200k - Eligible Investment

[PineappleThief]

Hello Zimba and Marcnath,

I have a question relevant to this discussion.

If I buy a house (residential) and obtain permissions to have it changed to commercial and set it up as B&B, will that count as valid investment? If not, how would you advise so I could basically buy a house for the purpose of running B&B.

Thank you in advance!

[CR001]

Your post has been split to its own topic. Kindly refrain from tagging onto other members threads.

See point 12 in the forum rules FAQs link below.

announcements/read-me-getting-started-t ... 24804.html

[CR001]

Any money paid to a previous owner does not count as investment. For investment, the money must go into the business.

[PineappleThief]

Sorry as I'm new! thanks for your reply.

So if my business account buys the house property and sets it up as B&B, would that be valid? Sorry I'm wondering whether there's a way to set up a house as B&B, and have it counted as 200k investment

Many thanks for your input

[CR001]

ANY money paid to a previous owner for property DOES NOT count as investment, regardless of where the money is paid from.

Investment must be INTO the business, i.e. not INTO another persons hands/account for purchasing a property.

[PineappleThief]

Thanks for your input.

On page 70, https://assets.publishing.service.gov.u ... ur-v21.pdf

It states that investment in hotel is permitted. However, hotel investment would also be like buying from a previous owner? can someone shed light on this statement?

Thanks

[CR001]

Yes, note that I did not say you cannot do a bed and breakfast in any of my responses.

However, any money paid to a previous owner isn't counted as investment. If you pay £200k for a property, you would then need to invest a further £200k to claim points for investment.

[PineappleThief]

Again, thanks! I was not aware of this side of the story, even though I've been looking into it for a while.

After a lot of reading on forums, I understand that there's 2 things. 1) Investment (which is fine for a property?) and 2) Expenses

If I pay £300k for a property and generate income (not rental, Im aware of that). Can I use the business income to pay for business expenses (e.g. salaries, furniture, etc) until it reaches 200k? So this way I will satisfy the 200k investment requirement?

Please correct me at any stage as I try to learn

[PineappleThief]

Hello,

I would appreciate if Zimba, marcnath and CR001 could contribute to this discussion.

I will restart this thread as I found conflicting information on the forums (hence correct me if Im wrong).

I simply want to establish a new B&B business by purchasing a property. I will purchase property only after visa grant. So I'll have access to cash 200k until I start my business after grant of visa. Now that out of the way:

I refer to: https://assets.publishing.service.gov.u ... ur-v21.pdf

On page 23, it states "Invested or spent by the applicant’s business excludes spending on all of the following: buying the business from a previous owner, where the money ultimately goes to that previous owner, rather than into the business being purchased"

I believe I'm NOT buying a business, I'm only buying a property for the purposes of business. Shouldn't my 200k investment in property count here?

Now referring to https://assets.publishing.service.gov.u ... 042018.pdf

On page 32, it states "(i) If you have bought property as part of your business investment, the value of any residential accommodation cannot be included."

Here again, it talks about properties and how residential is not accepted, i.e. implying that commercial property is acceptable for investment.

After the 2 points above, I believe my investment of 200k into a commercial property for the purpose of running B&B on it should satisfy the 200k investment requirement?

Conflicting info on forums as well

CR001 mentioned here: "any money paid to a previous owner isn't counted as investment. If you pay £200k for a property, you would then need to invest a further £200k to claim points for investment."

marcnath mentioned: "Then you need to meet the criteria for your points, which does not prevent you from spending money on property as long as it is not for property management, as described earlier."
Linked here: uk-tier-1-entrepreneur-visas/tier-1-ent ... l#p1492954

Also here: uk-tier-1-entrepreneur-visas/tier-1-ent ... l#p1492954 Zimba and marcnath seemed to have an opinion that supports buying commercial property as being counted in 'investment'.

So please clarify whether I'm right in the sense that my 200k investment in commercial property for the purpose of B&B should count here? and sorry if I did not understand your meaning!

[marcnath]

Yes, you are right.

If you invest 200K into your business and then spend part or all of it to buy commercial property that you use for B&B, then that money should be acceptable as investment.

The key is that it should not have been a business before - given that it is a residence that you are buying and then converting it to a commercial establishment, it does not look like you would meet that.

[PineappleThief]

Many thanks for your clarifying response, marcnath.

I have a question in relation to the conversion of residential property to commercial property for the use of B&B.

I do intend to buy a residential house and convert it into a commercial property (as you've correctly noted). However, should I somehow manage to have it converted to a commercial property BEFORE I buy it or AFTER I buy it? or it doesn't matter?

