Raj Shah, director and principal of Blue Wealth Capital looks at how a community could look in the ‘new normal’
So what will the post lockdown ‘new normal’ look like?
Will out of town office hubs appear for a better work/life balance?
The case study below explains how a local community could have new life breathed into it.
Commercial property renovation: a case study
Mr Jones is planning to buy a rundown social club with the intention to renovate the club to create a public house and develop the upper floor into office space, which could be let out. He intends to fund the proposed purchase as an investment through his pension scheme.
The facts
Mr Jones has three separate personal pensions valued at around £190,000, which he intends to consolidate by transferring them into a Self-Invested Personal Pension (SIPP).
The loan, as with any transaction between the SIPP and the member or any other connected party, must be on commercial terms and documented.
Mr Jones has personal savings earning little interest, which he can lend to the SIPP to augment the funds needed to fund the renovation. Any transaction such as a loan between the SIPP and a connected party (the member) must be established on commercial terms and documented.
The process
Mr Jones completes a pension provider questionnaire.
The questionnaire captures the data necessary for the provider to ensure the property is fully commercial, that it meets other acceptance criteria and that there are sufficient funds to cover the property purchase, associated expenses and expected renovation costs.
The provider accepts the property, along with the required renovation work.
Mr Jones establishes a SIPP and arranges the transfers from his three personal pension funds into the SIPP.
The provider sends instructions to the solicitor named on their questionnaire who is to act for the SIPP trustees who are Mr Jones and Providers' bare trustee company (XYZ & Co Trustees Limited).
The property purchase is from an unconnected third party – therefore, a professional opinion of valuation is not required.
The transfers into the SIPP are subject to a 30-day mandatory cancellation period. Once this period has expired, the SIPP funds can be used to pay the property deposit and complete the property purchase.
Mr Jones arranges for his solicitor to prepare the documentation on the loan from him to the SIPP having obtained evidence of commercial life-for-like terms.
The result
Once the renovations are complete the pub on the ground floor is let to an unconnected public house company for £200,000 per annum and the offices on the upper floor to an unconnected company for £6,000 per annum. The rents received by the SIPP are then used to service and repay the loan from Mr Jones.
Mr Jones uses his own solicitor for the property.
Mr Jones manages the property himself and the SIPP avoids having to pay additional management costs.
The leases provide tax-free investment income to the SIPP.
Any gain in the value of the property is free from capital gains tax.
Working with a high-quality financial planner who understands the way in which your retirement funds could be used to benefit both you and your local community.
Raj Shah is founder of
Blue Wealth capital and
has been shortlisted for Financial Planner of the
Year and Investment
Adviser of the Year.
