Property Investment Via Company

M

mike456

Registered User
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28
Hi Everybody,

I have muted the idea with a few friends up to 10 about the posiblity of setting up a limited company for the purposes of propery investment. I propose it will work as follows.

We all invest between 15K and 20k each. We purchase a house in a regional town for apporox 150K to 200k.

We rent this out and apply to the bank for a loan to purchase another property of simmilar value. We then use the rent of both properties to begin paying off the mortgage on the second property. Another consideration may be to get and interest only mortgage and build up finance in the compnay. With the view to purchaing more property?


Can you see any pitfalls or problems?
 
Yes
Taxation (corporate as well as income tax) could hit the shareholders twice. I think distributions also attract a surcharge.
Companies need administration - keep and file proper books of accounts, board of directors (and all the responsibilities that go with it nowadays, its no joke!) etc.
Business plan?
What happens if shareholders wish to exit in the future?

Limited partnership is probably a better way to go if you wanted to do this.

Before you embark on this road, i would suggest getting appropriate taxation, financial and legal advice.
 
It generally is not a good idea to place investment property in a compnay due to the issues raised above

But in the case above where you mentioned that there would be likely to be more than 10 investors
The one really sticking point has always been the close company surchage on the income

But if there were more than 10 individuals it may not be considered a close company and the surchage then might not apply

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But the double hit to CGT will apply on the sale.

Also even if there are 10 individuals some may be associated so example some might be brothers, sisters, parents, aunt, uncles etc so they will not be regarded for close company purposes as seperate individuals.
 
If none are related will this make a difference.

Where can I find more information on the concept of a close company?
 
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