.

Rent is VAT exempt as is providing medical services (and loans too I presume.)

I am concentrating on cashflow rather than capital appreciation and will re-invest every single penny of my property profits; I will always (hopefully) be a highest rate tax payer for the rest of my life; I get to re-invest 80% of my property profits through a Ltd company, but only 50% of my property profits under my own name as in essence I will be paying 45%+ tax on any personal profits! Over decades; this will seriously add up.

[stek]

My mate bought a shed load of lower end properties in Staleybridge to rent out every year he had to fork out for a new boiler or even a hot water tank more than once cos the scrotes lifted them, did a runner and never paid the rent.

£2k a pop...

He ended up auctioning the houses off at pretty significant loss.

[northernladuk]

I can get lending on property through my ltd company to allow me to purchase more property through my Ltd company; yes the interest rate will be a little higher but as I work off such high yields; I still have plenty of profit margin left..

Mind me asking how you will do this bearing in mind your LTD is only a year old and you have a 25% tax to pay? Doesn't leave a lot?

Also what is the point if you admit that there will be no profit to pay CGT? No profits but you buy a new one every so often? But surely you are going to lose 20% on CT and then on tax to get it out the company when you sell?

I have a number of properties so I can see where you are coming from, particularly with ltd money doing nothing and housing stock going up.. but it just doesn't sit right at all.

Anyway, the sooner you speak to your accountant the better. We obviously don't have a clue about your situation or how to help.

[northernladuk]

Even though I own quite a number of properties; I concentrate on low value and high yielding properties for the most part; hence I have never yet reached the SDLT threshold for any of my properties I've purchased. So I'm nowhere near as big as I sound with "many properties."

Does that mean renting tulipholes to students, the great unwashed and the like and not spending any money on upkeep? I have lived in digs with landlords like you as a student... lol

[zguy27]

My property investment approach is a seperate issue from Ltd co/tax etc... but

In essence I would rather buy 10 x £40k flats (£400k) giving me a total of £50k per per in gross rent (12.5%) rather than 1 x £400k in London giving me rent of £20k per year (5% If I'm lucky.) As an example; the last property I bought has a yield of 18% - got rented the day I bought it.

My family have been involved in property for decades and this is the way they've all done it and got quite good at it ; concentrating on yield and ROI rather than capital appreciation. We don't care about capital appreciation at all. In fact I would like property prices to fall even further (as it would allow me to purchase more.) Renting to low income households is a niche by itself, but we do it fairly well - it's not for everyone. True, I wouldn't want to live in many of the properties in some areas I have, but people do and as long as the property is well maintained then they're happy. (no boilers gone missing yet...)

There are some portoflio lenders out there that lend to Ltd companies for BTL; don't need any loans for it just now but by the time I do I'll probably have another year of accounts.