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Starting out with £100k equity

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Hello All,


I'm very excited to be here after having discovered the Property Podcast a month ago - since then I’ve been hooked!  So thank you very much to Rob and Rob for the education and entertainment.


Hopefully you guys can help me get off on the correct path:


My goal: to build a portfolio of professional lets over the next 20 years that will generate a net income of £3k a month (plus inflation)


My situation

- I own and live in a house in Cambridgeshire  

- Luckily I have just a touch over £100k in equity that I could currently release in order to invest in a BTL property to get my ‘portfolio' rolling

- I do not have an excess of time so I’m really looking for ‘hands-off' investing and management through managed professional lets


I’d really appreciate advice on the following:

- Given my goals and as a high rate tax payer, setting up a Ltd company seems to be the way to go.  How do you actually do this, how long does it take, how much does it cost?  Are there any sites or books out there that you recommend I read to help me with this?  

- Is this true: if I remortgage my own home, I can ‘lend’ the money to my company as a ‘Director's Loan’ for a deposit on BTL property.  I can then extract that money (plus interest) when I need it back to own person without having to pay tax.

- Once I have set up the company, can I legally back-date company expenses, to cover my expenditure pre-company start date? For example: traveling to check out potential investments, meeting with sourcing companies etc.

- Is there any noticeable difference in void periods of 1 bed verses 2 bed flats in city centres?

- How much can I expect to pay for accountancy fees for 1 or 2 properties on the books?

- I’ve crunched some figures for 1 and 2 bed flats in Central Manchester but, with conservative estimates on fees, rates and voids, the ROI usually comes out at 1 or 2% at best!  Are margins usually that tight on single lets? 


Thank you very much, any advice will be much appreciated.




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Start by speaking to a good broker to confirm you're mortgageable, and getting a good accountant to set up your Ltd Co.  Setting up a company and very cheap and quick (I paid £100 for my accountant to do it, you can get it done for cheaper but I wanted them to set it up).


Yes to directors loan, your accountant will run you through this. Always pay for professionals to advise you, you will save a lot in the long run than getting incorrect advice.  I believe you can backdate expenses, I read it somewhere, but your accountant will be able to confirm. I pay £700+VAT for Ltd Co accounts and £300+VAT for personal accounts a year.  If you don't yet have an accountant you may find this an interesting read - https://www.amazon.co.uk/Your-Accountant-Good-Bad-Greedy/dp/0995525609


Personally my route was to pick 'an' area, not necessarily the most exciting which currently seems to be Manchester followed by Liverpool (and Crewe if you're a TPP listener!), just one with good fundamentals and a buoyant rental market, then finding a great independent agent, once I had that I was able to find a few properties relatively quickly with their advice.


I buy houses, 2 bed terraced properties for the yield. Everyone has different reasons and preferences so go with what feels right to you.  I believe there will always be a strong market for houses whereas city centre flats can have a lot of tenant moves, I want long term tenants, but it is just my opinion.  Be wary of sourcing agents - I tend to book 30 viewings in 2 days and get viewings done, I do this every other month and find it easy to do, once you're on the ground you will learn a lot.


Best of luck.

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Hi Cornelius, property investment is so exciting, but it can also be stressful, so what works for one person might not work for another.


IF I were in your shoes, this is what I would do:


1. Definitely ltd co.  I’d use on online set up agent.  There are so many out there.  I bought one this morning for £3.99, but that works for me because I have my own registers and share certificates etc.  On the other hand, my husband bought one last month from the same agent for £59, because he wanted everything done for him.  Find a package that suits you best.  If you fill in everything correctly, and don’t use a ‘banned’ name, it should be formed in 1-3 hours.


2.  I always lend money to my companies, but the charging interest bit was too complex for me (I hate figures), so now I don’t charge interest.  If your accountant can sort it all out for you, you’d effectively get interest relief on your remortgage.  I’d keep it simple.  Do an agreement/minutes to document what you are doing.  You never know, it might come in handy if HMRC asks any questions.


3.  Re Back dating company expenses.  Some are automatically allowed, but I won’t say any more because I hate figures.


4.  Re voids - sorry, can’t say anything as these could vary from one road to the next, let alone town, or county.


5.  ROI - if you are only looking at 1-2%, it seems low based on what people tend to say are acceptable ROIs.  As a rule of thumb (because of my limitation with no’s), I have 65% - 75% LTV mortgages and go for rents that will pay 110% of the mortgage + give me at least £500 pm on single let’s (flats).  With HMOs, my requirement is that 50% of the rooms be able to pay the mortgage.


6.  Cost of accountancy services - will probably depend on who you use, and what you want them to do.  I have single property companies, and my accountant charges £840 for the first one and discounts the others.  I’d allow £1000 for a 1-2 property company.


Also, I don’t buy anywhere more than 1hr’s drive away from my home - but then I self manage.  Further, I never buy in an area that I don’t know (that is just me).  Work out your own strategy, and go for it.


In London, most councils will take a house off you for c. 5 years, and pay you rent every month.  Do the councils in the areas you are looking at do this?  They pay a bit less than the market rates, but if so, this way you could be completely hands-off, and not suffer any voids either.  What would suit you best?  Good luck :).

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