Buying commercial property with a SIPP

booka787

I am hoping I can get a steer on this as there’s a lot of confusing guides out there!

I have a commercial property with a commercial mortgage on it with a residential flat above it and would like to know:

1) the mortgage outstanding on the property is the same as my SIPP value with HL (circa £80k) so is there a way I can pay off the mortgage with a SIPP)

2) does all of the rent received from the whole property have to be paid into the SIPP or just the interest or whatever calculated on the £80k? The property is currently generating over £2k a month in rent. 

3) can I self manage the property or do it have to go to a management service provided by the SIPP company?

4) what would the fees/charges be on such a transaction?

Just to be clear, my ultimate target is to be able to utilise the money locked in my SIPP to pay off the very high interest commercial mortgage, however some of the monthly rental is used for my own income at the moment so would I not be able to personally use any of the rental income if I bought the mortgage out with my whole SIPP?

thanks in advance for any help which will be much appreciated! 

dunstonh

) the mortgage outstanding on the property is the same as my SIPP value with HL (circa £80k) so is there a way I can pay off the mortgage with a SIPP)

Not unless you are aged over 55.

2) does all of the rent received from the whole property have to be paid into the SIPP or just the interest or whatever calculated on the £80k? The property is currently generating over £2k a month in rent. 

properties held in a SIPP are owned by the SIPP.   So, any revenue from them belongs to the SIPP.

3) can I self manage the property or do it have to go to a management service provided by the SIPP company?

It will no longer be your property.  It will be up to the SIPP administrator to what level of management is required and when.

4) what would the fees/charges be on such a transaction?

Most SIPP providers that engage in commercial property will have their tariff on their website.   it wont be cheap.

HappyHarry

First off, you will need to separate the residential flat and the commercial property into two properties, as the tax penalty for putting residential property into a SIPP is prohibitive.

Then, you need to either purchase the commercial property with funds from the SIPP, or contribute the commercial property to the SIPP whilst bering in mind your annual contribution limits. You will need a SIPP that is able to take out a mortgage to help fund the property purchase.

1. No, that makes no sense, the SIPP is looking to purchase the property from its current owner.
2. The rent belongs to the owner - in this case the SIPP.
3. The SIPP can employ someone to manage the property. You need to be careful making that yourself, as it should be done "at arms length" to avoid unauthorised payments from the SIPP, and subsequent penalties.
4 Whatever you agree.