Building a property portfolio and taking advantage of investment opportunities in a booming housing market have been given a major boost.
Businesses looking to buy and develop residential property can use an often-overlooked funding option.
Pension-led funding has helped more than 2,000 UK SMEs finance their own businesses to the tune of more than £227 million using money from accumulated pensions.
This innovative form of finance can also be used by companies who are in the business of acquiring and developing property.
A business owner, or owners, can set up a Small Self-Administered Scheme (SSAS) to loan capital to their business from the pension.
This funding option could be attractive as securing capital and keeping control of a business becomes even more of a challenge in times of uncertainty.
Pension-led funding is a form of finance where the interest you pay on the loan is paid back into the pension scheme, rather than to a third party.
A business owner could not only grow their property portfolio, but potentially increase their net worth at the same time.
There is also no need for personal guarantees or charges over the business owner’s own home.
Using the SSAS option for residential property investment is available to limited companies for a genuine commercial purpose relevant to the business’ normal trading activities.
Residential property investments cannot be held as pension assets without a valid commercial reason and could be classed as an unauthorised investment and subject to tax charges.
Note that direct investment in residential property by the SSAS is not allowed.
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