First-Time Property Developer - Finance

Dave117

Simon

How did it go then.....?

Did you make any decisions?

I am currently developing a property in SE London, and once finished will move in myself, but hope to move into developing full time.

big step and quite a big risk... but potential to be very rewarding financially and could be a career to enjoy!

granville_2

You may not want to hear this, but IMHO if you have to ask these sort of questions on this forum you really aren't in a position to start developing property.

I think people have been watching too much property !!!!!! tv.

ymmv.

Doozergirl

The only enjoyable bit is looking for houses and thinking what you're going to do to them. Ripping it up is alright bu then you have to put it together again. There's a bit of an uplift when you've finished and you finally get an acceptable offer. Then it's just relief when you finally exchange.

The rest is dirty, expensive and frustrating.

stevemcol

Is the main drive to live in the property the avoidance of CGT/Income tax or the realisation of funds to buy the property in the first place?

If for example I was looking to develop a porperty and had sufficient surplus / borrowing potential against my existing property and was willing to take the risk, would that be a viable option?

Doozergirl

stevemcol wrote: »

Is the main drive to live in the property the avoidance of CGT/Income tax or the realisation of funds to buy the property in the first place?

It's either or both. If you're starting out then the property being your main residence eliminates CGT altogether. Once you've got going then that isn't an option at all.

stevemcol wrote: »

If for example I was looking to develop a porperty and had sufficient surplus / borrowing potential against my existing property and was willing to take the risk, would that be a viable option?

It depends on how much surplus you have. I don't think that pulling a small amount in the form of a remortgage to fund the deposit on a subsequent mortgage is any way to go for a first timer...

There are so many things to go wrong and you have little idea how much your budget will be when you start out. The competition for smaller houses is so rife that you would be very lucky to make any decent amount of money on something where you could still obtain a mortgage. People totally misjudge the cost of works and pay over the odds for the house in the first place.

You should minimise risk wherever possible. Successful property developing is about taking calculated risks. The house you buy will always be worth something, it's how that compares up to the levels of debt that you have. No one wants to be caught with their pants down.

I'm just rambling now.

stevemcol

Your ramblings are appreciated.

Have been thinking for years (long before the currret TV obsession) about taking the plunge developing. I've got a mate whose whole family have been involved in the building trade for their living. We'd need to go into it together to share the financial burden. Selling up would not be an option, he's got a family and me and the OH are very settled.
I expect they all say this but I really do think we have a good feeling for budgets (his connections and me having recently had my own house done up). What I'm not sure about are specific purchase and resale values and peripheral costs (legal, accountancy etc.). That's where I need to start with research I guess.
I'm wiling to take the hit of a small loss or break even on the first attempt. It's the best way to learn.

Incidentally, why do we keep referring to CG tax. I thought property development for resale was subject to income tax?

Doozergirl

If a house is your main residence for a period of time for a genuine reason, you are not subject to CGT. Needing somewhere to live is a pretty genuine reason!

If you are doing it a lot then there is unlikely to be a genuine reason that HMRC would be satisfied with.

The best way to learn is to search hard and find a bargain. That way you have more leeway to make your mistakes. Purchase and resale, well, be prepared to have rightmove as a constant companion for a long time before you buy. I check rightmove every day for new houses to the market in my pet areas so I know where prices are at. It also means I have a pretty good feel for the market. I can tell almost instinctively which houses will fly and which will stick

stphnstevey

I can see the benifits of living in the house while you renovate and that it can be the only option to start off - but it does seem a fairly nomadic lifestyle! Not everyone would be able to do this.

For instance we were moving every 6 months because of my job. We now finally have some stability and want to set down roots. We have bought a place that has had nearly everything done. How do I start?

I can never understand how people manage to buy at auction - bearing in mind that you have to pay the full sum normally within a short period (28 days or so) which is normally too short to arrange a traditional mortgage?

wecanhelpu

Living in a house while you are renovating it is the cheapest way of doing things but..............

It is horrible. I've done it a couple of times.

Never again.

Doozergirl

wecanhelpu wrote: »

Living in a house while you are renovating it is the cheapest way of doing things but..............

It is horrible. I've done it a couple of times.

Never again.

Me neither! :rotfl: