Am I right to tell him he is mad?

brixham

A friend bought a buy to let a few years ago. After being let down by a couple of tennants on the trot he wants to sell NOW !
40% equity so should be OK there but its empty and could take to sell.
Should he try to get rid at any cost or hang fire and see what is around the corner (whenever that comes!).
Also would he have to pay capital gains tax as I don't think he would of thought of this ? !!
Thanks.
brixham

SquatNow

Sell at any cost sound like a good plan.

I doubt CGT will come into it as he is unlikely to have made much in the way of profit when you count interest, buying/selling costs, maintenance, repairs, voids, and the fact that he'll have to sell at a huge discount to get a buyer.

monkeymaster

brixham wrote: »

A friend bought a buy to let a few years ago. After being let down by a couple of tennants on the trot he wants to sell NOW !
40% equity so should be OK there but its empty and could take to sell.
Should he try to get rid at any cost or hang fire and see what is around the corner (whenever that comes!).
Also would he have to pay capital gains tax as I don't think he would of thought of this ? !!
Thanks.
brixham

Capital gains tax is payable on any profit they will have made. It's unlikely property prices will reach the level they were at peak for at least 10 years so your friend seems sensible in wanting to get out asap and not chase the market down or hold onto a depreciating 'asset'.

Generali

My belief is that house prices are going to fall by a lot more before the current problems in the housing market are over so he's probably best to take whatever price he can get within reason.

Of course you and I have no greater foresight than anyone else so anything could happen.

brixham

OK thanks guys. I'll offer him your words of wisdom and claim they are all mine !
Thanks
brixham

SquatNow

BTW.... is the place empty at the moment?

:A

chewmylegoff

SquatNow wrote: »

Sell at any cost sound like a good plan.

I doubt CGT will come into it as he is unlikely to have made much in the way of profit when you count interest, buying/selling costs, maintenance, repairs, voids, and the fact that he'll have to sell at a huge discount to get a buyer.

interest, maintenance, repairs and rent (or lack of it in a void) are not relevant for CGT. they go into the income tax calculation.

the amount chargeable to CGT will be calculated as the difference between the net sale proceeds (after selling fees) minus the original cost to buy (i can't remember if you can add the stamp duty on to this cost - probably not).

(if there have been any improvements e.g. a new extension then you can add these costs to the original cost to buy - but you can't add on the cost of general maintenance over the years, or replacing something that was already there e.g. a boiler)

you are allowed to make something like £8k (maybe more these days) of gain a year before getting taxed. any capital gain after that incurs an 18% charge (i think this is just the flat rate now regardless of how long you have owned the asset which used to make a difference).

Icey77

chewmylegoff wrote: »

the amount chargeable to CGT will be calculated as the difference between the net sale proceeds (after selling fees) minus the original cost to buy (i can't remember if you can add the stamp duty on to this cost - probably not).

Hmmm, I'm not sure ... I have to look it up. On one hand it looks like a charge paid as part of buying the property but knowing things as they are there is probably a teeny little sentence somewhere that excludes stamp duty as an allowable expense :rolleyes:

But I do know that if you paid a mortgage product fee then that is an allowable expense for CGT - coz HMRC told me!

Running_Horse

brixham wrote: »

Am I right to tell him he is mad?

You know how it is, some people just cannot be trusted to run their own lives. Also, be sure to tell him what clothes to wear, what woman to make love to, what car to drive, what food to eat, what TV programmes to watch, which soap to use, what pet to have, which websites to visit, how often to cut his toenails, and when to scratch his armpit. Or, you could always mind your own business.

brixham

OK thanks Running Horse GREAT advice. So glad you aer here to help !
brixham

brixham

Sorry Squat .............Yes the place is empty and has been for a few weeks now