Landlord sells personally owned rental flat to trading Ltd Co

Landlord sells personally owned rental flat to trading Ltd Co

07.03.17 | Written by: Nick Helm

We were approached by an existing client looking for help in selling one of her personally owned rental properties to her trading limited company which she owns jointly with her husband. The company is a car repair garage.

She had been advised by her accountant to take this route, as it would be more tax efficient than keeping them in her personal name going forward even though it meant selling the property at the open market value, with all the usual associated costs of sale (including the stamp duty surcharge).

The property in question is a one-bed flat in a three-storey block which has been rented out for the past five years. Prior to this the couple had lived in the property.

The couple also wanted to raise capital to expand the property portfolio and were keen to secure a mortgage linked to Bank Rate.

Buy to let funding options for trading limited companies is restricted to a few lenders, as most favour SPVs which have been set up for the sole purpose of property investment. The fact the couple had also lived in the property was also a sticking point.

We approached one of the specialist lenders, which we knew would consider the case. We helped the client put together the necessary paperwork which included the last two years’ trading accounts and the following terms were offered:

Property value: £160,000

Loan amount: £104,000

LTV: 65%

Rate: 3.99% term tracker

Term: 20 years capital and interest

Lender arrangement fee: 1.6% (£1,664)

Borrower: Trading limited company

RTI: 125% @ 6.49%

Mortgage payment: £345pcm

Rental income: £650 pcm

Gross yield: 4.88% pa

Consultant: Nick Helm, 01732 471606

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.