Ltd. company formation for an auction purchase - timing

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  • doobrey
    Whenever I have bought any property I have started by running the numbers. Could be on a leveraged or unleveraged basis depending on the circumstances. Monthly rent x 12 minus allowance for voids, minus all estimated costs (which may include mortgage if leveraged) and divide by purchase cost plus capital expenditure if applicable. This gives either net yield, with no mortgage, or ROCE with mortgage. Or preferably both to see how it would stack up either way.

    I use that method to work out what the property is worth to me (or perhaps more accurately what I am willing to pay for it, which is not strictly the same thing) and decide whether to make an offer, or bid, based on that.

    Although I hadn't appreciated just how similar the process is until recently, I now realise that the method is almost exactly the same as a value investor uses to assess companies and decide what share price they are willing to pay. Unless trading or speculating (where the issues are different) the property can be considered a business and the investor should be trying to calculate its intrinsic value and buy with a margin of safety.

    btw, as an update on the original question I spoke to both the auctioneers and my solicitor about this today. Auctioneer thought it would be possible to bid as an individual and do some kind of legal transfer to a Ltd during the conveyancing process. My solicitor pretty much echoed this in vague terms but said it was not something they did and I would have to consult a commercial solicitor. Lacking definitive info, I gave it a miss this time.

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  • Gordon999
    How do you decide on the maximum price for bidding at the auction?

    Is the price set at 10 x the estimated annual rent ?

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  • loanarranger
    I would suggest that you create the Limited Company , make sure that if it is going to be an SPV vehicle that you have the right SIC code. If you haven’t any activity during the financial year you can register a dormant account statement with Companies House. At least you would have everything in place when acquiring your first BtL in the company’s name.

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  • doobrey
    Thanks - that's that what I suspected.

    Not unwilling to form company if needs be, but it's all admin.

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  • Section20z
    I've changed buyer name in the past post auction but not recently so I think due to money laundering etc it wouldn't be allowed. For the sake of £35 maybe form company pre auction and pass the registration formalities

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  • Ltd. company formation for an auction purchase - timing

    I am thinking of bidding on a property at auction next week.

    If buying any more property my intention is to do so as a Ltd. company. However, there is no Ltd. at the moment, since there is no need for one unless I am buying a property.

    I am conscious that at an auction, contracts are exchanged when the hammer falls and a deposit is payable immediately. Therefore if buying as a Ltd., does it have to be the Ltd. which registers to bid and pays the deposit? Or is it possible to do so as an individual, then form a company, and for that company to complete the purchase?

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