LandlordZONE

22

Nov, 2014

Saturday

Results 1 to 6 of 6
  1. #1

    Default My dad has 10 buy to let properties, can i turn this into a company??

    Hi All,

    I would like some advise on a couple of things...

    • My dad currently has 10 buy to let properties.

    • All on interest only mortgages.

    • He manages them all and he's now getting a bit old (68).

    • He would like to offload the properties to us kids, or sell them.

    • There isn't much equity in the houses, so make a profit.

    • Time is not on his side!


    The issue is he's making a good profit on all houses in terms of rent vs mortgage and will continue to do so even if the rates rise by a couple of percentage.

    He would like to hand over a couple of houses to me but the mortgage providers are not happy with his credit so they wont put me on the deeds.

    What are our options? Having them managed by an estate agent has failed on several occasions.
    Is there a way we can combine all the mortgages into 1?
    Can we create a company to hold the mortgage debt?
    Is it possible to get a commercial mortgage to cover all properties?
    How can he hand over the houses to us kids without getting stung by capital gains tax?

    Any advise is much appreciated.

    Thanks

    Jeffers

  2. #2
    Join Date
    Jul 2008
    Location
    help@tenancyservices.co.uk
    Posts
    15,862

    Default

    Ah, if only we could all avoid Capital Gains Tax, wouldn't that be nice?

  3. #3
    Join Date
    Jun 2008
    Location
    oop north
    Posts
    5,255

    Default

    Is there a way we can combine all the mortgages into 1?

    the only way is to ask the mortgage lenders.

    Me, I would say no to your dad.

    10 properties on interest only mortgages. !
    Which, when all mortgage terms end, and end within
    a few years of each other, the current owner HAS to
    repay the loan, in full.

    Assume £100000 per property value,
    Where are you going to get one million pounds from ? to
    pay the loans off ?
    ( only the interest on the loan is
    being paid off .)

    tell your dad to sell all, put it in bank, then write his will,
    when he knows all are sold, and money is in the bank

    Have a nice day ?

    R.a.M.

  4. #4
    Join Date
    Jun 2008
    Location
    Andalucía
    Posts
    9,804

    Default

    Having regard to the size of the portfolio, and in any event, I think your father needs to take professional advice from a tax specialist lawyer or accountant, if not both. Taking into account your father's over all estate and his concerns they can advise how best to proceed.

  5. #5
    Join Date
    Jun 2008
    Location
    oop north
    Posts
    5,255

    Default

    The issue is he's making a good profit on all houses in terms of rent vs mortgage and will continue to do so even if the rates rise by a couple of percentage.
    As stated above, serious investigation is needed, and legal advice
    together with an accountant being given the loan outstanding
    and todays value of the property (which may be less that what was
    paid for property ).

    You are not making a profit until you include the money owing
    on the property, such as working forward to the end of the
    loan, (20years ? )and your current profit at the end of the loan (saved ) adds up to more than what you have to pay back
    to the lenders ( 1 / 2 million pounds.)

    The profit in your case, is money left after having paid off the
    loans, and NOT money left after paying the interest only !

    If you get £ 500 per month rent, less void periods, less interest
    payments, repairs, insurance, legal expenses, YOUR time, etc etc.
    you may be left with £ 200/300 per month income.( Not profit )

    1 million pounds owing on the property, means that at £ 300
    income per month towards paying off the loans at the end of
    the mortages, = £ 36000 per year income towards paying off
    the loans.
    1 million divided by £ 36000 equals 27 years to acrue 1 million
    pounds to pay off the loans when due, so at the moment, you
    are running at a loss.

    Tell your dad that you dont want to find 1 million pounds when
    loans are due, nor do you want to find £ 100000 to pay off
    just one property loan when due.
    Yes, you can sell the property, ( then have topay off the FULL
    original loan ) but that's not very nice for the peoplethat have
    made your property their home, and you have to tell them to get
    out.

    we of course don't have your financial details, but hope above
    shows you could be lumbered to having to sell property
    just to pay off the full loan, and depending when property
    was bought, may sell for less than you owe.

    R.a.M.

  6. #6

    Default

    Thanks for all the advise, I was thinking of taking over a couple of his properties, as i currently manage one already. Mine is also on interest only but I save the difference in costs vs rent income so can make over payments at the end of the year.

    He's worked his nuts off for these houses and I wanted to make sure he's doing the right thing.
    Some of the houses he cant sell! by the time he's sold the property, paid CGT, agent fee's and costs, it would leave him just about even.
    The minimum term on 1 house is 6 years going up to 14.

    So yes - we need to do something, just wanted idea's!!!

    I'll contact the experts and seek further advise,

    Many thanks

    Jeffers

Similar Threads

  1. CGT for a ltd company rolling rental properties
    By DeanK in forum Tax Questions
    Replies: 2
    Last Post: 28-02-2012, 18:15 PM
  2. Transfering Use of properties into a limited company
    By RomansProperties in forum Finance & Investment Questions
    Replies: 1
    Last Post: 29-11-2010, 06:09 AM
  3. Leasing my own properties to my own limited company
    By Zanzibar in forum Residential Letting Questions
    Replies: 4
    Last Post: 04-04-2010, 11:46 AM
  4. Replies: 6
    Last Post: 29-03-2010, 18:00 PM
  5. Think of changing my properties over to a Ltd company
    By Just joint in forum Finance & Investment Questions
    Replies: 9
    Last Post: 31-01-2006, 12:42 PM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •