Buy-to-let (BTL) property can be a great addition as part of a diversified investment portfolio.
Having a tangible asset that can grow in value or provide you with income makes it an undoubtedly attractive proposition, especially for professional footballers.
Buy-to-let investing may have been a deliberate and conscious decision to store your wealth. Or, you may have become an “accidental landlord”, acquiring properties to live in throughout your career by moving from club to club without selling them.
Either way, it’s crucial to think about the way you buy your property and what you hold within your portfolio first.
Here are some key considerations for footballers interested in buy-to-let investing.
Your property goals will depend on where you are in your career
When building your BTL portfolio, the first thing to consider is your objectives. Do you want to target growth on the value of your properties over time? Or do you want to be able to draw an income from them?
The answer to these questions depends on where you are in your career.
Early on or mid-career
For example, if you’re early on or in the middle of your career, you might prioritise growth in the value of your properties over income, because your wages should currently be providing you with enough income to fund your lifestyle.
That means choosing properties with a focus on capital appreciation rather than strong rental yields might make more sense.
Choosing properties with the best growth potential means their value can be growing while you’re still playing football. Of course, there’s no guarantee that properties will always rise in value, and there are other factors to take into consideration when choosing which properties to buy.
This could include:
- Location (location, location!)
- Property type
- Freehold versus leasehold
- Future saleability.
It’s vital to be led by your head rather than your heart when investing in property, especially if it’s not something you’re hugely experienced in. It’s an investment, not a place for you to live, so taking professional advice is highly important.
Coming to the end of your career
On the other hand, if you’re about to end or have already finished your career, your priority may be producing a regular income stream to fund your lifestyle after you retire.
In that case, your focus may be best aimed at maximising rental yields, by introducing different types of property into your portfolio.
These might include:
- Student properties
- Holiday homes
- Houses of multiple occupancy.
Even though the rate of growth on the property’s value will likely be smaller, the amount you can receive in rent will likely be greater.
However, care must be taken with these kinds of property, as they often require more management. This can be time-consuming and potentially expensive.
Your ability to borrow money will likely diminish as you get older
Throughout your career, you may want to consider borrowing money to fund a more extensive portfolio.
However, your ability to borrow money is often linked to where you are in your career.
For example, you’ll likely be able to borrow the most money early in your career when you have the most time to pay it back. This will then diminish as you approach retirement, as you have fewer years of earning money from playing.
So, it may be worth considering buying more expensive properties early on, giving you a greater chance of being able to afford them while they grow in value.
Then, as you get to the end of your career, you can transition from a growth-based portfolio to less expensive properties that require less borrowing but provide a greater yield.
The key thing to remember is to tailor your portfolio to your current circumstances, both in terms of how you fund it and what it offers you.
Buying property through a limited company can be more efficient
There are two ways of buying property: either in your own name, or by setting up a limited company that buys the properties instead. Both can borrow money, although the rules will be different, and the way tax is calculated on rental income and any increase in value will also be different.
So, advice needs to be taken on which is the best route for you. However, in our experience, buying through a limited company can have some significant benefits.
There are a few key advantages to holding your properties in a BTL company instead, particularly as a footballer.
You can reduce your Income Tax bill
Buying property through a company can reduce your tax bill, as you’ll pay Corporation Tax rather than Income Tax on your retained profit.
The Corporation Tax rate is currently 19% in the 2021/22 tax year, substantially lower than higher- and additional-rate Income Tax of 40% and 45% respectively. So, paying the lower Corporation Tax rate could help you pay less tax overall.
Similarly, as you’ll be able to retain funds in the limited company, you’ll have more control over the amount of income you take, and so declare for tax purposes, in each tax year. This means you’ll be better able to manage the amount of tax you’ll be liable for.
In combination, this can be hugely beneficial during your career, giving you a way of reducing how much tax you’ll owe on your properties.
You can make a director’s loan to be repaid after you retire
To buy a property, you’ll likely need a deposit to do so. That can be funded by making a “director’s loan” into your limited company. This can then be used to buy the property, alongside any borrowing you may take out.
Future money withdrawn from the limited company, either income or lump sums, can then be classified as repayment of director’s loans, consequently meaning they wouldn’t be subject to tax.
This can be a particularly useful strategy for professional footballers, as the company can then repay the loan to you from its profits once you retire, providing a return on your money when you most need it.
For example, making loans of £20,000 a month for 10 years of your career would see you put £2.4 million into your company.
You could then draw that money as income in retirement, providing you with £240,000 a year for 10 years before tax is due.
This can be a highly tax-efficient way to draw income once you finish your playing career.
Attractive interest rates, despite borrowing through a company
Some private banks that you might use to fund your purchases as a footballer may allow you to purchase your property through a limited company and set the interest rate at a similar level to a traditional buy-to-let mortgage.
This can mean you get the best of both worlds: the advantages of buying through a limited company, without being penalised with a higher interest rate.
However, it isn’t all good news, as the bank may ask you to sign a personal guarantee (PG) against your other personal assets. This could mean taking on greater risk and liability. Make sure you take advice before doing this.
Be careful if you already have properties
If you already personally own buy-to-let properties and you’re thinking of moving them into a limited company, you’ll need to carefully consider whether this is a sensible and cost-efficient choice.
Substantial charges could be payable on transfer, including Stamp Duty, Capital Gains Tax (CGT) due on profits you make, and the legal cost of transferring ownership.
We would strongly recommend you speak to us before taking any steps to transfer your properties.
Get in touch
Here at ProSport we’ve helped many football professionals get started, and then thrive, in the buy-to-let market.
Email enquiries@prosportwealth.co.uk or call 01204 602909 to find out how we could help you.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.
