lukeo started this topic @ 14:21 on 12/11/2005
I currently run my own LTD company(computer related). I have £300k in the business account, £50k corp tax due to come out anytime soon. £200k estimated profit in the next financial year. I have £45k in personal savings(tax paid) and I live in my sisters rented house. I'm paid by salary and dividend from my business which totals around £35k per year. Anything else I want from the business account is taken as extra dividends and is liable for income tax.
My mum and Dad are soon both quitting their jobs(in their 50s) and they've often talked about going into property development, I too would like to do the same, but obviously keep my current business as my main source of income.
I am very inexperienced when it comes to starting a business, being only 25, my current business, although successful is hardly what you would call a professional operation. I'm slighlty unsure about the best way to move into properly development, should I create a new LTD company? and how should I fund it?
I have a fair amount of personal savings, and a large amount of cash in the business account but I'm unsure of how best to use the cash and go about purchasing a first property for development? Do I need to look at a loan or should I use the money I already have? Can anyone look at the information provided above and give advice based upon what they would do with the same figures?
many thanks
RE: Starting in Property Development
James Smith | 14/11/2005 09:39 AM
Luke,
This really is an "ask your accountant" scenario as there are lots of options, each with different advantages/disadvantages. There is no one right answer, hence why you accountant probably would have inhaled a few times and said "ummm" a lot when if you rang them before making this post.
Your four basic options are:
1) Invest in your own name
2) Invest in the current company
3) Start a new company owned by the current company
4) Start a new company owned directly by yourself
The problem with (1) and (4) is that any money you take out of the company will be taxed as a higher rate tax payer, reducing the amount you will have available for investment, although your existing company could loan the investment money to "new co", and pay interest on it. (2) is actually a strong possibility although VAT could be an issue, and there is always the risk of the company becoming "non trading" if the property development went badly and the property was let out rather than sold on.
If your current accountants arnt up to it and would like to do some formal planning, then I would be pleased to assist you further offline.
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: RE: Starting in Property Development
lukeo | 14/11/2005 01:47 PM
Thanks James. FYI my current business is not VAT registered as 95% of my clients are overseas.
With regards options (2), seeing as though my current company does around 200-300k profit/year then won't I slip into the higher corp tax band if the property development side of things takes the total profit over 300k?
RE: Starting in Property Development
James Smith | 14/11/2005 01:58 PM
Luke,
Regarding (2) if you have 2 companies (as in 3 or 4) you will move up towards the higher corp tax band anyway, as the bandings are divided between each company when you have more than one in "common control". It gets rather complicated with the marginal relief calculations.
The decision depends very much on how things are going now, and what is likely to happen in the future, there is no one "right" answer for all.
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: Starting in Property Development
egliptor | 15/11/2005 01:49 PM
This forum is very good, so i've registered.
Talking about property development i' m more or less within that field trying to push more into it. When looking back things can always be created differently.
As the previous user says there are many ways to carry out the venture.
For me, i would start small maybe try getting a house for yourself in your name then try to devleop it. This will then give you some sort indication of what the venture entails.
For instance i noticed when going into this field that you have to first build repores with builders and workers of that field. Then also gather some information on building materials in general and so on. I' m sure the user burny could help with the building materials as he can get them at a nice price.
By obtaining a property yourself you then get the overview of what the venture will have in hand for you reagardless of good or bad.
As for funding a property, in my opinion paying out less in the beginning is better i feel as you look to make a quick turnaround on the basis of buy, develop then sell so less money should be used to aquire the property. Obviously for many the option of using their own personal funds is not as open as yourself. So taking out a mortgage with a low interest rate is the option, which is then worked upon due to the property being turned around within a short period of time.
For 25years old you seem to be doing well for yourself, i congratulate you as i'm 25 and still trying to make headways.
Please correct me anyone if my information is lead astray but ri will share what knowledge i have.
Regards
RE: Starting in Property Development
virtuallysorted | 15/11/2005 03:27 PM
An option may be to put some of the money into property development as part of a SIPPS plan for your pension. I have a friend who's a financial adviser who specialises in this area. I'd recommend taking professional advice though as it all sounds a bit complicated!!!
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Caroline Wylie
www.virtuallysorted.com
www.SocietyOfVirtualAssistants.co.uk
RE: Starting in Property Development
egliptor | 15/11/2005 06:28 PM
RE: Starting in Property Development
Nicol | 15/11/2005 11:01 PM
im jus tgetting into property development and its very exciting aspect to get into specially after running another business from 18 till now (21)
RE: Starting in Property Development
splatthefly | 23/11/2005 11:20 AM
We have a site that will be really useful for you. Its at www.investalist.co.uk. You can register for a free investment seminar that is only 2 hours long but stuffed with useful info'. There is also an online database of around 1200 land and property opportunities within the UK suitable for investors and developers. We also have a database of over 1000 foreign property opportunities. The site lists future dates for most of the UK property auctions. We also have very experianced financial advisors that can be accessed for free and are used to giving advice to investors. Give it a try!