Anyone still looking at buy to let?

[psychocandy]

Your mates a total mug, then.

Sounds like he will never make money out of it, IMO.

He bought the flat and lived in it. Then he inherited a house and now lives in that. So rather than sell the flat he decided to rent it out.

Obviously, prospective tenants will only pay the going rate for rental. They don't care how much the service charge or your mortgage is.

Obviously, when the mortgage is paid off he'll be left with ownership of a flat which he can then sell I suppose.

[Hobosapien]

Obviously, when the mortgage is paid off he'll be left with ownership of a flat which he can then sell I suppose.

He could sell it now and settle the outstanding mortgage (assuming it's worth more currently).

By continuing he's gambling that the place will be worth more in the future for the time frame he is thinking of holding it for. Maybe he'll be right.

[northernladuk]

Watching the TV programme "Nightmare Tenants and Slum landlords" always puts me off BTL.
..

I was watching Benefits Street the other day. Always makes me think that anyone claiming benefits it's a oxygen wasting scroat.

Seriously man, these programmes are made to be car crash watching. Letting one of these skew your thinking isn't right smart.

[psychocandy]

I was watching Benefits Street the other day. Always makes me think that anyone claiming benefits it's a oxygen wasting scroat.

Seriously man, these programmes are made to be car crash watching. Letting one of these skew your thinking isn't right smart.

Flippin heck NLUK - are you sort of admitting I might not be a scroat even if I claim benefits?

[northernladuk]

Flippin heck NLUK - are you sort of admitting I might not be a scroat even if I claim benefits?

I never said you were a scroat. I said as a contractor you are a disgrace.

[zcapr17]

Getting back to the original question...

Anyone still considering buying new places? How are you planning on doing it? Through a shell company? Personally? Something else?

I have two rental properties in my own name and am currently reviewing whether to continue to invest personally or switch to investing via a limited company for future purchases.

I've talked to several accountants over the last week and built a spreadsheet to model the various structures for investing in property. The three options I've looked at are outlined here.

Key things I've discovered:

• Getting money into an SPV: Loaning money from my contracting company directly to a new SPV is much more efficient that taking divis and then re-investing the personal funds into a stand-alone SPV. However, if you go down this route, the loan must be at a commercial interest rate (this doesn't result in any more tax, it just shifts profit from one company to the other), and more importantly, your contracting company will be ineligible for the flat-rate VAT scheme and would have to use standard VAT. My contracting company benefits to the tune of several thousand £'s per year from flat-rate VAT compared with standard VAT, so this is significant.
  
• Regarding VAT in general, residential rent is VAT-exempt. That means an SPV cannot charge VAT on the rent and cannot recover any input tax incurred. So a property SPV would not be VAT-registered, regardless of the VAT status of the parent contracting company.
  
• In terms of getting profits out, property investment companies are not eligible for Entrepreneurs' Relief, so profits would need to be extracted as dividends. However there are also other options for disposal such as selling on shares in the SPV, which gives important flexibility compared with investing personally.

My model allows for SPV running costs, higher mortgage rates and legal costs, and the effect of losing flat-rate VAT benefits in my contracting company. I've factored in a 1.5% premium on mortgage costs via an SPV compared with personal BTL mortgages. However it's worth noting that the mortgage advisers I've spoken to expect this gap to narrow over the next few years as more investors switch to using SPVs.

After crunching the numbers it looks like a subsidiary SPV is the best option for me, as I intend to invest for 20-30 years. If I was investing short-term (less than 10 years) then doing it personally would be the best option. This is mainly due to the differences in how capital gains are treated.

HTH

z.

[psychocandy]

I never said you were a scroat. I said as a contractor you are a disgrace.

Aw I'm filling up here.

[Old Greg]

Aw I'm filling up here.

I don't think petrol stations accept giro cheques as payment.

[psychocandy]

I don't think petrol stations accept giro cheques as payment.

Been a while OG. Dont think they even do giro cheques any more do they? Straight into bank account matey.

[psychocandy]

I don't think petrol stations accept giro cheques as payment.

I get the impression that because I claimed JSA once over 2 years ago I am now eternally damned in your eyes?

Might not sleep tonight after that or I might even cry myself to sleep.....