Residential Investment Property Dilemma

wilfred30

The first thing you need to do is put together a written agreement that you both sign.  It should, ideally, include all the 'what if' scenarios.

Only having a verbal agreement is a recipe for disaster IMO.

AdrianC

Anon4tax said:

The question is about changing the agreement and whether or not it’s fair to do so?

Your "partner" thinks it is.
You disagree.
Who else's opinion matters?

Sit down over a cuppa and a packet of plain choc digestives, and come to an agreement like the pair of functioning adults you are.

SpiderLegs

Anon4tax said:

Thank you for your responses. It may sound too good to be true but this is an actual deal i’ve partly done! The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

I've spent a considerable amount of time sourcing the deal. If you’re interested ive put more figures at the end the sale was supposed to be completed before Christmas but we’ve had to delay completion and that’s why the cost are above £10k. I can source similar deals!

purchase price: £320k
refurb & decorating: £1,250
legal fees: £2,462.95
5 months rent: £4,850
council tax: £444
estate agent fees : £3,750

It’s impressive that you can take a 320k purchase, paint some walls and flip it for 375k. Was it purchased at a significant discount or has the market in general risen 15% in the five months you’ve owned it?

hazyjo

Anon4tax said:

The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

Of course it is. If it was in writing, he'd be far less able to renege upon his word.

Anon4tax

hazyjo said:

Anon4tax said:

The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

Of course it is. If it was in writing, he'd be far less able to renege upon his word.

You are right it does matter. My partner knows what the agreement is, they want to amend it. Maybe i’m too kind in entertaining them, to be honest if it was written i’d still consider their thoughts and feelings. 

Anon4tax

SpiderLegs said:

Anon4tax said:

Thank you for your responses. It may sound too good to be true but this is an actual deal i’ve partly done! The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

I've spent a considerable amount of time sourcing the deal. If you’re interested ive put more figures at the end the sale was supposed to be completed before Christmas but we’ve had to delay completion and that’s why the cost are above £10k. I can source similar deals!

purchase price: £320k
refurb & decorating: £1,250
legal fees: £2,462.95
5 months rent: £4,850
council tax: £444
estate agent fees : £3,750

It’s impressive that you can take a 320k purchase, paint some walls and flip it for 375k. Was it purchased at a significant discount or has the market in general risen 15% in the five months you’ve owned it?

The property was undervalued over the last few months i’ve been developing the skill of finding undervalued properties and also finding out how best to present them to the market to achieve a good sales price. I originally had an offer for £385 but that fell through! 

SpiderLegs

Anon4tax said:

SpiderLegs said:

Anon4tax said:

Thank you for your responses. It may sound too good to be true but this is an actual deal i’ve partly done! The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

I've spent a considerable amount of time sourcing the deal. If you’re interested ive put more figures at the end the sale was supposed to be completed before Christmas but we’ve had to delay completion and that’s why the cost are above £10k. I can source similar deals!

purchase price: £320k
refurb & decorating: £1,250
legal fees: £2,462.95
5 months rent: £4,850
council tax: £444
estate agent fees : £3,750

It’s impressive that you can take a 320k purchase, paint some walls and flip it for 375k. Was it purchased at a significant discount or has the market in general risen 15% in the five months you’ve owned it?

The property was undervalued over the last few months i’ve been developing the skill of finding undervalued properties and also finding out how best to present them to the market to achieve a good sales price. I originally had an offer for £385 but that fell through! 

Is this your first venture and do you have more such projects lined up?

Anon4tax

SpiderLegs said:

Anon4tax said:

SpiderLegs said:

Anon4tax said:

Thank you for your responses. It may sound too good to be true but this is an actual deal i’ve partly done! The figures aren’t the actual question. The question is about changing the agreement and whether or not it’s fair to do so? Also i’ve learnt my lesson about getting agreements in writing but that’s also not the dispute my partner wants to change the arrangement!

