Property Development as a way to make money to reduce debts?

Louise1521

My friend has just done exactly that to pay off her debts. She bought a 2 bed terraced by remortgaging her home. Spent 3 months modernising it, and has just completed on the property, making nearly £20k. In fact she's in the process of buying her second one now. However, she was fortunate in having friends and family who helped do the house up, which obviously kept the costs down.

Lottiepots

Louise that sounds similar to what we are trying to achieve but I realise there is obviously an element of risk attached. Any other tips, experiences are very welcome.

Pennywise

Don't think in terms of capital gains tax on any profit you make (and the advantages of annual exemptions etc). Capital gains tax is on investments. What you propose is a trade, i.e. the renovation of a property with the intention of resale and profit. It will be taxed as a trade, with no annual exemptions, and you will also pay national insurance on the profit (if over £4k). You could therefore be looking at a tax bill of 30% (if you are basic rate taxpayers) or 48% if higher rate taxpayers - 40% tax and 8% NIC (on profits between say £5k and say £33k). HM Revenue & Customs are actively challenging property developers who claim the capital gains tax route.

Xbigman

I've seen property developing succeed and fail to make money. Are you willing to give up every weekend for six months plus a lot of evenings? And if so why not go the safer route and get a second job/do mass overtime.

What does ring alarm bells though, using other peoples money, especially when this is family. I tried my own business to pay off debts and it failed. I don't regret anything except the years it took me to pay back my friends money. On that basis, please consider what you are doing very carefully.
Regards



X

skintchick

My parents bought two cottages next to my nan's, and have done them up. Dad reckons he barely make any money at all - be warned.

He didn't do it for money though cos they are next to my nan's house and she was worried about nasty builders and developers - the houses were in a dreadful state and rat-infested. Yuck!

rprinter

IF you know the local market REALLY WELL then, if you find a good opportunity go for it!

I saw a flat about a year ago advertised near me, I knew it was a bargain. Should have bought it. It sold for £123k. It re-sold 5 months later for £172k. Probably just a lick of paint, new bathroom and kitchen.

You can follow actual prices achieved in any road/area/town/city at https://www.houseprices.co.uk The sale prices, from land registry, are listed from Year 2000 its fascinating reading!

Like with anything, NEVER rush into it!!

(I'm in an area with a lot of retired people and a lot of families struggling with the property prices. This would have been a flat owned by an older person, bit musty etc, re-done to suit a younger family I expect. This was a 3 bed flat in the same road where 3 bed houses go for £250k upwards)

r

Lottiepots

rprinter that is a really good website, would be extremely helpful, only problem is it's for England and Wales. Does anyone know of anything similar for Scotland?

Thanks to everyone who has taken the time to respond so far, we really are in a dilemma so is good to view all angles.

R00STER00

Try this one:

http://www.nethouseprices.com

This does the whole of the UK and is free to use.

ceegee

I wouldn't see it as a way out of debt. It looks more to me like increasing your existing debt. If it was me (which it isn't!) I would want to clear my existing debt before speculating in such a way. You do not know what the future holds and I feel it would be better to deal with your current debts first. Your income may be good now but life does have a habit of throwing spanners in the works (sometimes by the bagful!). Loss of income, collapse in house prices etc, etc.

Still, this is all just my point of view and I am a gloomy and cautious type of person. I hope, however, that another point of view is of use to you. :cool: