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  • Property-a-holics

    Owning BTL property outright the way to go?

    But I wouldn't be able to gift the property to say a son unless the mortgage was paid off though?

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    Doesn’t this benefit depend on whether you buy in a company or not? I believe I can add my son to a list of shareholders and when I die he would inherit the property without any inheritance tax?

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    Assuming I could persuade the taxman it qualifies for business relief?

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    I wouldn't be looking to buy any more in a company, none are in there so far and I don't think it's financially worthwhile to do it. With large CG in the SE up until now it would cost a lot of money to sell into a company, and not much point having a company for no more than 1 purchase.

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    Hi Adam,

    I couldnt agree more on transferring-in, but I am buying new in a ltd company. I was of a similar view, but worked-out if my wife stops paying into her personal pension and instead we pay into it from the pension, we have essentially go the money back out without any tax (we can keep the money she was paying in in our pockets) I have no intention of selling up our personally-owned but I like having two options - one where we get personal Cat allowances and one which negates section 24 and gives us greater flexibility to bring in new investors/plan inheritance.

    As you I haven’t done my annual return or tax return - but how hard can it be?

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    I  don't think this is correct. For most businesses it's true but companies that hold property for rental purposes, including commercial property, still incur inheritance tax on the properties as far as I am aware. I'd be pleased to be proven wrong but I don't think I am.

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    Hi Alison - you are correct companies that hold investment properties are subject to iht- but I think it may be possible to become a trading company by tweaking your activities at the appropriate point?

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    I'm planning on buying in a Family Investment Company with funds from an inherited property.

    In simple terms I will gift 49% of the shares to my daughter at £1 each, these will be the shares that have legal ownership of the properties, I will retain 49% of the shares, these will have beneficial ownership of the properties. The remaining 2% will be voting shares, which I will retain for now as director. The funds will be provided via a director's loan.

    As long as the DL is paid down to below the IHT threshold there is no IHT liability as far as I am aware. I can gift the voting and beneficial shares at any point I choose and they will remain low value. The FIC will be an investment/holding company.

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    It all depends on your time horizons and attitude to risk. Its all very well people talking of how their investments have performed over the last 7 years or so, just about anyone buying then will have done well.

    The convenient calculations using continual rent growth and capital appreciation are nonsense over a 20 year period and it will all vary depending on your location.

    on a building i converted in 2002 the rents still lag inflation over that period by over 20%, most of that is at long last recoverable but tenants currently in situ could never afford such increases so i need to increase modestly each year and make hay when tenants change ( though as rents are low turnover is reduced) , the building itself is probably worth only 10-15% more than it was at its 2007 peak.

    however i’m not a hard nosed , income is everything landlord, i converted and built to provide an early retirement from my main occupation. Imcould have made much better decisions but also could have made much worse.

    The point at which you buy in the property value and interest rate cycle will have far more effect than many other factors. Between my own residence and flats i have 1 interest only mortgage outstanding , i have in addition  an offset mortgage i can draw down on on my own house if i need access to funds and a war chest if a good deal comes up, for me that means a 7% return on a cash purchase of a building in reasonable condition and lettable on completion or variable return around those criteria. I don’t see that being likely until section 24 is fully implemented ,there is a downturn or labour gain power , though at that point i’d want much greater returns.

    the mortgae i have is a lifetime tracker taken out when money was being given away, as such there is no point paying it down in the current interest environment.

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    " The convenient calculations using continual rent growth and capital appreciation are nonsense over a 20 year period and it will all vary depending on your location. "

    This is how I feel now as well. Up until a few months ago I was using inflation/3% as a benchmark for prices etc. but when you run them through the spreadsheet you realise just like many Govt. figures they've been massaged to give a viewpoint. They're all based on low-value items anyway, so have little relation imho to £1000+pcm rent or £300k+ properties for example.

    As I've always said on here, 3% of very little is sweet FA!

    From here on in with figures I'm going to work with what I'm seeing in my locale, what has been achieved, and add in an arbitrary future projection which will be VERY conservative based on where I see UK PLC and all it's representatives ;->

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