I ask this because it is stated here on page 32 and various other pages: https://assets.publishing.service.gov.u ... 042018.pdf

"(i) If you have bought property as part of your business investment, the value of any residential accommodation cannot be included. You must provide an estimate of the value of the residential accommodation if it is part of the premises also used for your business. The valuation must be from a surveyor who is a member of the Royal Institution of Chartered Surveyors dated within the three months before the date of application"

So this confuses me. Does the above relate to my B&B business? would this property investment only be counted if I have the residential property converted to commercial property BEFORE I buy it?

Or maybe it makes no difference to me? because I am not having any tenancy agreement, and hence it wouldn't count as 'residential accommodation' investment? however.. it was a house so.. it confuses me.

Summary:
I'm just confused whether I should convert the residential property to commercial property BEFORE I buy it or AFTER I buy it, in order to have the property investment counted? or it does not matter at all in my circumstance?

Thank you in advance

[marcnath]

Many thanks for your clarifying response, marcnath.

I have a question in relation to the conversion of residential property to commercial property for the use of B&B.

I do intend to buy a residential house and convert it into a commercial property (as you've correctly noted). However, should I somehow manage to have it converted to a commercial property BEFORE I buy it or AFTER I buy it? or it doesn't matter?

I ask this because it is stated here on page 32 and various other pages: https://assets.publishing.service.gov.u ... 042018.pdf

"(i) If you have bought property as part of your business investment, the value of any residential accommodation cannot be included. You must provide an estimate of the value of the residential accommodation if it is part of the premises also used for your business. The valuation must be from a surveyor who is a member of the Royal Institution of Chartered Surveyors dated within the three months before the date of application"

So this confuses me. Does the above relate to my B&B business? would this property investment only be counted if I have the residential property converted to commercial property BEFORE I buy it?

Or maybe it makes no difference to me? because I am not having any tenancy agreement, and hence it wouldn't count as 'residential accommodation' investment? however.. it was a house so.. it confuses me.

Summary:
I'm just confused whether I should convert the residential property to commercial property BEFORE I buy it or AFTER I buy it, in order to have the property investment counted? or it does not matter at all in my circumstance?

Thank you in advance

It should not matter when the conversion happens.

If you are going to living in part of the building (as you probably will), then the proportion you use for residence will not be counted towards investment. You need a qualified RICS surveyor to make that estimation of that proportion. So, it is important you do this valuation after conversion, of course. Possibly closer to your extension application anyway.

[PineappleThief]

Hello marcnath,

Many thanks for your valuable input.

I have a related question (and this thread provides the background) hence I'm posting here.

If I take a loan from a UK bank to afford a bigger B&B but do invest my 200k, would that also be a valid investment? or would the bank loan make my investment invalid?

Thanks in advance

[PineappleThief]

Can't edit my previous post so I will clarify here:

If I take a loan from a UK bank to afford a bigger B&B (i.e. deposit 200k to the bank and take out a loan on that basis), would that also be a valid investment?

Thank you in advance

[marcnath]

Hello marcnath,

Many thanks for your valuable input.

I have a related question (and this thread provides the background) hence I'm posting here.

If I take a loan from a UK bank to afford a bigger B&B but do invest my 200k, would that also be a valid investment? or would the bank loan make my investment invalid?

Thanks in advance

As long as you have invested 200K of your personal money, any additional investment/loan, etc has no impact

[marcnath]

Can't edit my previous post so I will clarify here:

If I take a loan from a UK bank to afford a bigger B&B (i.e. deposit 200k to the bank and take out a loan on that basis), would that also be a valid investment?

Thank you in advance

The key evidence needed is that you transfer 200K of personal money to the business. If the business then deposits that money in the bank and takes a loan against it, I would consider that normal business activity (though I can't see why the bank would loan you more than the 200K) and should not impact your immigration application.

[PineappleThief]

Thanks marcnath for your detailed reply - that makes sense and I also don't see any problem now.

You don't see why the bank would loan more than 200k. Why is that? Is it because I would be a new expat and as such considered a high risk? Please share your reason!

[marcnath]

Thanks marcnath for your detailed reply - that makes sense and I also don't see any problem now.

You don't see why the bank would loan more than 200k. Why is that? Is it because I would be a new expat and as such considered a high risk? Please share your reason!

Yes, credit history is one thing but that is not what I had in mind.

Why would a bank take 200K deposit from you and loan 250K, instead of just loaning you 50K ? The risks are the same for the bank. I would expect they prefer to do the latter approach if they can manage the credit risks.

[PineappleThief]

I see your point - thanks for sharing!

In my understanding, a bank typically requires 25% deposit for a house. I was thinking that with a higher deposit (200k) I could afford a bigger B&B. For example, for a 100k house the 25% deposit would be 25k. Similarly, the 200k deposit may qualify me for a bigger B&B.

