Structuring a Buy to Let Investment
The most important element in becoming a Buy to Let Investor is getting the investment structure right from the outset, this will be dependent on what your long term investment strategy is, and the tax implications for you throughout the period of investment. The balance of capital to be invested between savings and lending is also important, as is ensuring that the income from the asset is sufficient to pay the outstanding debt and costs of ownership.
There are three main mechanisms of structuring your investment Buy to Let, listed below with relevant advantages and disadvantages:
Structure 1 – Investing as an individual
Advantages:
Simple Structure
Flexibility on entry and exit.
Disadvantages
Inefficient for tax purposes
CGT on gains and Income tax/PRSI and USC on rental inome
Structure 2 – Company
Advantages
More tax efficient – Company tax rates on income and gains
Greater lending available.
Disadvantages
More complicated structure therefore additional costs(Legal, stamp duty etc)
Structure 3 – Through a pension
Advantages
Most tax efficient – No CGT/Income Tax etc
Tax relief on contributions in.
Disadvantages
More complicated structure – Assets held in trust and revenue rules, all property transaction must be arms length.
Additional costs (legal, etc pension trustees etc)
Lending for each structure:
Structure 1 – Individual:
Max LTV: 80%.
Rates: 3.63% APRC 60% LTV to 5.19% APRC for 80% LTV.
Max Term: 5 – 35 years with a 10 year interest only option available. Typically max term to 25 years.
Structure 2 – Company
Max LTV – 65% LTV
Rates: 5.45% – 5.75% LTV dependent and Capital and Interest.
Lending: Up to €4mn available. (Min €40k)
Terms: Up to 35 years.
Structure 3 – Pension
Max LTV: 50%
Max Term: 15 Years (Interest only option available)
Max Lending: €500k (Min €40k)