Podcast Summary
Rent to Rent Schemes: High Returns, Potential Risks: Thoroughly research companies and individuals, consult legal and financial experts before investing in rent to rent schemes to mitigate potential risks.
While rent to rent schemes can offer high returns, they also come with potential risks. Tom, a listener, asked about the legitimacy of such schemes and what precautions to take if he decides to invest. The hosts of Ask Rob and Rob acknowledged the appeal of these schemes, which involve guaranteeing rent for a property and having a company manage it as an Airbnb, but also warned of potential scams. They advised listeners to thoroughly research the company and individuals involved, and to consult legal and financial experts before investing. Tom's second question was about legal considerations, such as contracts and insurance, which should be carefully reviewed and addressed to mitigate risks. Overall, while rent to rent schemes can offer attractive returns, they require careful consideration and due diligence.
Beware of investments promising extreme returns: High investment returns should be met with skepticism and thorough research to mitigate potential risks
Extreme investment returns should raise red flags. In the discussion, Tom was offered a potential investment opportunity with a promised 150% return. However, the speaker advised caution due to the potential risks involved. The speaker explained that such high returns are often too good to be true and that smart investors should be skeptical. The speaker shared their experience of having seen many investment schemes promising high returns fail, regardless of whether they were property related or not. The speaker recommended that Tom conduct thorough research before making any decisions, as the potential risks may outweigh the potential rewards. Overall, the takeaway is that while it's natural to be attracted to high investment returns, it's essential to approach such opportunities with a healthy dose of skepticism and due diligence.
Investigating beyond reputation is vital: Always research extensively and ask about past failures before investing, no investor is perfect. If a company makes a profit but the owner takes a salary, no corporation tax applies to the company, but the owner is subject to income tax.
Due to the complex and specialized nature of some investments, it's crucial to conduct extensive research beyond just trusting the reputation of those presenting the opportunity. Even reputable investors like Rob and Rob, who have had the majority of their deals turn out well, have had their fair share of failures. Therefore, it's essential to ask about past investments that didn't go as planned and remember that no investor is perfect. Regarding the specific question about limited companies, if a company makes a profit of £30,000 but the owner takes a salary of £30,000 before declaring profits, no corporation tax would be applied to the company. However, the owner would still be subject to income tax on their salary. It's essential to consider all tax implications and potential risks before deciding whether to invest through a limited company.
Minimizing corporation tax through salary payments: Paying all profits as salary could lead to higher personal taxes and NICs, making it a complex decision depending on individual circumstances.
While paying yourself or employees all the profits of a limited company to minimize corporation tax might seem appealing, it's not a simple solution. This approach could result in higher personal income tax and National Insurance Contributions for you. HMRC is always one step ahead, and they have thought of most potential workarounds. Each person's tax situation is unique, and what works best for one might not work for another. The decision to own properties within a company or as an individual, and how to extract funds from a company, varies greatly depending on individual circumstances.
Consult with a tax professional early on in the property buying process: Early consultation with a tax professional can save costs and complications later, answer key questions before meeting with them using Property Hub's free PDF, and remember they can't determine your goals and objectives.
It's crucial to consult with a tax professional early on in the property buying process to ensure the best tax structure for your specific situation. Trying to change it later can be costly and complicated. To help you prepare for this consultation, Property Hub has created a free PDF of questions to answer before speaking with a tax advisor. Their YouTube channel also features a video on the topic. Remember, a tax professional can provide valuable advice based on your goals and objectives, but they can't determine those for you. By investing in professional advice upfront, you'll save more in the long run. Stay tuned for more property insights in the Sunday Times and the weekly podcast.
