First time buyer of property from grandparents

ElliottW

Hi all,

I’m 20 years old, I live in the East Midlands and I am looking to buy my first property (off of my grandparents). This is primarily for short term profit, I have no intention of living in the house, only to renovate and sell on.

My grandparents are desperate to get rid of the property as council taxes are soon to be rising for people who own more than one property...

Therefore, this seems like the perfect opportunity for me to make some money and get on the property ladder.

Now I must add that the house is in need of desperate repair and months of grafting, but I see the light at the end of the tunnel!

So, I ask for advice from people who are understanding of this particular subject or have experienced this themselves

E.g. what would be the best way to approach this situation being a first time buyer with no credit history?

I would appreciate any feedback on this,

Thanks

lindylootoo

Can't advise on all the details you'll need, but when you finally sell on the refurbished property and make a profit, you will be subject to Capital Gains tax..........unless it has been your main residence for a certain period of time (can't remember.........but think it's 3 years).......you'll need to clarify! You'll also need to keep every single receipt and expense you sell to offset the profits.

xylophone

Are you in a position to get a mortgage on the property?

If so, you'd do better to live in it as your principal private residence for a couple of years while you work on improvements and then sell on so as to avoid CGT on sale.

davidmcn

xylophone wrote: »

If so, you'd do better to live in it as your principal private residence for a couple of years while you work on improvements and then sell on so as to avoid CGT on sale.

And also if you want to take advantage of the FTB relief under SDLT.

Fire_Fox

Welcome to MSE.

Do you have savings for: structural survey, deposit, conveyancing solicitor, materials and tools, household bills?

Is the property classed as 'habitable' for mortgage purposes? Do you qualify for a mortgage? Do you have relevant skills and experience (DIY/ building trade)?

steampowered

As this will be your first property, remember that you are using up your first time buyer benefits - e.g. FTB SDLT relief, the ability to use a help to buy ISA.

Perhaps this isn't a problem but it is worth thinking about.

If you are planning to get a mortgage, worth bearing in mind that not all lenders will be prepared to lend where you are buying from a related party such as your grandparents. If you need a mortgage it is worth speaking to a mortgage broker who will know which lenders are open to this and which aren't.

Slithery

lindylootoo wrote: »

Can't advise on all the details you'll need, but when you finally sell on the refurbished property and make a profit, you will be subject to Capital Gains tax..........unless it has been your main residence for a certain period of time (can't remember.........but think it's 3 years).......you'll need to clarify! You'll also need to keep every single receipt and expense you sell to offset the profits.

Surely in this case the OP would be liable for Income Tax, not CGT as they are purchasing the property solely to flip for a profit.

AnotherJoe

Elliot, some Q's.
Whats the house worth?
Would your GP's sell it to you at a discount?
What savings do you have?
How much do you earn?
Would you live in it whilst doing it up?
Do you have the skills to do it up yourself?
Do you have the cash to do it up yourself?
Have you estimated the time and cost to do it up?

ElliottW

Hi Joe,

The house has not been properly valued yet but going by online valuations, it is valued at a minimum of £60,000 and could rise as high as £90,000 when fully refurbished.

As my gp’s are desperate to get rid of it, they are willing to give it me at a discounted price.

I have £11,000 saved up as of yet and earn £14,700 a year.

I highly doubt I’d live in it.

I’m not particularly concerned about the know how behind the reparations.

I understand it’ll cost a minimum of £10,000 in repairs.

AdrianC

ElliottW wrote: »

This is primarily for short term profit, I have no intention of living in the house, only to renovate and sell on.

Thus making it a business activity, by HMRC's "badges of trade", so liable to income tax.

My grandparents are desperate to get rid of the property as council taxes are soon to be rising for people who own more than one property...

No, they're rising for owners of empty property. Why is it empty, rather than let or sold? You'll have it empty, too, so how are you planning to pay CT on it?

ElliottW wrote: »

The house has not been properly valued yet but going by online valuations, it is valued at a minimum of £60,000 and could rise as high as £90,000 when fully refurbished.

As my gp’s are desperate to get rid of it, they are willing to give it me at a discounted price.

How "discounted"? How will you finance the rest?

I have £11,000 saved up as of yet and earn £14,700 a year.

I’m not particularly concerned about the know how behind the reparations.

I understand it’ll cost a minimum of £10,000 in repairs.

"A minimum of £10k in repairs", but you don't actually understand what you're letting yourself in for. Where's that number come from? That minimum is just about your entire fund, and your disposable income won't exactly go very far towards even materials costs, let alone labour... Are you planning on DIYing the work, or point-and-pay?

Seriously, while this might sound like a good idea on the surface, I think you're sleepwalking into what could rapidly turn into a nightmare. Do you have anybody to bail you out, when you inevitably need extra funds? Do you have any plan for funding at all?

onwards&upwards

A house that needs ‘desperate repair’ and ‘months of grafting’ is probably going to cost more than 10k to sort.