Company structure and mortgages for family property

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    Company structure and mortgages for family property

    Hi all,

    Our family owns a block of property which consists of 5 flats (1&2 bedrooms), a block of garages, and 2 commercial units.

    The annual rental is approx. £35k per annum.

    We have no mortgages or outstanding liabilities.

    We would like to use the equity we have, to finance further buy-to-let properties.

    How should we go about doing this? The properties are currently held in my parents name and they are (60 and 70 years old), so they fear a personal mortgage won't work due to their ages. They have suggested setting up a property co. and getting a portfolio mortgage but we have no experience in this area.

    Could somebody please advise?


    #2
    You need a specialist mortgage broker, because that's a complicated porfolio.

    And, probably a family solicitor, because the IHT on that would be painful.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      The trouble is that if your parents have owned for many years there will be a large potential CGT liability on a disposal of the property to a limited company. Even if they transfer it at an undervaluation, the HMRC are entitled to CGT at the full market value which could be as much somewhere between £500 -750k judging by the rental income, depending on where the property is located. There would then be a ton of stamp duty; enough to buy a new Jaaag on the company acquiring. Their best bet is to put their feet up and enjoy it.

      Comment


        #4
        Originally posted by ATC View Post
        Their best bet is to put their feet up and enjoy it.
        Not if they don't want large chunks of it going to the taxman when they die.

        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          £35k isn't a fortune for an elderly couple to live on. Over and again Ive seen families go to great lengths to pass down wealth to grandchildren whose lives are, frankly, counterintuitively blunted by it. The 40% IHT is better value than the alternatives.

          Comment


            #6
            Thanks all for the responses.

            Further info:

            - The property was purchased in 2005 for £425k and going off local prices and trends, it probably isn't worth a lot more than that now, therefore shouldn't be hit with much if any CGT.

            - I have one sibling who has equal interest in the property

            My parents want to set up some kind of property co. to fund further investments. Is this a feasible possibility?

            Comment


              #7
              [QUOTE=mikestew89;n1098052My parents want to set up some kind of property co. to fund further investments. Is this a feasible possibility?[/QUOTE]It is a possibility, but their previous investment has had almost no increase in value over 15 years.
              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

              Comment

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