Cosmetic buy to sell

hazyjo

Another thing... you'll still be liable for ground rent and service charge (presuming there are both), and you may find yourself having to pay anywhere between around £200-£1,000 for the leasehold info/management pack for your buyers.


Jx

Doozergirl

I wouldn't touch any property for a potential profit/loss of that amount, let alone a leasehold. Leaseholds cost more and take longer to turn around. A potential profit of that much can very easily turn into a loss.

I've never come across a property that only needed cosmetic work.

Properties that apparantly only need a lick of paint do not sell to people who want to make money, they sell to people who want a home and to put a bit of a stamp on it.

You could easily earn £6-8k with a second job, and no risk. As a wage, it's very little.

Also, fwiw, I don't think that anyone is under the illusion that the OP is not using passive aggression in their posts.

kingstreet

booksurr wrote: »

so you wish to become a property developer

you think that a lick of paint and a new carpet will add £10K to the selling price?

give up watching daytime property !!!!!! shows and rethink your budget. Professional developers will be competing hard with you for anywhere with that sort of margin.

you will struggle to get funding unless you are prepared to lie on your application form as you are not buying a place to live in so many lenders would not give you a residential mortgage, instead they may give you a development loan or a commercial mortgage

unless you intend to lie to HMRC you will be classed as a property developer not a property investor and so will be liable to income tax not CGT on your profit as you are classed as a "trader" even if you only ever do this once

having said all that plenty of people do undertake property development and make a go of it so if you are prepared to take risks then go for it

What he said.

Plus the SDLT surcharge mentioned by others and that your buyer may struggle to get a mortgage if you try to flip it inside six months, as noted by hazyjo.

Finally, you should approach this as if you are setting up as a property developer as doing more than one or two will see you treated as one by HMRC.

bmthmark

Personally for me its too much risk for too little profit. Also all the stress that goes with it. You will be constantly thinking that you are spending too much and that it is eating in to your profit.

If on the other hand you said you wanted to buy a complete wreck and spend more fixing it up and modernising it then that has the potential to make money. But unfortunately there are more risks with this and you need to be prepared to loose a lot of money (hopefully you wouldn't) but you never know.

rtho782

Your best case scenario is make 10k. I don't know where you are, so can't say for sure how much flats are worth, but let's say you are looking at something you buy for 100k.

So, buy @ £100k, sell at £110k. A 10% markup

As the point of this is to get together deposit for a BTL property, we'll have to assume you are going to need a mortgage. It's not going to be a residential mortgage, as you're not buying it to live there as your main home, so at best you'll get a 90% LTV.

So you need a £10k deposit.

You think you can get away with £2k of costs to add £10k of value, which I feel is a bit optimistic, but let's run with that.

This decreases your profit to £8k.

You will have to pay the 3% additional stamp duty, so on a £100k purchase, that's 3k.

This decreases your profit to £5k.

You will have to pay solicitors fees etc for both buying and selling a leasehold, including searches when buying. This is going to be at least £2k.

This decreases your profit to £3k.

You may have to pay a mortgage application/valuation fee, this could easily be £500.

This decreases your profit to £2.5k.

You will have to pay your mortgage for the time from purchase to sale, even if it takes months to sell, or the buyers solicitors take ages doing searches. You may well find they reduce their offer when they realise you've paid £10k less a few months back, and you need time to do the work, so it's easily 6 months.

At 4% APR, which probably isn't far off for a non-residential 90% LTV mortgage, this is £1,800.

This decreases your profit to £700.

Is this worth the hassle? I'd say no myself..... Anything goes wrong and you've lost money!

eddddy

catoutthebag wrote: »

One of the guys that helped with my flat did similar cosmetic work in the development on a 1 bed and has walked away with 20k profit

Sometimes people do have lucky breaks like this. But it tends to be by chance, rather than the result of business planning - for example, just happening to be in the right place at the right time.


Just out of interest, it would be great to see the before/after Zoopla or Rightmove links to see what he did to the flat.

phoebe1989seb

bmthmark wrote: »

If on the other hand you said you wanted to buy a complete wreck and spend more fixing it up and modernising it then that has the potential to make money. But unfortunately there are more risks with this and you need to be prepared to loose a lot of money (hopefully you wouldn't) but you never know.

Agreed.

We've restored a few very characterful period properties - not as developers, but to live in - one of which was an unmortgageable wreck when we purchased, and have found that market conditions have as much (if not more) impact on sale prices than standard of finish.

Property 1 - restored over ten years. Large 6 bed house (had been converted to 4 flats when we took it on) that we improved with the addition of extra bathrooms and large eat-in kitchen. We didn't extend, but fully rewired, re-roofed, rebuilt the original Victorian conservatory, new boiler/cast iron rads, replastered, new flooring, full redecoration and landscaped garden. When we sold we made a staggering 470k on top of our purchase price. I think our renovations came to between 80k and 100k - quite low as we did all the donkey work ourselves

Had we not done any of the work we'd have still made around 300k profit as prices had risen in the ten years since we purchased.

Property 2 - restored over three years. This was a non-listed Tudor building that had been subject to so much tampering over the years a surveyor believed it dated from the 1930s! We did mainly cosmetic stuff - partial rewire, new flooring to some rooms, two new bathrooms, new kitchen (hand built, painted timber - in keeping with style of house), redecoration throughout and relandscaped garden. Works to house cost us around 45k.

We bought just before the 2007 crash and sold for considerably less than house + works had cost us......but we achieved a sale in 10 days when houses were taking years to shift. Everyone agreed our standard of finish, type of kitchen etc made the house much more saleable.