I've spent a considerable amount of time sourcing the deal. If you’re interested ive put more figures at the end the sale was supposed to be completed before Christmas but we’ve had to delay completion and that’s why the cost are above £10k. I can source similar deals!

purchase price: £320k
refurb & decorating: £1,250
legal fees: £2,462.95
5 months rent: £4,850
council tax: £444
estate agent fees : £3,750

It’s impressive that you can take a 320k purchase, paint some walls and flip it for 375k. Was it purchased at a significant discount or has the market in general risen 15% in the five months you’ve owned it?

The property was undervalued over the last few months i’ve been developing the skill of finding undervalued properties and also finding out how best to present them to the market to achieve a good sales price. I originally had an offer for £385 but that fell through! 

Is this your first venture and do you have more such projects lined up?

Second Ive got one in the wings i should complete the purchase of before the stamp duty window closes

oldbikebloke

Anon4tax said:

Second Ive got one in the wings i should complete the purchase of before the stamp duty window closes

so you are deliberately undertaking property development activity with the express intent of buying in order to sell.
you have a business partner whose only purpose it seems is to be a source of part funding

I note you have "carefully" put the mortgage in your name, presumably to deliberately get round joint ownership and therefore additional rate SDLT on purchase

are you and your partner correctly declaring your (soon to be repeat) business operation for tax purposes? As property developers, both you and your partner are subject to income tax on any profit, since your business is one of trading activity, not property investment in a home you will be living in with an expectation of continuity .

sounds to me that both you and your partner need to step up a gear in terms of the formalities of your business.
Yes he has a point that he gets no return for x months on the money he loaned, so "rent" would compensate him for that (rather excessively compared to interest rates obviously) .
You on the other hand are providing "labour" at no cost to him .

each of you therefore gets a " return" on your respective funds invested whilst the works are underway. So there is patently grounds for either of you arguing one gets more than the other out of that aspect. 

the answer to your question: is it fair"? therefore appears to be go off and negotiate between the pair of you and make sure your business plan includes all financial impacts before working out who gets a better outcome and therefore who is being "unfair" because I'll bet the profit is not 50/50 and that needs sorting before you repeat on your next venture and HMRC slaps a bill on you for tax evasion if you think you are exempt because you live there

Anon4tax

oldbikebloke said:

Anon4tax said:

Second Ive got one in the wings i should complete the purchase of before the stamp duty window closes

so you are deliberately undertaking property development activity with the express intent of buying in order to sell.
you have a business partner whose only purpose it seems is to be a source of part funding

I note you have "carefully" put the mortgage in your name, presumably to deliberately get round joint ownership and therefore additional rate SDLT on purchase

are you and your partner correctly declaring your (soon to be repeat) business operation for tax purposes? As property developers, both you and your partner are subject to income tax on any profit, since your business is one of trading activity, not property investment in a home you will be living in with an expectation of continuity .

sounds to me that both you and your partner need to step up a gear in terms of the formalities of your business.
Yes he has a point that he gets no return for x months on the money he loaned, so "rent" would compensate him for that (rather excessively compared to interest rates obviously) .
You on the other hand are providing "labour" at no cost to him .

each of you therefore gets a " return" on your respective funds invested whilst the works are underway. So there is patently grounds for either of you arguing one gets more than the other out of that aspect. 

the answer to your question: is it fair"? therefore appears to be go off and negotiate between the pair of you and make sure your business plan includes all financial impacts before working out who gets a better outcome and therefore who is being "unfair" because I'll bet the profit is not 50/50 and that needs sorting before you repeat on your next venture and HMRC slaps a bill on you for tax evasion if you think you are exempt because you live there

Yes the intention is to settle down in one property and formalise a business developing properties on a commercial basis. I think the law is a lot looser than you think in regards to buying a property, renovating it and selling it on when it is your genuine place of residence. I enjoy moving and exploring different areas and finding where i want to settle down, this doesn’t mean i have to be subjected to a life of renting! but i get your wider point and the intention is not to evade tax as that is illegal and immoral but i’ll set up a fully fledged tax paying business when the times right. Thanks for your advice.