As a new landlord - bypass letting agent?

solidpro

Have you taken tax advice?

I have, and considered all those things. This is a long term investment and doing it as a limited company, especially as corporation tax is likely to come down at least 2% but perhaps 5% in the long term ultimately makes more sense.

When you factor in there are no likely changes to HMRC regarding interest on property loans as a business expense for property companies, the reason to function under a limited company becomes even more clear.

My income is already high enough without me paying more on the upper tax bracket with even less to claim back (due to the recent changes in individual landlord's taxes).

I'm not looking to smash and grab the capital, so those tax implications of getting the money out of the company in a short time isn't a problem.

solidpro

There are companies out there that will set up direct debits for private landlords (but not manage the property), so it's definitely an option. Having said that, I never paid rent by DD when I was renting, including when I lived in properties rented through letting agents.

Obtaining the right to take money from people's bank accounts (direct debit) is a difficult, time consuming and sometimes expensive proposition for many small businesses, which is why I believe many letting agents may also not have the option.

solidpro

we seem to be going off the topic of anyone else going ahead with managing properties directly over using letting agent. I'd love to hear anyone's experiences with making that choice...

Thanks!

HappyMJ

solidpro wrote: »

I have, and considered all those things. This is a long term investment and doing it that a limited company, especially as corporation tax is likely to come down at least 2% but perhaps 5% in the long term ultimately makes more sense.

My income is already high enough without me paying more on the upper tax bracket with even less to claim back (due to the recent changes in individual landlord's taxes).

I'm not looking to smash and grab the capital, so those tax implications of getting the money out of the company in a short time isn't a problem.

Even if corporation tax was set at zero you've still got to pay dividend tax on dividends over £5,000 per year.

Assuming you get dividends already from your IT business then you've got to pay 32.5% on everything the company pays you. £10,000 profit per year taxed at 20% and then the £8,000 dividend is taxed at 32.5% leaving you with £5,400.

Your personal tax rate is 40%...you would have been left with £6,000 had you purchased the property in your own name.

solidpro

Even if corporation tax was set at zero you've still got to pay dividend tax on dividends over £5,000 per year.

Sure thing. But I won't be taking any for a quite a few years, and even if we did, my partner doesn't earn anything right now, and she will be helping to run the company giving her plenty of good reasons to be on the payroll.

Your personal tax rate is 40%...you would have been left with £6,000 had you purchased the property in your own name.

That's still less than what is re-couped through a limited company. It's off topic anyway, and too complex to justify here, given all the individual aspects of why it makes sense. But thanks for the input.

benjus

As a landlord - I only had one property which is now sold, so not much experience. I didn't use an agent. The property was about 2.5 hours' drive from where I lived. If anything needed doing I'd give the tenant the number for the plumber or whatever to call and let them organise times etc, and the plumber just sent me the bill. That generally worked fine as the tenants were happy to be around to let the plumber in. If they had expected me to travel up there for it, it would have been a bit different.

I don't regret not using an agent. Joining a landlord association is a very good idea though - you'll get lots of resources.

As a tenant - I always had better experiences dealing direct with the landlord than through an agent.

solidpro

I don't regret not using an agent. Joining a landlord association is a very good idea though - you'll get lots of resources.

Many thanks for your experience, and that gives me a positive idea of being successful...

With landlord associations, there seem to be two main ones:

RLA (Residential Landlord’s Association)

NLA (National Landlord’s Association)

Can you recommend one, or both or something completely different?

Thanks!

*~Zephyr~*

I use an agent because my time is worth the cost. I also work full-time and can't be taking phone calls from a tenant at all times during the day. Some tenants like to be in constant contact with their LL for every minor incident and I need the agent to weed out the important phone calls from the "my windows are dirty, can I clean them?" ones. :eek:

Luckily, I've had a wonderful tenant for the past couple of years is an absolute treasure and I know that if she calls, its for a good reason and never for anything trivial. I'm hoping she stays for many years and, if she does, I'll probably drop the agent.

I'm a NLA member. I'm happy with them but can't recommend them over the RLA as I've never been a member of the RLA and so can't compare. I can't see there'd be much difference between the two though.

If you have an employee then you have a pension scheme. Channelling some of the Company profits into the pension scheme would be tax effective for your and the company. But your accountant will have told you that already.

You're not in Wales are you?

solidpro

Hi

Thanks for the perspective. I suspect I may well do a better job at vetting potential tenants than a letting agent, and therefore would hope that I may pick a good tenant over someone disconnect and earning a fee regardless of how difficult they may be.

Yes, it's likely the company will contribute towards pension funds as another aspect of the benefits of doing this under a limited company.

We're not in Wales.

Thanks!

Marvel1

solidpro wrote: »

I guess also (if it's allowed) can anyone recommend any other good forums or websites to do with smaller landlords, sharing knowledge and good ideas?

https://forums.moneysavingexpert.com/discussion/937335

https://forums.moneysavingexpert.com/discussion/1377883

https://forums.moneysavingexpert.com/discussion/comment/41155280#Comment_41155280

Also visit this forum often, as you get posts form both Landlords and Tenets.