Buy to Let Property Investment

In recent years buy to let has been a popular way of investing in residential property. Stock markets are out of favour with many investors who have seen the values of their portfolios, endowment policies and pension funds shrink, whereas property has generally continued to rise in value. Interest rates are at historically low levels and mortgage finance is readily available on competitive terms from major banks and building societies. This brings property investment within the means of more investors than ever before. In these notes we will take the example of a foreign domiciled person, a non-resident of the United Kingdom, buying a property in London with the benefit of loan finance, but the general principles can apply to many other markets.

Buying to let pre-supposes that there is a tenant willing to rent the premises and provide the cash flow, which will service the borrowing and is only one of the factors, which need to be taken into account before entering into a commitment. These can be summarised under three main headings.

The Property

It has been said that the three most important matters to take into account when buying property are location, location and location and this maxim holds just as true for investment property,

? It should be situate in an area where tenants are looking to rent

? It should be attractive to tenants and be, for example, an apartment, penthouse or a period or modern house. Listed buildings or converted churches may have their appeal but it is to a narrower market

? It should be in, or brought into, good condition.

? It should be in an area where property is in demand, making a resale easier in the future.

The Finance

For the right property mortgages are available both onshore and offshore, at competitive rates, from many of the major lending institutions and the terms can be negotiated. It is possible to obtain a loan on a repayment or interest only basis and for an agreed period. Whilst higher percentages are sometimes available we suggest not borrowing more than say 70% of valuation to avoid a cash flow crisis if interest rates rise and to allow for periods when the property is vacant. The lender will also be looking for a monthly rent of the order of 130% of the monthly repayment.

Taxation

In the United Kingdom the investor will need to take into account the three main direct taxes,

? Income tax, which is payable on rents. Loan interest and the costs of repairs and maintenance are deductible

? Capital gains tax, which is not payable by a non- resident on the sale of a property held only as an investment and not as part of a trade or business.

? Inheritance tax, which is charged at 40% on the amount by which the aggregate value of chargeable assets exceeds a threshold, currently £263,000.

Exposure to taxation can be limited if, instead of the property being registered in the name of the investor, the title is held in the name of a company formed in a tax free area, the British Virgin Islands for example. This subject is covered below.

There is of course one other important factor in this equation,

The Tenant

It is important to take up references on a tenant both to ensure that he can pay the rent and that the occupants are likely to keep the premises in good condition. Amongst preferred tenants are professionals such as bankers, stockbrokers, financiers, solicitors etc. many of whom require a property only when they are in the city and who have no interest in purchasing.

Furnished or Unfurnished

This is a decision to be taken in the light of the objectives of the investor. If he is looking for a long- term tenant, unfurnished may be the answer. The typical tenant described above may prefer a furnished property however.

Structuring the investment

As mentioned above, in order to reduce exposure to taxation, the property should be registered in the name of an offshore company, the shares in which are owned by the investor. By this means our foreign domiciled, non-U.K. resident investor can,

? Eliminate completely any liability to inheritance tax

? If each property is held within a separate company, avoid the risk that on a future sale the proceeds will be treated and taxed as trading income.

It is very important that the company itself be managed and controlled from a non-taxing jurisdiction and this is where the Chesterfield Group can help. Our services include,

? Forming the company in a suitable location

? Acting as Directors and Secretary

? Maintaining the Registers and filing the returns required by law

? Keeping the accounting records and preparing annual financial statements

? Filing the tax returns

? Liasing with solicitors, property managers etc. as required

The Chesterfield Group provides a full range of trustee, and corporate advisory, formation and management services and invites enquiries. More particulars can be found on our web-site http://www.chesterfield-management.com Ref=CH1EZ

---

An Investors 1st and Most Important Lesson

Are you ready for the lesson that will put you... Read More

Boston Real Estate ? Choosing the Right Boston Real Estate Agent

As a successful Boston real estate agent, it always puzzled... Read More

Tax Free Exchanges: Watch out for the New Residence Rules

On October 22, 2004, President Bush signed tax legislation that... Read More

Crossing the Gap from this Home to the Next: Bridge Loan

So you're thinking of getting into a bigger house. You... Read More

Real Estate Investors: How to Get a Powerful Marketing Education for Free

I am a total geek.A few weeks ago, late at... Read More

4 Dangers In Flipping Real Estate

If you have recently purchased some real estate for investment... Read More

Selling Your Own Home: 10 More Tips

Selling your own home can be a time-consuming and frustrating... Read More

Is An Old Home for You? ? The Cons

So you think you might like to buy an old... Read More

Feel At Home Faster After You Move

Moving to a new community can be a great adventure,... Read More

Afford A Dream Home In Belize

Shopping for property in Belize is not as simple an... Read More

Selling Houses: Psychological Effects of Landscaping

Buyers think they care more about the inside of the... Read More

Join the Bulgarian Property Boom With Confidence

An Irish property investor in Sydney, Australia has created an... Read More

Real Estate Investing ? FSBOs vs. Agent Listings?

Many would-be real estate investing professionals face discouragement because of... Read More

Writing on the Wall - Are REITs a Better Investment for You?

When I was a young child I had many annoying... Read More

As a Realtor, How Do I Attract Listings?

Have you ever noticed that despite the massive number of... Read More

Bulgarian Property Market Insight

GOLF GRABS BULGARIA!At the present time there are only three... Read More

Flat Fee MLS Listings - Is This The Future Of Real Estate

Realtors are all a buzz about this new form of... Read More

Do You Know What Design/Construct (or Design/Build ) Means? I Think You Should!

These real questions on 'How To' build are answered by... Read More

Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less

Demanding consumers"Internet buyers tend to be better informed on market... Read More

Forclosure And The Durrett Rule

It's probably happened to you...Folks learn that you know something... Read More

How to Build a Real Estate Investing Power Team

As you continue to read about real estate investing, you... Read More

Donald Trump on Real Estate

I love what Trump says about the business of real... Read More

Staging Homes for Top-Dollar Sales

Wouldn't it be nice to have Roger Hazard's design team... Read More

Probate & Obituary Marketing

I start my marketing with obituaries followed with probate filings... Read More

Look Past the Bottom Line for a Propertys Potential

It's unfortunate that many real estate investors tend to look... Read More

The Nose Knows

If you plan on getting the most from the sale... Read More

Buying and Selling Distressed Houses for Maximum Profit (Update)

If you want to become a real estate investor, find... Read More

Rental Property Management - Ten Questions

Why hire rental property management? Because doing it all yourself... Read More

For Sale By Owner Listings

Selling your home on your own, without a Realtor, is... Read More

18 Easy Steps to Buy a Bargain House

What is a "distressed" property? What is "bargain" real estate?A... Read More

Buying Rental Property - Avoid Sellers Tricks

Be careful when buying rental property. We stayed at a... Read More

The Real Estate Agent Alphabet

Alphabet Letters after a person's name seem to bestow some... Read More

Home Buying ? School District Issues

A good school district is a key factor in home... Read More