Reply to: Buying properties with LTD

[courtg9000]

You could try that but there is going to be a lot of complexity and someone is going to want it at a lot less than it's really worth.

I used to broker some of these deals. It's not that complex but there is a limited market in terms of buyers and sellers. It really is for professionals only especially the larger portfolios. The discount generally is not as big as you might think but it does reflect the difference in selling a number of properties as singles and the ballache that could come especially with a larger portfolio split. If you think of the ballache in selling your own home and buying and moving to another and multiply that by x number of properties, you get the picture.

[northernladuk]

Is there a reason for the value to be less than the LtdCo is worth. Is not a company valued at assets plus x years' profit. Which in this case would be value of two flats plus profit on rent? Never having ventured into selling a company but having watched Dragon's Den religiously...

I'm just thinking about buying and selling anything generally. There has to be a benefit to the person buying and that is usually the price. Why pay full price for something they could easily set up themselves, fully understand the risks and buy the properties they need/want. Why is what you have for sale attractive? What's in it for the person buying? You've a very small pool of people that would be interested in buying a business like this and then there is the question of is what you've got exactly what they want further reducing the pool. What is left is highly likely to be someone that's knows their beans and if it is they are more than capable of doing this themselves and get exactly what they want i.e. the right houses, right location, right condition, known risks etc. What does your sale bring to the table that is worth the market rate? IMO next to nothing so they are going to expect a discount to make it worthwhile. At the very least they want it cheaper to cover their costs and time let alone a good reason to actually buy.

Could be totally wrong but looking at the complexities, risk and costs of the sale for something at full market price doesn't make it an attractive prospect.

[simes]

You could try that but there is going to be a lot of complexity and someone is going to want it at a lot less than it's really worth.

Is there a reason for the value to be less than the LtdCo is worth. Is not a company valued at assets plus x years' profit. Which in this case would be value of two flats plus profit on rent? Never having ventured into selling a company but having watched Dragon's Den religiously...

[northernladuk]

Could one not just sell the company as a going concern? I have two properties in my LtdCo and I am thinking, if as and when the time comes, I look into that. That'll be decades away so what may or may not possible now is not necessarily relevant.

You could try that but there is going to be a lot of complexity and someone is going to want it at a lot less than it's really worth.

[simes]

Have you looked at the full lifecycle of this property i.e. the tax/cash handling at the end? It's always been the advice of this board to do it personally. Entry in to the BTL looks very attractive using company money but it doesn't look quite as good once you look at disposing of the property and distributing the funds.

Could one not just sell the company as a going concern? I have two properties in my LtdCo and I am thinking, if as and when the time comes, I look into that. That'll be decades away so what may or may not possible now is not necessarily relevant.

[otellomix]

It's complicated, but can be rewarding. Some points from my experience:-

• A separate Ltd with the appropriate SIC is needed, 68209 for example.
• An inter-company loan can be used. Note that this needs to be repaid if you ever want to close your IT Ltd. It can be written off under specific circumstances.
• You can choose to charge 0% interest on the loan or a market rate (seems pointless in this scenario).
• You could use a holding company structure and issue dividends down from IT Ltd to Property SPV. Not usually worth the complexity though.
• Interest rates on SPV mortgages are high and tend to outweigh benefits of tax-deductible finance allowance.
• I like gisp's idea of converting the IT Ltd to an SPV. I considered this too but ultimately I had different plans.

In my case I had plans to retire from contracting. So I MVL'd, claimed BADR and then invested the personal funds into a new SPV: these were treated as personal loans into the SPV. Using those funds I purchased properties outright, in the SPV. The properties now tick over and generate healthy returns. The loans are repaid to me (personal) tax-free whenever (post corp. tax) profits allow and will take years to repay.

Thanks for this! To go point by point:

- This is the case for me and it has already been incorporated
- Yes I know about the loan
- Not according to my account, or better, to not raise attention from HMRC they said it's best to charge some interests
- What would be the complexity around the holding/group structure? I would only need the holding company as I already have the two LTDs which would be the subsidiaries. The big advantage I see is not having to pay back the loan and I could move funds without the need of a loan agreement, but I guess I'm missing something?
- I know mortgage rates are higher, I was prepared for this
- I'm not considering converting my main LTD as it seems complex to me, I'm in a contract now and all the funds I would need to buy the properties are generated from there

[ChimpMaster]

It's complicated, but can be rewarding. Some points from my experience:-

• A separate Ltd with the appropriate SIC is needed, 68209 for example.
• An inter-company loan can be used. Note that this needs to be repaid if you ever want to close your IT Ltd. It can be written off under specific circumstances.
• You can choose to charge 0% interest on the loan or a market rate (seems pointless in this scenario).
• You could use a holding company structure and issue dividends down from IT Ltd to Property SPV. Not usually worth the complexity though.
• Interest rates on SPV mortgages are high and tend to outweigh benefits of tax-deductible finance allowance.
• I like gisp's idea of converting the IT Ltd to an SPV. I considered this too but ultimately I had different plans.

