Buy to Let - How I made £100 @ month

missk_ensington

Wonder if my Mum can get BTL mortgage instead? Think its because she in a Company that she has Commercial Loans. It has its bonus' though as she pays no tax! Because its a company she always ensures a profitable rental is cancelled out by a rental which has had thousands spent on it. Thus, never officially making anything, and equity isn't profit :rotfl:

Tassotti

I don't think you can get BTLs for commercial properties, as they are based on residential property.

Creative accounting can always be applied to any business

Hereward

missk_ensington wrote:

Wonder if my Mum can get BTL mortgage instead? Think its because she in a Company that she has Commercial Loans. It has its bonus' though as she pays no tax! Because its a company she always ensures a profitable rental is cancelled out by a rental which has had thousands spent on it.

Most BTLers offset the interest of their mortgages against their income to reduce their tax liability, so in theory the only benefit of swapping to a BTL mortgages is that the rates are possibly lower.

Thus, never officially making anything, and equity isn't profit :rotfl:

Unfortunately that isn’t true. When your mother comes to release the equity in her portfolio (through selling it) any rise in the asset value is considered to be profit, but some costs and relief’s can be used to reduce the liability.

missk_ensington

Hereward, they are never intended to be sold. The idea is that in 8 years when the loans are paid off (started at 15 years) she will have a comfortable living from the rent of 20 properties and barely any costs. No doubt she will pay tax on this but it will be such a large sum coming in that I don't think she'll care.

She wouldn't pay tax when she releases equity and sells one, because she'd go and live in it for 2 years first and make it her main residency :rotfl:

Tassotti

you are confused missk

moving in for 2 years would make no difference to the CGT position.

Anyway, where would the bedroom be...in the shop window :rotfl:

missk_ensington

Tassotti- many of her properties are ordeinary domestic rentals and other half Commercial (she only went into Commercial in the last eyar or so).

If I am not mistaken you don't pay CGT on your own home that you live in, hence why I intend living in all my developments (as difficult and depressing as that often is when you find brick dust in your cornflakes!!!)

Pennywise

missk_ensington wrote:

Tassotti- many of her properties are ordeinary domestic rentals and other half Commercial (she only went into Commercial in the last eyar or so).

If I am not mistaken you don't pay CGT on your own home that you live in, hence why I intend living in all my developments (as difficult and depressing as that often is when you find brick dust in your cornflakes!!!)

I think the point that Tassotti is making is that since the company owns the properties, there is no principal private residence (PPR) relief - companies are not entitled to that relief nor the letting relief nor taper relief. Worse still, if she moved into a house owned by her company, there would be quite a large tax/NIC bill as it would be a taxable benefit in kind unless she paid the company a market rent for the property. The only way she could get PPR relief would be to buy the property from the company - but that has to be at market value, so the company would pay tax on its full profit, and mother would not make much, if any, profit as its value would not rise much in the two years.

As for your own idea of living in the properties as you do them up - a good idea in theory, but HMRC can refuse PPR relief and tax the profit as trading profit (with no CGT gains) if your intention was profit - so a chain of houses you buy, live in, do up and then sell, would not guarantee you tax exemption - in fact probably more tax/nic as the profits would be trading profits not capital gains.

Tassotti

missk_ensington wrote:

Tassotti- many of her properties are ordeinary domestic rentals and other half Commercial (she only went into Commercial in the last eyar or so).

In that case, it may be better to move the commercial loans to BTL mortgages on the residential properties and make a bit more money on the rental income.

See above for the tax situation

robwend

realwildone wrote:

This has got to be the worst investment ever. Are you that thick that you cannot make more money for your investment than 1200 a year.

Oh my god. I cannot believe the insanity out there.

is a personal attack a vaild post? i think not . how rude are you mr!.if you cant be pleasant shut the duck up

clutton_2

ignore him robwend - he's just a wind-up merchant and not worth it.