Albert47

After Advice??

I seen an older style semi house in my local town, its in need repair. The structure is sound but the decor is.....well nasty (old women own it). I think i've spotted a bargain with a chance of a bit profit. So it's sparked a few brain cells in my head.........guess what im going to have a go at?????or certainly looking into.

Im doing all the research i can from the tin-ter-net,book, estate agents be etc.

Im just after so good advice from you lot that have had a go at it, sucessful or not.

any advice would be helpful.

The bit i cant seen to find any info on or that im unsure of is:

how would the mortgage work? Would i buy the house normally as if i was going to live in it, then do it up, sell it? If so, i take it an interest only mortgage is the way to do it for that short time.
Would I be charged for paying the mortgage off in such a short space of time after i sell it (ie 4-6 months) or is there a special mortgage/mortgage company i can use for developing.

What is the score with capital gains tax, im guessing i will be charged some sort of tax on the profit, if there is any, how much tax would i be charged.

Will i be entitled to claim anything thing back from the development, im thinking im doing the local encomomy a favour by turning this house into a decent for someone at decent price.

Im in the early stages of getting info, so if these questions seem basic to you lot. its a sharp learning curve for me, but im going to give it a go.

thanks in advance

Adam

unclebuck

CGT would be 40% of profits made.

Unless it is your 'primary' residence when you sell. So, make sure it is.

stevebt

iTrader: (8)

if fyou sell the hose within 1 year you will have to pay tax on the profits, unless you live in the place !!! do you have any building skillls ??? if you are only planning to redecorate there cant be much profit in it unless the market is still rising ??

Albert47

I thought as much, 40% robbing B*****d's. How long do I need to live in it to cancel out CGT?

Building skills, Yeah I forgot to mention, There is two of us doing it. My mate is a ex time served bricky/plasterer before he changed jobs and got another mate who works with me but still does brick laying on the side.

Trust me boys, Im all over it!!!!!!!

edited to say: ive just read the 1year bit, that answers my question!!!

dpb

Set up as a co. - youll then be taxed merely on your profits

unclebuck

Golden rules are:

Buy at the right price. (get a survey first)
Make a realistic budget and stick to it.
Don't 'personalise' the development.
Don't rely on rising markets to predict your profit.
Sell quickly.

salsa-king

or sign it over to your wife, if she earns less than you, then you can let her pay the 'tax' on the profit.. you pay the 40% when yu sell and your income/her income gets taken into account.


ie: if you earn £20k a year and you make £50k on the house sale profit.. you pay the 40% on the £30k+ mark

If your wife only earns, say £5k + the above £50k = earning of £55k.. you/she pay/s the 40% on the £25K extra. where as you pay 40% on the £40k


is something like that anyway.. speak to your accountant.. or DeepSingh

Phil

unclebuck

Yes CGT, the same as interest payments on savings will be automatically taxed at 40% unless you make it otherwise.

orbix

I could be wrong but if the house is in both of your names then don't you get a combined CGT allowance of £17,000ish before you pay CGT?

Bluie

If you live in it you can claim PPR and no CGT is payable.
If not you will be taxed on the profit which is after certain allowances for buying/selling then you have the CGT allowance 2006/07 is £8,800.
If you are married then own it jontly to make use of both CGT allowances.
Once you deducted all allowances the net profit will be added to your income and taxed accordingly with the 22%/40% bandings

Albert47

Thanks for the info lads,

A little more research on CGT is needed. I dont mind paying tax but when its 40%, its a bit excessive.

if you have anymore advice keep it coming.

cheers

Adam

Deep Singh

On the tax issue its what Bluie says. If you are married then you can make up to approx £17k profit ( ie proceeds after capital allowances) before you pay a penny. If it is your primary residence ie you don't have another property in your name you pay 0%

Go to HMRC website and search for capital gains tax. Beware that Gordon Brown is very strict on CGT. My most recent submission is under enquiry and they are going through it with a fine toothed comb. Luckily I have nothing to hide, if I did I'd be buggered.

salsa-king

it goes to 40% if your earnings + the profit of the house sale puts you in the 40% tax bracket. best thig to do is have a year with out any income.. then the house profit will be your earning.. so you can keep in the 22% tax bracket instead of the 22% and then the 40% tax when your earning go over £37k (i think its that figure)

Deep Singh

Forgot to mention HMRC have 'drop in centres' where you can go for free advice. You have to make an appt over the phone.

LeeMac

iTrader: (1)

If you're not going to reg as a company -
Buy the house in a name not on your current mortgage, pay the council tax as a primary residence, 1 person living in to get a reduction (if you still can)
get it done up and flog it, no CGT
If you dont have a mortgage then you could get it in your name

Depends how much your gonna make, with allowances you might not pay much, keep your receipts

orbix

How does this work?

Do you get a mate to buy a house for you?

LeeMac

iTrader: (1)

your missus, boyfriend, daughter or son

Huw Jorgan

Albert47, A few things to ask. What is the ceiling price for a property in the area? Thats achieved & completed price not asking price.

How long has the property been on the market? Why do you think it is such a bargain? If its been on a while, ask yourself why. Many agents will have details of builders/developers, who make a living from this sort of thing, these are usually contacted first whrn such a property comes along, if they have rejected ask yourself why.

Get a full structual survey done on the property subject to purchasing it, its worth spending £500-800 now than discover a major problem later.

As for the mortgage, make sure you get one without a tie in period or redemption penalty. Seek advice from a whole of market broker, who doesn't charge for their advice.

Don't forget to factor in all costs when budgeting, many people think of kitchens/bathrooms/double-glazing etc but foget about re-wiring, plastering, survey & sols costs, stamp duty, hire of equipment, mortgage payments. When you have your budget, add at least 10% as a contingency fund.

sbk1972

Mmmm Sarah Beeney's t1ts !!!!!


Sorry, all this talk of property, mind's drifting.

SBK

salsa-king

the Building/Structual survey, thats what we paid for via HSBC (£600 from Direct Valuation). I've just found out this week that we didn't get the above survey.. we had the Homebuyers survey!!!!!! that on was £200 cheaper!!

So not happy now we are finding out there are more problems than we firstthought.

we thought at the time the survay seemed a bit 'light' for what we paid, but we are lay men and don't know what the full servay should have in it or look like!