ASK515: Should I move into a company? PLUS: Rescue my poor credit rating!

0:02Rob B:Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Hey everyone, welcome to Ask Rob and Rob, the show where you give us your wonderful questions and we give you what we hope are some wonderful answers in return. It is super simple for you to submit your question, whether it be for this show or the Sunday Times. Rob, would you like to explain once again what that easy process is?

0:22Rob D:Surely everyone knows by now, but just in case, it's propertyhub.net slash ask. If you can find your way to that webpage, then you can leave us a written question for our Sunday Times column, see yourself in the paper, your mum would be very proud. Or you can leave us a voicemail, which is actually our preferred option, because then we get to play your lovely voice on the show. Okay, let's have a listen to our first question. This one is from Dan.

0:42Rob B:Hi, Rob and Rob. Thanks for your ongoing content. This has meant that we're in the process of buying our fifth buy-to-let in just three years. Our aim is to continue to buy at least one a year until we retire, but this will probably increase with the snowball effect you've talked of. My question is, and it's one I don't think you've had before, is with all the purchases, we've noticed our credit rating keeps taking a huge time that we are credit checked by the mortgage companies, even though we're buying through our limited company. We've been checked twice for our current purchases. We change mortgage company partway through for a better rate.

1:12Rob B:These checks become more and more regular as we go. It's slowly reducing my perfect experience score down to nothing. Do you have any thoughts or advice around this?

1:21Rob D:Dan, you're in the realm of champagne problems, but it's a real problem, but well done. but the fact that you are building a snowball at such a pace that that is going to become an issue is definitely a good sign. And I've got some practical advice for you but before I give you that practical advice I can give you a bit of comfort which is that you are rightfully proud of your credit score but actually from a lender's point of view your credit score doesn't matter that much. The score is pretty much a marketing number it's almost like something that's gamified that the agencies like to give you but what lenders will be looking at is the report behind that so they're not going to write you off based on just the score they'll look at the report and if there are lots of applications for credit going in but they're all clearly with buy select lenders and it matches up with the portfolio spreadsheet that your broker will have given them because it's something they have to do for portfolio landlords then they'll understand they do this every day it's not going to spook them so you can relax because the issue that you've described isn't really as much of an issue as it appears to be but it is possible that you can get yourself into a situation where there are so many applications flying around that your credit file is getting hit all the time and it gets confusing and you start getting lenders asking questions or even putting it in the too hard pile and there are two main ways to avoid that the first is to avoid switching if you can mid-application so you're not making more than one application per finance or refinance so you said that you changed for a better rate that can happen but ideally it shouldn't if your broker has put you with an appropriate lender to start with because generally if rates drop they'll drop across the market and you'll be able to get the existing lender to honour that drop.

2:50Rob D:And if there is a difference between lenders, it's probably going to be so marginal that it's not going to compensate for the fees of making the switch in the first place. So that's one thing that your broker can help you do. And the other thing your broker can help you do is minimise searches at all. So the other reason you might switch lenders is because you've got a decline. You're with a lender and at some point during the process they've gone, oh no, we don't want to do this after all. But a good specialist broker should stop that from happening because they should be able to speak to the business development manager at the lender at the very start and say this is the client these are their circumstances this is the property and as long as there's nothing unexpected that comes up during the process they know all the facts up front and they should be able to give a pretty good indication of whether it will be yes or no before even a soft search is made at the start of the process so Dan thank you for your question I hope you find that reassuring next up we've got a question in from Joe hi Rob and Rob Joe from London here thank you for all of your education over the years.

3:45Rob D:I'm a long-term follower and I've actually bought two BTLs through the Property Hub over the last few years. So thanks a lot for all your help with that as well. Both of them are coming up to mortgage renewal this year and I need your advice on what to do. So one of them was bought in my personal name, the first one. And then the second one I bought a few years later in a limited company as I decided I was going to pursue this strategy long term and try and build a portfolio. So the tax bill on the first one in my personal name wipes out my rental profit as I'm a higher tax rate payer. I'm just wondering, should I refinance this year and use the money to cover the costs of transferring that into my limited company, which would probably save me about a thousand pounds every year in tax?

4:35Rob D:I'll then have two in my limited company and it's easier for admin purposes as well so any comments on that strategy and what those steps actually look like consolidating a personal name property into a limited company if you've had any experience doing that i can't seem to find the exact steps and it seems quite complicated so yeah any thoughts or comments on that would be great and not sure if this is relevant at all but we are planning on putting our primary residence in london on an interest-only mortgage and going to rent somewhere else for a few years. So I've got three properties in total.

5:09Rob D:I don't know if that changes things. But yeah, any help on the strategy that you would employ would be great. Appreciate it. Thanks, guys.

5:16Rob B:Joe, thank you for your question. And well done so far on building your portfolio. I find it hard to believe it's worth you transferring your property from its current situation where it's in your own name into a limited company. And that's because of the transaction costs involved because when you move it it's actually a full transaction your limited company will be buying that property along with things like solicitor's costs what it will trigger is a stamp duty bill now will depend on the value of your property but my guess is that stamp duty bill will mean that it is not worth the transfer now a really easy way to assess this is look at what the difference would be to you if you moved it from a tax point of view on the income that you're earning and then look at the stamp duty to go okay how much is that stamp duty cost plus adding things like solicitor fees and all the rest of it and then go how many years because I do believe it would be many years how many years would it take for me to break even after making that transfer that's the simple way of doing this so let's just say your transfer costs were£20 ,000 and the difference in terms of profitability in income you earn each year is£2 ,000, then it will take 10 years to break even.

6:32Rob B:Now, they may be wildly different numbers. It may be a much shorter period. It may even be longer. But you need to go and look at that. You need to go and assess it. And that will help you make that decision. If it is a long time out, like 10 plus years, it's just really not worth it because you may decide to move that property on by that point in time. so for most people unless it is a really low price property it's not worth going through that process but it is just a simple calculation go through that process and that will help you make that decision so not great news joe but at least you have a process to follow now that will help you make the best decision for you and your portfolio good luck well that is us done for this week and

7:10Rob D:we'll be back to do it all again next tuesday but before then you can join us for the property podcast on thursday so we'll see you then bye bye bye

7:20Thank you.