[marcnath]

I see your point - thanks for sharing!

In my understanding, a bank typically requires 25% deposit for a house. I was thinking that with a higher deposit (200k) I could afford a bigger B&B. For example, for a 100k house the 25% deposit would be 25k. Similarly, the 200k deposit may qualify me for a bigger B&B.

Yes, that is right. But the bank doesn't take the 25% and then loan 100% of the house price. They loan 75% and you pay 25%. The 25% is not a deposit, it is paid for the house.

[PineappleThief]

Oh, I got your point. I hope my plan is feasible in the way I described. Thank you very much for clarifying that about the deposit!

[PineappleThief]

Hello,

I'd like to do software business and I will invest monthly from personal account to business account over the 3 years.

However, I'd also invest in residential accommodation on the side. I'm aware it doesn't count towards visa points.

Can I first invest 200k into residential accommodation from my personal account? I'll continue investing those monthly investments into business account.

Since the majority of 200k has been spent (from personal account) into accommodation, I'd have to make up for it somehow, to invest into software business.

So can I reinvest the profits I make from residential accommodation into software business to meet the 200k requirement? or that 200k money should not have been used that I brought from home country?

Would love to hear the discussion from Marcnath and other senior members!

P.S. Could mods explain why I don't have permission to search forum? Thanks

[marcnath]

Hello,

I'd like to do software business and I will invest monthly from personal account to business account over the 3 years.

However, I'd also invest in residential accommodation on the side. I'm aware it doesn't count towards visa points.

Can I first invest 200k into residential accommodation from my personal account? I'll continue investing those monthly investments into business account.

Since the majority of 200k has been spent (from personal account) into accommodation, I'd have to make up for it somehow, to invest into software business.

So can I reinvest the profits I make from residential accommodation into software business to meet the 200k requirement? or that 200k money should not have been used that I brought from home country?

Would love to hear the discussion from Marcnath and other senior members!

P.S. Could mods explain why I don't have permission to search forum? Thanks

A condition of your visa is that you have access to the 200K until it is invested in your business. Using that money for a residential property would, in my opinion, violate the conditions of your visa exposing you to the possibility of curtailment of the visa.

[PineappleThief]

Many thanks for your clarifying response, marcnath.

I have a question in relation to the conversion of residential property to commercial property for the use of B&B.

I do intend to buy a residential house and convert it into a commercial property (as you've correctly noted). However, should I somehow manage to have it converted to a commercial property BEFORE I buy it or AFTER I buy it? or it doesn't matter?

I ask this because it is stated here on page 32 and various other pages: https://assets.publishing.service.gov.u ... 042018.pdf

"(i) If you have bought property as part of your business investment, the value of any residential accommodation cannot be included. You must provide an estimate of the value of the residential accommodation if it is part of the premises also used for your business. The valuation must be from a surveyor who is a member of the Royal Institution of Chartered Surveyors dated within the three months before the date of application"

So this confuses me. Does the above relate to my B&B business? would this property investment only be counted if I have the residential property converted to commercial property BEFORE I buy it?

Or maybe it makes no difference to me? because I am not having any tenancy agreement, and hence it wouldn't count as 'residential accommodation' investment? however.. it was a house so.. it confuses me.

Summary:
I'm just confused whether I should convert the residential property to commercial property BEFORE I buy it or AFTER I buy it, in order to have the property investment counted? or it does not matter at all in my circumstance?

Thank you in advance

It should not matter when the conversion happens.

If you are going to living in part of the building (as you probably will), then the proportion you use for residence will not be counted towards investment. You need a qualified RICS surveyor to make that estimation of that proportion. So, it is important you do this valuation after conversion, of course. Possibly closer to your extension application anyway.

Thanks for your reply Marcnath. I've took my time to think about it but it seems like even if I revert back to my previously discussed plan of B&B, I still have to purchase a residential property at some point which would later be converted to commercial / B&B.

My concern is, would my investment of 200k not count from this property because at the time of purchase, it was a residential property (I only convert it later on to B&B). 2nd question: even after conversion, the HO could still call the B&B as a 'residential accommodation'?

Thanks for your input!

[marcnath]

I doubt it will matter if it is a residential property before converting it to a business use. There is nothing against investing into a residential property.
The requirements is that, when it is used for mixed purposes (I assume you will still be living there), you need an assessment from a surveyor as to what proportion is residential and what is business. The investment that is then recognised is the proportion for your business.
Obviously, if you buy the property in the 1st year and finally convert it into a B&B couple of months before extension, you could still meet the requirements but would be likely to attract refusal on genuineness.