New startup property investment company

[TimCamb]

Hi

 

Absolutely new to this and want some advice before I decide on a strategy.

 

My wife and I currently run a successful business partnership which puts us both close to the additional rate tax bracket.

We are paying back a personal loan to buy out my old partner which will be paid in 4 years time.

We have over 500K equity in our own home which the bank will let us borrow against.

We own the business property in a SIPP fund (total SIPP value about 120K, no mortgage with rent paid by the business).

The SIPP fund returns 4K a year after fund fees but the property has not appreciated in 10 years.

 

We would like to retire when the old partners loan is paid off in 4 years time and we would need income of 50K pa. once retired.

We may be able to sell the business in 4 years but it is not guaranteed (as we pretty much are the business).

Currently we save roughly 25K a year after tax is paid.

 

My initial thought is to start a new Ltd company for the properties and possibly make our children directors as well (future planning).

I don't think there is any way of getting the money out of the SIPP (I took 25% 3 years ago as tax free cash).

 

Should I re-mortgage our home (I can get a rate of 1.3% interest only but we would end up paying it) and use those funds to buy properties.

Should I rely on the 25K a year savings as a deposit and take out a BTL mortgage at a much higher rate.

Is there another way of doing this?

Should the funds go into the company as a director's loan (so it can be repaid in the future if/when the properties appreciate).

House prices in our region are typically 200K for a 3 bed semi and rent for 950 a month but happy to look at other areas.

 

Our key aim is to get enough income to retire in 4 years and ideally (but not essentially) repay the personal loans in 10.

 

Thanks for your thoughts - please be blunt.

Tim, wannabe investor.

[Darren McNeill]

Hi Tim,

 

You have mentioned that you require £50k pa once retired - is this to fully be fulfilled by property or will you have other forms of income such as a pension etc?

 

Once you have the income that is required from property, then ideally you need to work out how many properties that may look like, so using the example you gave with the 200k property returning 950 pcm:

 

200k purchase

50k deposit

2k legals

0.6k per year running costs

3.69%  Ltd Co interest rate

 

This would return you 4,804 per year after expenses (excluding tax).  If you needed 50k per year then ideally you would require 11 properties, so needing £572,000.  These numbers are of course very basic and there is likely to be more costs involved etc, but they give you a rough idea.

 

With regards to your purchase funds, you have mentioned that you are saving 25k pa at the moment, but haven't specified how much you currently have saved?  Now that you have a rough idea of how much capital you would require, you can then start to look at what equity you should release from your home (if you chose to do so of course!).  Have you factored in the increase in your mortgage payments if you release equity etc?

 

There is still quite a bit that you need to think about etc but hopefully the above can help you to focus on the areas that you need to.

 

Darren

 

www.fmp-investments.com

www.f-m-p.uk

property@f-m-p.uk

I am looking for private financing

with a 10% ROI - get in touch

 

[marcopalco]

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