How much would you pay for this house?

ctz

You are a property developer. You are standing in a village. To your east, south and west there are rows of 3-bed terraced houses. These houses sell for £150,000-£170,000. To your north there is a Tesco superstore so large it distorts time. You once went in there for 2 pints of milk and some salad items, and when you came out time had advanced by 3 days. In fear for your lifespan, you vowed never to return.

Back to the houses. You are standing in front of an end-terrace. It is the same size and shape as every other 3-bed terrace in the village and has a For Sale sign on it. The house needs work. You will need to buy the following items:

• loft and cavity wall insulation
• new kitchen
• new bathroom
• new floorings
• paint
• tidy-up-exterior kit

You have a plan. To buy the house and the additional items, then sell again for a profit. You aren't the only one with this idea - the seller is taking sealed bids due to the amount of interest. You have in your hand an envelope, containing a sealed bid which you are about to pass to the estate agent. You need to outbid everyone else but still turn a profit.

How much is the bid for?

silvercar

....£110,001

Emmzi

"check what I have in my pockets"

(we are playing zelda, right?)

Cannon_Fodder

£66,666.66

Mutton_Geoff

Min Selling price = £150k

Costs:
loft and cavity wall insulation - £500
new kitchen - £2500
new bathroom - £2000
new floorings - £1500
paint - £1500
tidy-up-exterior kit - £1,000

Legal/fees/interest £6k
Min profit margin £20k
Contingency £5k

Total costs/margin £40k

Max offer £110k (or £110,001 as silvercar suggests)

silvercar

Mutton_Geoff wrote: »

Min Selling price = £150k

Costs:
loft and cavity wall insulation - £500
new kitchen - £2500
new bathroom - £2000
new floorings - £1500
paint - £1500
tidy-up-exterior kit - £1,000

Legal/fees/interest £6k
Min profit margin £20k
Contingency £5k

Total costs/margin £40k

Max offer £110k (or £110,001 as silvercar suggests)

On which you'll pay income tax as you are trading. Only way that you will get away with making it a capital gain is if you can show that you intended to let the property after doing it up. Then it comes a capital gain and you have an allowance and a tax rate of only 18%.

I spent more on the kitchen and bathroom and less on the fees & interest.

ctz

Thanks for the responses. Zelda was before my time I think

The asking price is 105k and the estate agent says they've already had offers over that.

I'm not a developer but I think most of the other interest is. It's useful to know how much they might be thinking of.

marcg

A builder might trim £15k off Mutton's bill since he may have men on the payroll sat round doing nothing, costing him money. Not much you can do about that if it happens.

Doozergirl

The last end terrace we sold for within that range we paid £92,500 for. £110k is what I'd call fair but not something I'd be interested in.

If it genuinely only needed what you say needed doing then it will sell for more than £110k. It's not a true project, it's mortgageable and therefore something that a potential owner occupier would pay at least £125k for.

woody01

Depends where it is!
If it's:
- Ooop North - £45
- Daaan Souf - £185,000

Mutton_Geoff

and the estate agent says they've already had offers over that

That's where you're going wrong - believing estate agents! Their comment would have no bearing on my offer even if it were true.