Updating post from Reddit.
I've just acquired 3 more properties through my Ltd Company.
It currently has 4 properties, all BTL.
I also have 3 BTL properties in my personal name (1 UK, 1 Dubai, 1 Philippines).
All of my properties are owned outright.
In the company the properties are worth somewhere ~650k.
Personal properties ~900k.
What is the best way I would be able to borrow within the Ltd Company to purchase more properties?
Are there providers that offer borrowing against a portfolio instead of having to mortgage each one? I know setup costs on BTL via Ltd Companies can be a pain if each mortgage was done separately.
The company has around 250k in the bank in cash. I'd ideally like to start beginning moves to maxing out the amount of properties that could be acquired and get solid cash flow.
Am I better off mortgaging personal properties (lower rates, easier setup?) & providing funds as a director loan?
The mortgages will be secured house by house. Setup fees and interest rates are slightly higher. Blocks of flats lots higher in setup fees. Depending on the desired income and the current income you could do this with cash that you have and not worry about mortgages.
Use the £250k to purchase another 4/5 properties returning around £2,500 per month. Then use all the rent to add to the portfolio every 1/2 years obviously this gets faster as the portfolio grows.
Thanks. So use the 250k as a deposit and focus on mortgaging the new properties instead?
If you borrow against the personally held properties the loan interest won’t be fully deductible against costs so it will probably be more expensive even though interest rate will be lower.
Usually a ltd co mortgage is a bit cheaper than a business loan, has a longer term, allows you to borrow a bigger % and isn’t repayable on demand so that’s the way I’d be looking but interested to hear if I have missed something
I assume I could deduct the interest again my personal income from the properties though?
But I think it could probably get messy so maybe you’re right doing it via the ltd company is better.
But the mortgage would be per property? Could a business loan be done against the portfolio as a whole? I guess one question would be whether each mortgages setup costs would end up making the business loan have a better rate long term?
You cannot deduct all of the interest against your personal income you get a max 20% credit. It’s explained here
https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-income/buy-to-let-mortgage-tax-relief-changes-explained-aHQIA2d4bjXj
Mortgages would be per property but almost certainly cheaper & longer term.
Business loan typically 5 years and if the bank decides your assets have gone down in value they can make you pay a cash sum to keep their LTV % the same.
And often the business loan has a ‘we can demand the money back in 24 hours’ clause in the smallprint.
By having several mortgages (with different providers) you can unencumber them discretely whereas a business loan is over you for everything until the money is paid.
Only downside to a business mortgage is that you will need be a guarantor personally. Not sure if this is the case for a business loan
Get a 2nd charge mortgage on the property with most equity.
All are 100% owned outright. The only debt is the companies director loans to me.
I’m more so interested in whether to borrow against the whole lot at once vs mortgages but everyone seems to think mortgages are the way to go.
Mortgages have the lowest rate.
You can simultaneously remortgage while completing a purchase and either use all the remortgage funds to purchase outright or use the funds as a deposit. If you use all the funds to purchase outright, you now have another unencumbered property you can remortgage later to make more purchases!
I'm a specialist mortgage broker, give me a shout if you want me to take a look at your portfolio!
Use the £250k to buy 4/5 houses in the north east £40/£50k per house with around £500 pcm return. I always look for over 10% return, EPC C or above and no damp. That way you can buy the houses outright you still don’t need any mortgages or setup fees.