In my case I had plans to retire from contracting. So I MVL'd, claimed BADR and then invested the personal funds into a new SPV: these were treated as personal loans into the SPV. Using those funds I purchased properties outright, in the SPV. The properties now tick over and generate healthy returns. The loans are repaid to me (personal) tax-free whenever (post corp. tax) profits allow and will take years to repay.

[BoredBloke]

I know this lost do them. Don't know if they are any good or not though

https://www.cumberland.co.uk/busines...es/holiday-let

[otellomix]

gisp I do need a mortgage

sreed Yes I know those things about the loan, unfortunately. That is why I was trying to find another possible way. Thanks!

[sreed]

Hi everyone,

I'm the only director and only shareholder of an LTD which over the years has been able to accumulate some liquidity. I've been looking into opening another LTD for the sole purpose of buying and renting properties and I wanted to use some funds from the primary LTD. It seems the way to go is a loan from the primary LTD to the secondary LTD and I have a couple of questions about this:
- do I have to set an interest rate on the loan or this can be interests free?
- do I have to have a repayment plan in the agreement or I can just outline a number of years and pay everything at the end of the term? (ie. I move 100k now, the repayment terms is 25 years and in 25 years I move the 100k back)
- isn't there another way to use funds from the primary LTD without the need of paying them back? I've been reading about setting up a Holding company as parent of both the LTD, but I'm not sure if it would be possible and especially if it would be worth it?

Thanks a lot.

I used an intercompany loan to get a BTL through a separate SPV a couple of months ago. The mortgage was with Kent Reliance and this is what my broker said KR needed to meet their policy -
- the intercompany loan needed to be documented, the loan needs to be repayable, with a term and interest rate. The document needed to be sent to the lender.
- the term of the loan should not exceed the term of the mortgage
- interest rate should be HMRC's standard rate

I forwarded the above to the accountant who sorted out the document. Mine does not specify a monthly payment or anything like that.

Don't know the answer to your last question, I'm assuming its possible but not sure it makes sense for a small portfolio. If you have a good accountant, best speak to them about it.

Perhaps I'm stating the obvious, but if you're buying the right property at the right price in the right location, it's always a good time to buy a BTL All the best.

[TheGreenBastard]

Anyone suggesting doing BTL in your own name (for people with another primary income stream [salary, PAYE]) don't know what they're talking about, that includes anyone calling themselves an esteemed accountant. If it's your primary income source, maybe.

You simply cannot enter the market now in your own name and make money. Any personally held mortgaged BTL that are coming up for mortgage renewal are going to get wrecked.

[northernladuk]

Could you elaborate a little bit? Are you referring to taxes when and if I will sell the property in the future? If we assume the mortgage will be extinguished, there will be capital gain. Anything I'm missing? I will have dividends tax if I decide to pull money from the LTD but I would have that anyway.

I can't as I don't really know so you need your accountant to give you a full breakdown of exit costs to the point the money is in your pocket. I believe from reading on here that it isn't always efficient to do it through the LTD but you need to understand it. You mention capital gains but that's not a thing with a LTD BTL. You will get taxed via corp tax on profit so you've a hole in your knowledge which you need to fill hence my comment about understanding the full lifecycle. Not steaming in and getting some nasty surprises at the other end.

[gisp]

I had already asked about that and my accountant said it wasn't possible to buy properties with the same LTD

It is most definitely possible if you don't need mortgage.
If you do, then it depends on the lender, but in theory possible.

If not, convert your LTD to SPV.

[otellomix]

I had already asked about that and my accountant said it wasn't possible to buy properties with the same LTD

[gisp]

I did it the other way around.
I converted my cash rich LTD into SPV.
Opened another LTD for IT contracting.
BTL mortgages were about 0.5% worse to this converted spv, than BTL mortgage to a new spv.
I went for cash buy at the end. Been getting 13% ROI. Not bad.
This is the most tax efficient way, no taxes.
Alternatively you can use current company for both property and contracting (just been suggested by my accountant), but that depends on the lender. Will they lend you money that way. If you don't need mortgage I'd go 2 activities LTD.