Advice for a beginner - Property Investment

Connor27

My wife and I have recently been thinking about buying a property, doing it up, then selling it (in about 12months) with a view to making about £10k-£20k profit. If the market were to crash we may however rent it out for some time til the market picks up again. We have a mortgage on our existing property which I would like to keep totally separate. The problem is, we havent got a clue how to go about it. I appreciate that this is a very general question, so does anyone know of any resources available on the internet.

Some of the questions I'm hoping to get answered are:

What sort of mortgage would be best for this purpose?
Would we have to pay capital Gains on any profit?
Is it worth doing or shall I just buy a load of scratchcards?

Doozergirl

Hi Connor, I can only recommend that you start small. If you can sell up and buy a house that needs some attention, you have more leeway to make mistakes. If you think that's too stressful, don't even think about buying a second house! Contractors cost a fortune if you don't know the right people; it's a job in itself to manage people and the budget; any timescale you have will go out of the window; the stress of paying two mortgages is huge.

If you can't sell a house, at least you're living in it - renting just delays the inevitable - it's got to be empty sometime just before you sell it. Also, empty houses are much, much harder to sell than a home. Just the feel of it makes it worth more to most.

There are lots of houses out there that have potential for a bit of an update and an extension and they aren't even advertised as such - you have better potential to get it at a good price if there aren't lots of other would-be property developers climbing all over it. Houses like that have a habit of going for too much.

Capital Gains Tax would be payable on any profit over your initial allowance (about £8,000 per person named on the deeds). No CGT on a house if it's your main residence - another reason to live in it!

HTH

F_T_Buyer

May I ask a few questions?

I assume this endeavor is purely to make money? As you have a mortgage (on your principle residence), I assume you will borrow the money? If you are prepared to take the risk of borrowing money, why not look at other investments? Once you have compared investments, ask yourself:

What would be the cost of the investment in your time? What would be the risk? What would be the potential return?

I think we need more information...

To answer your questions:

What sort of mortgage would be best for this purpose?

Interest only - offset against tax.

Would we have to pay capital Gains on any profit?

Yes, as you are not living in the property.

Is it worth doing or shall I just buy a load of scratchcards?

No.

Let us know your findings!

kinesin_2

Imo the days of cheap and easy profit from buying/selling property have been and gone. The market is slow, buyers expect more and recent press articles on the oh so un-fair practice of gazundering highlight that it's not a easy time at all to sell.
The major mortgages lenders are expecting a 0-3% growth in prices over the year.. any decent post tax saving rate is higher!
In order to come out with a profit the costs linked to buying and selling, especially any stamp duty/fees needs to reclaimed.
Any new mortgage will have a associated interest costs linked to it, this interest needs to be taken into account in the overall costs/profit calculations.
Unless you have very very good trade links + get staff mortgage rates I wouldn't even think about it - there are plenty of other investiments available that would give a less risker return at this point in time in the market cycle.
The issue with housing when compared to shares is gearing. It's possible to invest 10k in shares and have it double or become worthless, but you will have only even lost 10k. Having a mortgage of 100k off a 10k deposit, might lead to doubling you money (20k) ,or prices not moving at all, either way you have had to pay interest/fees on the lending... leading a net zero profit for any work done. Worst case is housing market falls and erodes into your inital 10k, but then also puts you into neg equity, at this point you can't just walk away unlike shares - you have to pay off your debt, either via selling the house, or finding more money.
People offen suggest that HPs can't fall, but imo if they can go up at 20%/year then it's possible for then to drop 5%/year -it doesn't even sound that bad, however it's still a large piece of financal pie.

Doozergirl

...hence if the house you renovate is the only house you own, you have the opportunity to discover if it works for you with minimum outlay and you have hopefully a little added value in your home which is the best insurance you can have against price falls. Worst case scenario is that you have a nice house to live in at the end of it!

david29dpo

i bought a flat in feb for £58000. £20000 deposit the rest a top up on my present mortgage. new kitchen, bathroom etc total spent,£62000. sold yesterday for asking price of £74500. not bad for 7 weeks very hard work. however i did all the work myself. it can be done but the problem is finding the right house. as someone said, start small. this was my first house and yes, i will be doing another! go for it but be careful.

paulpaulpaul

Hi, I done the same about 3 years ago and even then it was said that the market was dead and prices would be coming down, and guess what 3 years later they have gone up by another 30%

Most important thing is buying the correct property, ideal situation is knowing an estate agent.

Starting small is a good idea but then you are also looking at houses that a 1000 other small time budding property developers want, beacause so many inexperienced people are trying to do it there are few bargins at the real starter level.

I personally think the best profits and better bargins are to be had on higher value houses, naturally the risk is greater and when its the first property is scarey

I brought for 47500 and sold for 73000 7 months later,

cost about 10K to do up and sold privatly

The house was about 20 miles from home which does not seem far but when you are working evenings and weekends you seem to spend alot of your free working time travelling.

One thing I found is that you look at a room and think " oh just a lick of paint, new carpet and all will be done, weeks later of sanding, painting, sweeping up you are still on the same room,

This is unless you can get full days doing it but do you want to lose all your weekends and holidays,

I hardly saw my family for months and months, Yes i made about 17K and if I worked in a very low paid job it would probably have been wonderful, as I was already a top earner 17 K was very very nice for 7 months work but not life changing for me, whereas working every weekend and after work was life changing.

I did have sombody working for me as well at £ 10.00 per hour

although I made a good profit I never did do it again,

FatJock

david29dpo wrote:

i bought a flat in feb for £58000. £20000 deposit the rest a top up on my present mortgage. new kitchen, bathroom etc total spent,£62000. sold yesterday for asking price of £74500. not bad for 7 weeks very hard work. however i did all the work myself. it can be done but the problem is finding the right house. as someone said, start small. this was my first house and yes, i will be doing another! go for it but be careful.

Where can you but a flat for 58k?

The minimum I've seen round the area I'm working is 80k and thats a re-furb from a builder.

david29dpo

tipton, west midlands.

Anastasia

I find this web site helpful. There are plenty of experienced people in the forums.

http://www.channel4.com/4homes/ontv/property-ladder/index.html

Jorgan_2

It is still possible to make money from doing up property, its just a lot harder than it used to be. The easiest way to make money is to buy a property as cheaply as possible, how you do that is another matter. Remember to buy the worst property in the best street, not the best property in the worst street.