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Refurb works within SPV Ltd company


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Morning All,

Just in the process of selling my first flip and now looking to move towards the BTL investment route. My plan will most likely involve carrying out works to these BTLs to increase the market value. 
The question I have - When creating a company, am I okay to just have 1 SPV Ltd company to buy, carry out refurb works, refinance with BTL mortgages and also hold the properties. Or will I need to form a parent company that specialises in carrying out the refurb works on the properties held in a separate SPV? 
 

Thanks.

 

Alex

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Hi Alex

Interested to see who responds on this because I am not sure whether I have done this correctly. I have personally carried out the refurb, refinanced and then let to tenants, all within the same SPV. As I understand it the refinance is a loan so is not treated as profit and therefore isn't taxed. This allows me to invest it into the next property. Only issue is that it looks like the company is performing terribly financially as it has large capital investments & large debt for relatively small monthly income. However the books don't take into account the large uplift in equity that has been achieved. As I said, interested to see what others say.

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You want to avoid Parent Companies and Group Structures, when it comes to getting mortgages for Buy-to-Let Purposes.

Most mortgage lenders do not like complex structures and want people as the shareholders/directors not other companies. As this increases the risk in there view and complicates the legal process.

You can use the same SPV to Buy, Renovate and Rent (BRR) a property.

You should use a different entity or personal name to Buy, Renovate, Sell (BRS) a property, as that is trading/construction and mortgage lenders do not like that either. Though if you do this every now and then its not bad, its if its routine thing they wont like it at all.

:wub: Get Mortgage Advice from my Team at Bespoke Finance on 08009202001 or email hello@bespokefinance.info 
:ph34r: 
Please don't take my messages on Property Hub as Personal Financial Advice, just a rambling guy passing time on a Coffee Break.
 

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Trading and investing activity is also best kept separate from a tax perspective. Trading companies receive more beneficial tax treatment than investing companies when you come to sell your shares or wind up the company in the future. Also if it is 2 separate companies you can use inter-company loans which can be a tax efficient method of moving funds from the trading company to the investing company to buy property.

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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I have been doing this for last 5 years and have had no problems with the buy/renovate/rent/mortgage process or my accounts. I sold 1 property but it wasn't a flip as such - just decided the property wasn't performing for me. The accountant said its fine for a BTL SPV to do the occasional sale if it needs to as that not the same as 'trading'. All good so far..

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21 minutes ago, haf1963 said:

The accountant said its fine for a BTL SPV to do the occasional sale if it needs to as that not the same as 'trading'. All good so far..

Yes it is different if an investing company makes the occasional sale of its investment stock to realise a gain but based on the question it appeared to be a traditional flip that Alex was talking about, purchased to make a profit in the short term, which would be a trade. The type of finance used and length of time held would be a good clue as to which activity was being conducted. 

David M Slater ACMA 

Accufy Accounting  - Proactive accounting for property investors 

0208 242 4926    info@accufy.uk

 

 

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