House prices

[Anonymous]

My business partner and I are thinking about purchasing an untidy house with the intention of banging in a bit of our furniture, lick of paint and selling it on for a quick buck, whats peoples opinion of the market at present.

Regards Senior

 

[mel]

hi senior
if you've got the time and money , i cant think of a quicker way to earn
money
make sure the house is in a desirable area and you cant loose

mel

 

[RogerS]

Senior

Very much depends where you are thinking of buying as to how much you will need to shell out in the first place. Depends on how much additional work you intend to do. Depends on how much profit you want to make.

If just cosmetic (ie fit new kitchen and bathroom and repaint) then do your sums very very carefully as the overheads (stamp duty/estate agent fees etc) will quickly eat into any potential profit. You need to have a clear understanding on what uplift in the selling price you will get after all your hard work. Might not be as much as you think and you can't necessarily rely on any uplift in the market to bail you out (unlike many of the properties featured in Property Ladder)

Don't forget the costs in servicing any mortgage.

Most profit is made by buying at the right price.

Lastly, watch out for the tax angle on any profit you make

 

[wizer]

i have been talking about doing it for years, every year i tell myself the market is going to crash, but it hasn't.

I say go for it

 

[dedee]

I've had a very happy experience (although contracts still not yet exchanged). Over 300% increase in 11 years.

Guess it all depends where the property is and resist the urge to do what you like rather than what will sell the house.

Andy

 

[rkchapman]

The trouble with buying property to resell rather than to live in is that there is a significant potential downside to go with the potential gain. If the market does slow down then it can do so very quickly as everyone tries to sell at the same time leading to oversupply...

It's not like other investments where you can just hold on to them and wait for the market to recover, or just decide to cut your losses and sell at whatever todays price is - you get to keep paying the bills while you wait, and there is no easy way to get out if no-one is buying (which they won't be if they can't sell their own properties - it's a viscious circle).

Just a word of caution from someone who has been burned in the property market...

 

[SammyQ]

DeDee? How about 750-800% in 14 years?




I couldn't afford my house nowadays....

 

[dedee]

I couldn't afford my house nowadays....

Neither can I which is one reason why we are selling up and moving out


Andy

 

[Anonymous]

Thanks for the imput guys, possibly 3 of us to buy a £550,000 house, me, business partner and our fitter plus wives, all on a personel basis rather than the company, that way we avoid some capital gains.

We could wack a £30k kitchen in at cost plus fitted furniture elsewhere and hopefully sell at a reasonable profit, who knows, i'll let you know if we do it

 

[RogerS]

Thanks for the imput guys, possibly 3 of us to buy a £550,000 house, me, business partner and our fitter plus wives, all on a personel basis rather than the company, that way we avoid some capital gains.

Er..um..actually, no, I don't think so. You will be liable to capital gains tax unless I'm mistaken. Or, even worse, the taxman deems it that you are property developing aka trading in which case your venture is deemed as generating income....which means being taxed as income tax (and paying NIC). Better if you can hold on to it and rent it out before selling it. That way you are property investing where the tax regime is different I believe...

but I'm not an expert.

 

[Anonymous]

Yes your liable to capital gains tax but theres a personal allowance of something in the region of £8-9000 as I understand, that was my take on it, Roger, or have I misunderstood?
Plus it is a business venture so I expect tax on profit.

 

[DomValente]

Buy in the right area. Count every penny, if this is your first time it's very easy to overspend. Trust me :wink:

Dom

 

[RogerS]

Yes your liable to capital gains tax but theres a personal allowance of something in the region of £8-9000 as I understand, that was my take on it, Roger, or have I misunderstood?
Plus it is a business venture so I expect tax on profit.

Yes and no. As I mentioned in the last post, it is possible that the revenue will consider you as trading in which case it's not capital gains but income tax that you pay. You've almost certainly eaten up your personal allowance and also any tax will most likely be at your marginal rate ie 40% plus you get NIC added on top. If you run your own business as a limited company and you are a director then it gets even worse AFAIK. My advice is get good tax guidance before you start.

 

[Anonymous]

Roger- thanks, yes i'm company director (and chief sweeper upper) so not so good, will discuss with our accountant on points raised, thanks again.

Senior

 

[JFC]

Im not sure if putting in all the mod cons will work , make the kitchen and bathroom look good yes but your idea of what is the best may not be the buyers . You could build 20 k worth of wardrobes that will be ripped out as soon as they move in .

