bbc progs on property development

AlwaysWorking

Doozergirl wrote: »

Income Tax. Or corporation tax. It shouldn't be Capital Gains for property development.

:rotfl:I stand corrected! I had just seen this on the Directgov website and thought that was the right tax 'If you're selling a property that isn't your main home, it is likely that you will have to pay Capital Gains Tax.' Bearing in mind that most of the people on 'Property Ladder' and other such programmes usually have a job and presumably haven't set up a property development company.

Doozergirl

AlwaysWorking wrote: »

:rotfl:I stand corrected! I had just seen this on the Directgov website and thought that was the right tax 'If you're selling a property that isn't your main home, it is likely that you will have to pay Capital Gains Tax.' Bearing in mind that most of the people on 'Property Ladder' and other such programmes usually have a job and presumably haven't set up a property development company.

You don't need a company to pay income tax. We all pay income tax. If you are trading (which buying and then selling to make a profit is) then income tax is due.

Capital Gains would be due on a second home or (I think perhaps) a BTL where you'd be paying income tax on the income but captial growth over time was incidental.

leitmotif

I think these programmes have played a significant role in the boom. Lenders did overlend, but they couldn't have done so without the massive demand for excessive credit that in turn was fuelled by these programmes brainwashing the naive into believing that property is worth far more than it is. Add to that the Brits' obsession with buying rather than renting and you have a recipe for folly.

AlwaysWorking wrote: »

The only thing that annoyes me is that they usually say at the end of the programmes that the person bought for x, sold for y and spent z so they made x-z profit.....but what about mortgage payments and capital gains tax? It's not as easy as they make out, as even the worse developers on these programmes always seem to make a healthy profit!

Absolutely. No business would equate turnover with profit. I have a naive friend who bought a house for £100K in 2002. She wanted to sell it last year and it was put on the market for £235K. After 8 weeks it was reduced to £225K because they hadn't had any viewings. After another 8 weeks it was reduced to £215K because they hadn't had any viewings. After another 8 weeks they decided to let it out.

She recently boasted that they had doubled their money in only 8 years. This is nonsense for the following reasons:

1) They haven't sold it. Unless the money's in the bank you haven't made anything.
2) At a conservative estimate, assuming an average mortgage interest rate of 5% over those years, and knowing that they had a deposit of around 20-30%, they have spent at least 30K in interest so far.
3) They added a conservatory at one point. That cost 10K.
4) They demolished the conservatory to have an extension built. This cost 30K.
5) Stamp duty.

In total then, without any general maintenance, they spent £100K (price of house) + 30K (interest so far) + 40K (conservatory & extension) + 1K (stamp duty) = £171K. If they can't even get viewings at 215K, then this suggests they're unlikely to sell the house at even 200K (as anyone willing to pay that would surely view it at 215K and then try to negotiate 7% off). Looking at actual sales prices where they lived, they'll be lucky to break even on it. So the only real benefit is the savings in rent, which in itself is great, but has only been achieved because the market rose so much during that period. If the market had risen at a more sensible pace, or even fallen, they would likely have made a loss.

(If this had been a second home bought to let, there would be capital gains tax to pay and a higher rate of mortgage interest.)

In other words, they haven't doubled their money, and I fully agree that these vapid property programmes propagate the silly notion that price you sell it for minus price you buy it for is all that comes into the profit equation.

Jakilu

Work on property - how much will it cost?
This is my first post so not sure if I am doing it in the right place and in the right way. (I am 63)
I am looking to buy a house for my grand-daughter to rent from me, until she gets organised and can afford to buy it (with a little help from me).
I have had a Home buyers survey and it is suffering from damp in the inner and outer walls. It has a slate damp proof course and was built in 1946. I understand it will need a chemical injection damp proof course and this will involve at least some replastering, maybe full downstairs replastering. It is a 3 bed small semi-detached. It doesn't have electrical test certificate either so that may reveal it needs rewiring. The floors are also damp so I think this may involve new floor-boards, new air ventilation bricks and more insulation. Any experts out there who could hazard a guess at how much all this will cost? I know it sounds daunting but it is a nice house in a nice area and I am paying just a bit less (£500) than the valuation in the Home Buyers report -which was based on its current condition.

Any thoughts anyone..

Doozergirl

leitmotif wrote: »

In other words, they haven't doubled their money, and I fully agree that these vapid property programmes propagate the silly notion that price you sell it for minus price you buy it for is all that comes into the profit equation.

They don't do that though. They would have taken your friend's expenditure into account and made a caculation like you did. Just because your friend seems to think that you're stupid, it doesn't mean that BBC programming would reflect it the same way as she does.

I don't see the point in trying to calculate tax. Us lot seem to be able to figure out that you pay tax on gain, so most people understand that too. When we discuss salaries at interview, it's given that what they offer you will have tax taken from it. There is no point even trying to calculate tax for people when every circumstance is different. The same amount of gain on one property flip will result in differing levels of taxation for different people depending on their circumstances. If these programmes tried to calculate tax, it would defer from the actual project. It makes sense that we talk pre-tax language.

