Limited company

Discussion in 'General Property Investment Discussion' started by Deanb7823, Aug 3, 2018.

  1. Deanb7823

    Deanb7823 New Member

    hi all

    Cut a long storey short, I’ve got a few flips under my belt over the past couple of years part-time (currently employed carpenter) but now looking to form a ltd company to buy property for rental income and teaming up with my brother who’s also employed (fire service HGV technician) I was wondering if this was a good thing to do as it gives us more lending power and stability when making deals and so on? Or just me? I have a meeting with a accountant next week who I know who deals with landlords/investors and he will probably give me the different pathways to doing this and setting my company up. I have a few questions for my accountant would there be anything else worth noting before my meeting?

    Thanks for reading.
  2. diyhelp

    diyhelp Active Member

    Personally if you are looking to do this in the long term then setting up a company would in my mind be the best way to do it. Raising finance as a young company may not be much different from raising finance as an individual as I think, until you are established, they will require a personal guarantee for finance.

    One thing many people fail to realise with a property company is that when you finally decide to cash in your chips you can sell the company without having to do individual deals for each property. In this scenario the company would remain as the owner of the properties but the ownership of the company changes hands - thereby saving on solicitors fees.
  3. Deanb7823

    Deanb7823 New Member

    Long term will obviously be more beneficial with multiple properties. Do you mean a personal guarantee as in secured against my residential home? Or a person who will repay the debt if I couldn’t? And that’s a good point you’ve made there if I was to cash out later on. Cheers
  4. realdeals

    realdeals Active Member

    That is a very interesting point, selling the company in the long term as a portfolio of properties. If you have a number of properties this could save a fortune in legal fees and paperwork. A simple sale of shares in the company would suffice.
  5. Longterminvestor

    Longterminvestor Administrator

    A lot will depend on the % of deposit you can put down on any properties you buy in the future. Even though some mortgage companies are advertising mortgages up to 95% of the property value (again!) I doubt this would be available to a company but I could be wrong.
  6. Deanb7823

    Deanb7823 New Member

    95% LTV is only available for residentials not buy to let though? Right?
  7. diyhelp

    diyhelp Active Member

    Good point @Deanb7823

    That kind of LTV would not be avilable to buy to let investors although I would be interested to hear what kind of quotes you receive when you start applying for finance.
  8. Deanb7823

    Deanb7823 New Member

    Another thing I’m stuck with is the ownership of a limited company for two people when starting out from scratch with 0 assets in the company. For example would it matter if the ownership is 90%-10% or 50%-50% when it comes to getting mortgages/finance in the company? obviously our salaries from our personal jobs come In to play when applying for these mortgages to begin with as we would be personal guarantors. Can anyone help me with this please?
  9. Longterminvestor

    Longterminvestor Administrator

    Mmmm difficult one. I would assume that no shareholder would guarantee a mortgage 50/50 when the shareholding of the company was say 90/10 in another party's favour. As mentioned above, securing finance for a company, without a personal guarantee, is a whole different ball game.

    Some interesting pointers here:-
  10. Deanb7823

    Deanb7823 New Member

    Certainly is. You know lenders these days they want blood. I’m just going to keep the company in a 50/50 structure to avoid falling into any holes if lenders was to request this. Being a personal guarantee is what I’ll be doing a lot of in the early stages when starting out with 0 assets in the company.
  11. diyhelp

    diyhelp Active Member

    If you are taking on the majority of the risk with a personal guarantee then this needs to be reflected in the company set-up - maybe, further down the line, the payment of a special dividend just to you as a % of the profit on the property. In essence, you cannot be seen to take on the lions share of the risk without some kind of financial benefit as that would be crazy.
  12. Loooouu

    Loooouu New Member

    Hi everyone, i also have a couple of questions relating to a LTD company,

    I'm completely new to property and really hoping someone can give me some advice. Basically me and my sister are looking to go into property investment together, from the people we have spoken to they have said most people these days are setting themselves as a LTD company for Tax purposes. However no-one has given us any advice other than that and i'm wanting to know how i can work out if this is going to be the best route for us to go down. . . . Also someone has mentioned an SPV to me and that this is the better option than an LTD,

    Please can someone tell me which is the better option, or pro's & cons of these as i really dont want to get this wrong so early on and im not entirely sure whats right as so many people say different things.

    thanks in advance :)
  13. realdeals

    realdeals Active Member

  14. Longterminvestor

    Longterminvestor Administrator

    Buying and managing property within a limited company can, hopefully, shield you from any personal tax changes the government continues to roll out against landlords. As mentioned above, this would take in the changes to personal buy to let investments and the fact they are tapering down the amount of mortgage interest which can be offset against rental income. In a company this would not change, all finance charges can be offset against company income.

    However, its always best to speak to your accountant before you start making plans :)
  15. FWL

    FWL Member

    If you are looking to build up a sizeable property portfolio I would recommend going down the limited company route. Interesting points about the shareholding - the risk/investment/work needs to be split between shareholders so that all get out what they "deserve" in terms of dividends, wages, etc.

    It is also vital to keep all parties motivated - if one party has 30% of the shares and the other 70% then the minority shareholder may lose motivation further down the line. Difficult subject to sort out but one which you cant just sweep under the carpet.

Share This Page