Ltd Company Buy to Let ?

jamesml

Holly, do you just mean that the company needs to record at Co House that it also has another trade? I have never heard of having to 'register' as a property holding company - what on earth is this? Who do you 'register' with? All you have to do is contact Co House and let them know there is an additional trade within the limited company and you have the 'property trading' SIC added to your Co House record surely.

Prothet_of_Doom

Last return I made I added a couple of activities from the massive list:

http://www.companieshouse.gov.uk/infoAndGuide/sic/sic2007.shtml

At present I list 3 Principal activities, but would remove 2 and use the ones below. Isn't it that simple ?

68209 ? Other letting and operating of own or leased real estate

and

71122 Engineering related scientific and technical consulting activities

Thrugelmir

Prothet_of_Doom wrote: »

In what way would they get their fingers burned ?

A Company has no income as such. Profit is earnt from the trading activities of the Company. So should you find yourself contract less and the property vacant. Other than the available cash reserves there is nothing to service the cash flow requirements of the Company.

One issue with a Company owning the property. Is that the Company will pay tax on the disposal if a gain is crystallised. Further tax will be paid when the Company distributes the remaining profit to the shareholders.

Even if you find a lender. You'll still need to provide personal sureties against the money advanced.

amnblog

POD - you should speak to your accountant before you do anything else.

Mattygroves2

You need to make sure your Articles of Association, as lodged with Companies House, allow you to invest in property rather than simply changing your list of activities. If they don't then legally your company can't do what you want to do. As said above speak to your accountant.

holly_hobby

jamesml wrote: »

Holly, do you just mean that the company needs to record at Co House that it also has another trade? I have never heard of having to 'register' as a property holding company

As noted by Matty, by my earlier referring to registration and permissions

holly_hobby wrote: »

unless the Company have permissions to hold property

I'm actually referring to the details of the registered Articles Of Assoc. (AOA), which denote amongst other things, responsibilities of the directors, and more importantly define the nature and trading activity of the business (along with Memorandum of Association) - which as I say is what I meant by registration.


So OP, unless the Ltd Co has such definitions under their AOA, you can suffer some pretty hefty consequences from company hse, as they take breaches pretty seriously, which can include disqualification from being a co director, so its important to make sure things are top and tailed before diving in.

As I said way back, and others have implored, please involve your accountant in your considerations re owning property within a company wrapper, to which if you still want to proceed, they'll guide and deal with companies hse re any articles etc ..... obtaining Ltd Co BTL finance (if not purchasing for cash) will be the next hurdle to tackle ....

Hope this clarifies

Holly x

Prothet_of_Doom

Thank you. Must read the articles of association, again.

Prothet_of_Doom

Well, after 16 months of Procrastination, during which time, I have done much research and erm procrastination, I (with my wife) have had an offer accepted on a Property about 5 miles away from our home, and Today send the mortgage application off.
We could have got a BTL mortgage via the ltd company, but the interest rates were a bit silly, so most of the deposit is coming from the ltd company as dividend.
The last 2 months have been very interesting, watching my wife go from naive and trusting, to hardfaced wannabe Landlord, who only trusts what she is told if there are facts to back up the statement.
We started off looking at a property that backs on to our own, and decided the cheap, for a reason, wasn't cheap enough. To put it in context, typically nice 3 bed semi's have sold recently for £160K, and this needed a new bathroom, rewiring, central heating, kitchen, ceilings repaired, windows all round.

Now to me a rough estimate is either 1 year of EVERY weekend and £20K of materials, or it's 4 months of local trades men and £40K.

Now lets just say that you had £50K for the deposit and fees. On a BTL mortgage you can't borrow more than 75% so assuming you managed to do the work for £20K, you have £25K for the deposit, so the max we could really offer was £90K to £95K. Which rather than get a reputation with that agent, we decided wasn't worth asking for 35% off.
Then we looked at a house about 1/3 mile away, and decided that the "motorway" noise was not going to do the lettability any favours.
At this point we had booked to see another similar house, when my wife's first step to treating it like a business was taken.

We looked more closely at the actual rent and decided we might not bother.

So then we moved our target from £150K houses within 1/2 mile of us, which would rent for £700 a month, to £100K houses 5 miles away that would rent out for £550 a month.

We went to look at 2 tiny terraces, and one had the bathroom, via a bed room, that was too small for a bed. (It is now under offer, so someone saw the potential) and a one bed flat that was quite erm cheap but in a nice area (if you discount the pub next door and the petrol station across the road)
The other terrace was the first time an agent showed us around. And at this point I remembered why I hate estate agents. They never really tell the truth do they ? I'm looking at the old style fuse box and ask if it's been rewired. Yes recently apparently. (If the 1970's is recently, then yes indeed it has been rewired)
This agent side tracked us, by then trying to sell us a 13 year old purpose built 2 bed flat in a block about 3 miles away, where the postcode and area perhaps are less desirable.
Being the snob I am, I was pleasantly surprised, both in the immediate area (nothing too nasty within 3/4 mile or so) and in the flat, which needed some seriously easy TLC - as in decorating and work tops, and lino, and carpet (or laminate)
We found out the current yearly management costs for the block, and very clinically made an offer based on the fact that £930 was as much as the mortgage would be.
And the agent had been seriously bullcrapping about the likely income from the rent.
Our offer was rejected. We upped the offer a bit, and then decided that if they came back with a counter offer we'd stick based on the figures.
They came back a bit lower, but by this time, we'd viewed the house that we have now just put in a mortgage offer, and decided to offer on that instead.

Prothet_of_Doom

So when we started looking, I showed my wife the details of this 3 bed terrace, and she dismissed it out of hand. Anyway, I showed her 2 months later, and 24 hours later we are putting in an offer. Which was reasonable, not insulting, and accepted 2 days later.
And this is where the fun starts. So for 3 months I've been talking to 2 mortgage brokers, one of whom is an "expert" in Contractor Mortgages, and one who is an "expert" in buy to let mortgages.
Apparently I've given them both enough information that we are good to go. Fantastic smoke and mirrors sales patter.
I'll cut the story short. In the end I phoned up the lender who seemed to have the best deal online, and explained all the "issues" that these people seemed to think were a problem. None of the issues are an issue.
For instance. Last Year Jointly our 2 p60's show a combined salary of £20K, and my Self assessment shows a tiny dividend of £4,500.
Most lenders want you to be able to may the interest if it all goes titsup, and therefore expect to see an income of £25K.
My Ltd company accounts show an after Corporation Tax Profit of £24K, which is money I could have taken in dividend but chose not to. It's lower than it might have been because the business makes pension contributions which are a business cost lowering profit.
The person I spoke to at the lender explained that they will add up the p60's, add up the after CT tax profit, and decide that it comes to £44K, which is MORE than £24K. 2 sets of Ltd co accounts, 1 P60 each, 2 payslips each, they might write to the accountant, they might not.
Why this was such a problem with the "experts" I have no idea.

My only worry is if the valuation survey Thinks it isn't worth what we think it is. It was up for sale with 2 agents, and one (who are now handling the sale) had it as a 2 bed, with a "study" of 5 x 9 which is less that the 50 square foot normally deemed to be suitable for a child. And the other had it as a 3 bed, I suspect because they are estate agents and are prone to BS.
We see it as a 2 bed, and based our offer on it being a 2 bed. But we shall wait and see.

silvercar

So bottom line is that it isn't a company BTL but a personal BTL with the lender seeing (you hope) the tax efficient way you have adjusted your income to minimise your tax bill.