Could use some advice on a repossession

champstamp

We've come across a repossessed apartment (in very good condition) in arguable the most desirable building in a major city centre (I've followed this building for a number of years just through personal interest in it). It's asking price is 50k - 60k (30%) below it's market value. I found the market value from asking the Ea what it would be marketed at if it wasn't repo'd and checking previous sales on zoopler, the last two sales in Jan 13 where the same price as the Ea's estimate and the sale prices have remained a consistent since the building was finished 10 years ago.

We're considering buying the apartment, cleaning it up and putting it back up for sale within about a month, essentially flipping it and pocketing the difference.

How feasible is this? I've worked out all the fees/costs involved and we'll stand to make a small fortune which makes me believe it's too good to be true, which is why I'm asking your opinions.

RAS

I believe that there would be difficulties selling a property within 6 months of purchase as most mortgage providers would refuse to fund the purchase under money laundering rules?

stan5001

Minimum mortgage period is 5 years, and you'd be subject to Capital Gains Tax (between 18-28%) if you didn't live there for at least a year.

G_M

You are assuming you get the flat for the price advrtised. You may. You may not.

Repos continue to be marketed to attract higher offers even after your offer is accepted, right up to Exchange.

CGT may not apply - if this is a business venture it could be income tax. Take tax advice.

Some mortgage lenders may lend on a redeveloped property (and of course cash buyers can buy. Try asking on the 'mortgages board'.

champstamp

stan5001 wrote: »

Minimum mortgage period is 5 years, and you'd be subject to Capital Gains Tax (between 18-28%) if you didn't live there for at least a year.

Thanks for the reply, I'm not sure I follow, we've been offered a 2 year fixed mortgage so can you explain why the minimum mortgage period is 5 years?

champstamp

G_M wrote: »

You are assuming you get the flat for the price advrtised. You may. You may not.

Repos continue to be marketed to attract higher offers even after your offer is accepted, right up to Exchange.

CGT may not apply - if this is a business venture it could be income tax. Take tax advice.

Some mortgage lenders may lend on a redeveloped property (and of course cash buyers can buy. Try asking on the.

Yes I am making a lot of assumptions, assuming no one else outbids us AND we can sell it for close to its market value.

I wasn't aware of of CGT, thanks for bringing it to my attention. It isn't a business venture but it could be I guess. We're first time buyers who are looking at repossessions, but as this one is so undervalued we have been considering buying it just to sell it.

Thanks for the info.

G_M

champstamp wrote: »

Thanks for the reply, I'm not sure I follow, we've been offered a 2 year fixed mortgage so can you explain why the minimum mortgage period is 5 years?

You mean after 2 years you'll have paid it off and be mortgage free?

If you have that much money available, why get a mortgage at all?

champstamp

G_M wrote: »

You mean after 2 years you'll have paid it off and be mortgage free?

If you have that much money available, why get a mortgage at all?

No it's a 20 year mortgage with a 2 year fixed rate. I was under the impression that if you paid of the mortgage early, thus nullifying it, you paid a penalty percentage of the total (with this mortgage it's 3%) and then you're done. Is that not correct? I wasn't aware you HAD to have it for 5 years?

Also, are you still subject to capital gains tax if it's your main home and don't live there for a year?

Sorry for the many questions.

quotememiserable

there isn't a fixed rule on how long you have to be there, and really there's no minimum if you can convince HRMC that it was genuinely your main residence. This would be a much easier case to make if you actually sell up and move there, the sell up again.

ValHaller

stan5001 wrote: »

Minimum mortgage period is 5 years, and you'd be subject to Capital Gains Tax (between 18-28%) if you didn't live there for at least a year.

Largely ignore the above. Mortgages can be flipped at 6 months - and if you can make a huge profit, who cares about the CG Tax?

champstamp wrote: »

I found the market value from asking the Ea what it would be marketed at if it wasn't repo'd and checking previous sales on zoopler, the last two sales in Jan 13 where the same price as the Ea's estimate and the sale prices have remained a consistent since the building was finished 10 years ago.

....

How feasible is this? I've worked out all the fees/costs involved and we'll stand to make a small fortune which makes me believe it's too good to be true, which is why I'm asking your opinions.

Ignore the agent's valuation - well done for checking it out.

Rework your calculations for flipping at 6 months. Put it on the market 3.5 months in.