As for mortgage payments, HUTH does sometimes take it into account if the buyer talks about it. Some people don't have mortgages to pay. Property Ladder used to account for mortgages and fees.

It could be more accurate but it would become boring really. A rough idea of what people make or lose is fine.

If people are stupid enough to think they can do the same as the most successful people on any property in any town then more fool them. I don't feel the need to get anrgy about the BBC's reporting, I just have to accept that some people aren't that clever!

Doozergirl

Jakilu wrote: »

Work on property - how much will it cost?
This is my first post so not sure if I am doing it in the right place and in the right way. (I am 63)
I am looking to buy a house for my grand-daughter to rent from me, until she gets organised and can afford to buy it (with a little help from me).
I have had a Home buyers survey and it is suffering from damp in the inner and outer walls. It has a slate damp proof course and was built in 1946. I understand it will need a chemical injection damp proof course and this will involve at least some replastering, maybe full downstairs replastering. It is a 3 bed small semi-detached. It doesn't have electrical test certificate either so that may reveal it needs rewiring. The floors are also damp so I think this may involve new floor-boards, new air ventilation bricks and more insulation. Any experts out there who could hazard a guess at how much all this will cost? I know it sounds daunting but it is a nice house in a nice area and I am paying just a bit less (£500) than the valuation in the Home Buyers report -which was based on its current condition.

Any thoughts anyone..

Cost will depend on where you are but a Homebuyers Report will not reveal genuine damp. The surveyor will have taken a reading on a meter which doesn't measure 'damp'. It measures moisture and the two things can be quite different.

If you want an impartial view then you need to pay for a proper damp survey. Not an assessment by a company that sells damp proofing solutions - without doubt they will tell you the property suffers from damp and sell you a damp proofing solution!

I had a full buildings survey on my house. It suggested damp. We had our damp guy out to quote on the work but having lived here for over two years and having stripped every wall of wallpaper and seen everything underneath, there is no evidence whatsoever of anything. Real damp you can see and smell. If you can't see or smell it...

I have another house which had black mould everywhere. It was just the way they were living in it - overcrowded with vinyl wallpaper that didn't allow the walls to breath at all. It is absolutely fine now it's been stripped back, walls painted etc.

So I'd get yourself a quote to help with the negotiations with the vendor but unless there is tangible evidence of damp, I would do nothing to rectify it unless you want to throw money away. Wait and see.

A mortgage valuation will never come in at more than you are paying for a property or in theory you could ask to borrow more money from them. It also suits the surveyor that they can cover their backsides on the valuation. As they are accountable to the mortgage lender, it makes no sense for them to stick their necks out and value a house at more.

leitmotif

Doozergirl wrote: »

Just because your friend seems to think that you're stupid, it doesn't mean that BBC programming would reflect it the same way as she does.

Doozergirl, that's an unnecessarily spiteful and ungrounded assertion. There was nothing in my post to suggest that my friend thinks I'm stupid. Though she's a very nice person, she is pretty naive when it comes to working these things out. Please do not level such spiteful comments at me, I do not deserve it.

Doozergirl

leitmotif wrote: »

Doozergirl, that's an unnecessarily spiteful and ungrounded assertion. There was nothing in my post to suggest that my friend thinks I'm stupid. Though she's a very nice person, she is pretty naive when it comes to working these things out. Please do not level such spiteful comments at me, I do not deserve it.

I apologise. It was not intended as spiteful at all.

You used the word 'boasted' about your friend. And then drew a direct comparison to the same 'vapid' and 'silly' notions being portrayed on TV. I'm trying to work out why it's ok for you to say that about someone you know but it's not okay for me to make an abservation? Thank you for clarifying for me that she doesn't think you're stupid. But that you think she's not particularly bright. What a great friend you are sticking up for her when I said she thought you were stupid.

I will ensure I tone down my language for you in future.

twirlypinky

what about the one with Sarah Beeny where the people on the show always ignore her advice? That one is a more accurate reflection. I love the way she says at the end "Of course, there was a rising market and the money they made on this house would've been made if they'd done nothing at all"

I'd love to go on that show purely because i'm very good at doing as i'm told. I'd be her star pupil.

leitmotif

Doozergirl wrote: »

But that you think she's not particularly bright. What a great friend you are sticking up for her when I said she thought you were stupid.

That's another underhand comment. Please, Doozergirl, I really don't deserve to be addressed this way. The apology would have been much appreciated had it not been undermined by this statement, which is laced with sarcasm. I didn't say anything about her intelligence; naivety refers to having or (as in this case) showing a lack of experience, judgment, or information. Please just drop the attempts to get one up on another poster and stick to the topic in hand. Thank you.