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

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

    Comment


    • #3
      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.

      Comment


      • #4
        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.

        Comment


        • #5
          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.

          Comment


          • #6
            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

            Comment

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