 

[greybeard]

Location, location, location.

Patience, patience, patience.

(all truisms are true, by definition!, however boring, trite or simple they sound).

Only use money that you really really don't need for at least 2 years.
Be prepared to lose at least what you plan to spend on paint/polyfilla/kitchen. And make sure everyone understands that.
Forget about covering your real/personal labour costs.
Factor in your time-on-project by at least a multiple of two, and then add another 50%, and then think about it again (you need to understand the impact it'll have on your present way of life - like no free evenings until it's finished).
A six people planning/building committee is not a formula for instant decisions or success (IMHO!) - I'd suggest you make individuals responsible for certain areas re decisions etc.
Either budget v v carefully, and stick to it - no exceptions, or double your best estimate and plan resale accordingly.
Plan resale based on original cost plus cost of materials plus a modest profit % (building society savings rate are a clue - say 6%. Anything more is lovely but not to be planned for!!), and absolutely nothing else - a 30k kitchen doesn't mean the house is worth 30k more, ever. Sad but true. A new boiler, double glazing, etc etc, they none of them guarantee added value, all they do is make it easier to sell, possibly. And a lack of them is an invitation to the buyer to negotiate the price down.
Be ready (this is so easy to say, and acknowledge!, but almost unimaginably difficult to do!) to cut your losses and get out v v fast.

Other than that, sounds like an excellent idea!

 

[engineer one]

personally i think at this time, buying property for a punt is rather like trying to take over big companies, the potential profits are a lot smaller than sensible to make a decent return within say 12 months.

if you bother to read the financial pages you can see really heavy prices being paid for companies like boots, all using borrowed money which is expensive, and these days the excess meat on the corporate sandwich is not there, so making adequate cost savings difficult.

the same with houses. unless you can buy a real wreck in a decent area, that others can't see the magic of, then you cannot guarantee the uplift you need to make it worthwhile.

buying to rent has benefits, but as a long term thing, and maybe as part of a pension portfolio under a ssip. buying to sell really does at this time suggest a great deal of luck. everybody who has commented on their success has also said over 5-10 years, not 1-2.

the whole thing about the property price thing is that although it is supposed to be country wide, in fact it is the massive shortage of properties in popular towns and villages with the attendant great demand from nutters that pushes the prices up. then everbody says well it happened there it will happen here so.
but look carefully and you will see that some really stunning houses have been on the market for up to a year, often because they are just to b expensive.

good luck but why not re-do the original kitchen with new doors etc, and thus the expense will not be so great, but you can showcase some of your work, but are more likely to be able to meet more peoples' aspirations.
better to spend the money on the basement or attic rooms, and ensuring there are enough bathrooms/toilets, and adequate electricity power points.

paul :wink:

 

[RogerS]

if you bother to read the financial pages you can see really heavy prices being paid for companies like boots, all using borrowed money which is expensive, and these days the excess meat on the corporate sandwich is not there, so making adequate cost savings difficult.

Good point, Paul..although not all the money is borrowed. Why you've got all these private equity companies springing up all over the place is because there are enough moderately wealthy ex-City folk who have realised that they're not going to progress up the ladder any further, have money, have the time, inclination, contacts and experience and most importantly are bored and so they want to play. There isn't a single Footsie 100 company that is immune from being taken over by a Private Equity Company.

The real concern is that the raison d'etre of the PEC is to make money in the short term and so they are treating a major Footsie 100 company as a toy or a mere commodity. This is a huge destabilising force in our economy and I reckon the damage that they are doing/will do is potentially disastrous for everyone.

OTT over. Sorry. Got a little carried away there :wink:

 

[Anonymous]

Thanks for the points raised everyone, I have to count the hours I would put in, otherwise I may as well work harder at making furniture, the 30k kitchen would not cost me that as it would be one of mine. But I may now have to have a rethink. Thanks

 

[engineer one]

roger whilst i agree about bored people, the whole essence of the PEC is that they offer their investors a leveraged investment opportunity, which involves therefore borrowed money.

a good book to read, albiet out of date is "barbarians at the gate" which is about the KKR guys buying RJReynolds etc.

like you i am concerned with the destruction of decent companies, but it is rather like buying too many chinese goods, they destroy the local ability to produce things, and then when prices go up we are stuffed because we have lost both the manufacturing base, but also the ability of skilled workmen.

paul :wink: