Invest or sell up?

InvestorJoe

My three siblings and I inherited a large Victorian house in a fashionable area of London. My parents had it divided into flats and rented out. It currently enjoys an income of £18,000 per annum but it is now in a poor state of repair and any money spent on improvements feels like throwing good money after bad. The house is currently worth approx £600,000 in its present state. The house next door was completely refurbished and divided into two self contained apartments. Each flat sold for just over £500,000 each. At first glance it seems like a no brainer to clear the house, borrow and invest up to £200,000 for a full refurbishment and sell up, making £200,000 profit. However, when you pay off the £200,000 loan interest, divide the profit between four and take into consideration capital gains tax or income tax, is it worth the risk? Or have I overlooked some great tax advantage?

Doozergirl

Are the tenants on ASTs or are they regulated tenants? £18,000 isn't a great deal of income for a £600k house that should be worth £1m.

Would you feel comfortable carrying out that amount of work? Tax is the thing that inevitably comes after you've made money, so it depends on whether you think that the maths adds up. If you are employing a decent builder to do most of the work and project manage, and confident that there will be extra profit at the end, and minimal stress for you at the end, then maybe. I'm thinking it would be CGT as you didn't specifically purchase the property to trade it.

How big is the house? how many flats, two? £200k is a lot of money to spend if it has already been converted and you're not extending in any way, though it is London.

Otherwise, you know roughly what it's worth now. It's pretty easy to put it into auction and forget about it.