Podcast Summary
SPV expansion: Consider risk isolation vs simplified management when deciding whether to add new properties to existing or new SPVs. Risk isolation offers protection for individual properties, but may result in higher costs and complex management. Simplified management and lower costs come with increased risk of having all properties exposed to potential legal action or financial issues.
When expanding your property portfolio, you need to consider whether to add new properties to existing or new Special Purpose Vehicles (SPVs). Paul, a longtime listener, posed this question after acquiring three 1-bed properties in Central Manchester, with plans to increase his holdings to ten. Each of his current properties is in a separate SPV. Paul's dilemma lies in the potential risk isolation of adding new properties to separate SPVs versus the benefits of having multiple properties within a single SPV. If Paul adds each new property to a separate SPV, he can enjoy risk isolation. In this scenario, if he couldn't complete a purchase when the authorization plan is ready, his understanding is that he would only stand to lose his deposit for that specific property. However, if several properties are within the same SPV, the developer could potentially come after some of the other properties as well. On the other hand, having several properties within a single SPV offers benefits, such as simplified management and potentially lower costs. However, it also increases the risk of having all properties exposed to potential legal action or financial issues. Ultimately, the decision depends on individual circumstances, risk tolerance, and investment strategy. It's essential to weigh the pros and cons of each approach and consult with legal and financial advisors before making a decision.
Property in SPVs: Investors can reduce risk by isolating each property in a Special Purpose Vehicle, but it might result in higher mortgage rates and additional costs.
Investors can minimize risk by isolating each property within its own Special Purpose Vehicle (SPV), allowing profits to accumulate and purchasing new properties without tax implications. However, this approach might result in higher mortgage rates due to additional due diligence requirements for lenders. Ultimately, the decision to have each property in its own company depends on the investor's risk tolerance and specific circumstances. While some investors prefer this level of risk reduction, most investors keep all their properties under the same company due to cost and hassle considerations. It's essential to note that this discussion is not tax or legal advice.
Comparing mortgage brokers: Consider seeking advice from multiple mortgage brokers to ensure you're getting the best deal, but also build trust and understand their reasoning behind their recommendations
When it comes to remortgaging your home, it's worth considering the advice of more than one mortgage broker, especially if you're unsure about the one you're currently working with. While an independent whole-of-market mortgage broker can offer a wide range of options, it's important to build trust and understand the reasoning behind their recommendations. If you have doubts about a particular broker, don't hesitate to seek advice from another one. By asking for explanations, you can build trust and confidence in their expertise, ultimately leading to a better mortgage deal for you.
Mortgage Broker Advice: A good mortgage broker provides valuable market knowledge and insightful advice based on current conditions, considering your specific situation and providing a well-reasoned recommendation
When choosing a mortgage broker, it's important to look beyond just getting the best rate. While you can find good rates yourself, a mortgage broker's value lies in their market knowledge and ability to provide insightful advice based on current market conditions. A good broker will consider your specific situation and provide a well-reasoned recommendation, even if it's not in their immediate financial interest. For instance, Nick Shepherd, a mortgage broker frequently featured on the podcast, advised considering a five-year mortgage term instead of a two-year one due to high buy-to-let mortgage fees. This advice, backed by a solid explanation, gave confidence to the investor and demonstrated the broker's expertise. This is the kind of insight you should expect from a reliable mortgage broker.