Property Investment

First, it’s important to understand the concept of a ‘limited company’ before deciding whether to invest through one. These are separate entities altogether from the owner from a legal standpoint. In simple terms, Assets belonging to a limited company are owned solely by the company. In saying that, the suggestion is there are not only monetary benefits for people in the arrangement but many tax advantages and with practical relevance.

Reasons To Invest In Property As A Limited Company 

The recommendation for property investment is to do so using a limited company instead of making personal purchases. While you won’t own the real estate outright, there are a number of advantages associated with this type of business plan in the monetary sense, tax-wise, and in practical relevance. Some people remain skeptical around the concept, while others offer resounding approval.

  • Limited companies are under no restrictions for mortgage-interest relief.  Individuals with property investments see cutbacks in tax relief accessibility, while a limited company’s interest on a mortgage for a purchased property is entirely tax-deductible. In this scenario, an investor would be wise to make their purchase as a company instead of personally.

Further, starting from the current year, claims suggest that landlords are to discontinue deducting mortgage interest out of rental profits causing detriment to their income taxes in the future.

  • Higher tax rates exist for individuals. A business will pay ‘corporation’ tax instead of ‘income’ tax. Income tax has the potential for being excessive, particularly for anyone who earns a substantial income. Companies are only responsible for this when the business accesses funds. For a comparison of the pros and cons of an LLC go to
  • Shareholders.  If multiple shareholders are sharing in the profits via salary or possibly dividends, there is the potential for benefiting from the use of individual tax allowances, whether it be with you and a partner or your kids over 16.

Each can take the amount they prefer (the amount of profit taken doesn’t have to be the same for every person), and access can be made at any determined interval.

Employing an accountant’s services allows for simplicity when adding new shareholders to the structure or upon distribution of the profits between those currently onboard.

  • Creditors cannot access personal funds. Limited liability protection can be particularly advantageous compared to personal liability for those who purchase land and then opt to develop the property, particularly in times when a recession is being experienced.

Only accessible to a creditor in this situation is the business assets. If there is a financial hardship, no person involved or shareholder with an investment will be at risk. The only instance where there could be a problem is if a lender were to require that a first-time landlord put their guarantee on a mortgage giving creditors access to the individual assets if the LLC were to fail.

  • LLCs have better loan opportunities made available to them:  As a strong investment property portfolio develops, lenders recognize a business that has been well managed and is more willing to work with these companies. Creditors are also more willing to extend better rates. An LLC can take advantage of these opportunities in an effort to expand.

The ideal situation is to use one LLC for all of your ventures so you can view the performance of the entirety of your investments. You will be able to see which are making money and where the money is actually being lost. This concrete data can be given to those currently investing, potential investors, and creditors as a means of showing stability. Read what’s good and where the downsides lie with these types of investments

Final Word

These are standout reasons why it’s ideal to use a limited company to invest in property instead of doing so personally. Considerations need to be taken for the amount of time, effort, and cost that comes with running an investment firm of this sort.

On any given day, there may be more aggravations associated with dealing with shareholders, additional charges from resources due to having to handle an LLC, and extra work involved because you’re a business. It may seem beyond what the mere tax breaks are worth.

If you compare these challenges to those who purchase on a personal level, investors will still prefer the LLC and the many freedoms associated with it.