Flipping property or BTL?

hyundai2005

Hi all,

Looking to get some opinions on starting out with property.

For context I'm 18, In distance learning Uni, working 30H/Week in accounting bringing in 1500/Mo after deductions with plenty OT available. I own a car, have no debt and live with parents. Based in NI. I have 25K cash available and parents will lend me 55K bringing me to 80K cash buying power.

With BTL I understand the advantages of leverage, BRRR, building equity however with tax changes, interest rates, non paying tenants, cashflow issues it seems like it can fall like a domino effect.

However flipping houses seems better in my scenario since I won't pay tax in my scenario and seems like a much quicker way to grow my pot of cash, I would work on the property on evenings and weekends and I'm decent with my hands so will attempt most work myself.

I know I'm probably overlooking the process however please feel free to comment, thank you for reading.

lincroft1710

Why won't you pay tax?

ProDave

If you buy a house, live in it, renovate it and sell it, you won't pay tax.  But if you don't live in it and keep on flipping without declaring it HMRC will catch up with you sooner or later and charge you tax and a penalty.

FreeBear

lincroft1710 said:

Why won't you pay tax?

No tax to pay when you make a loss, which the OP will do.

Buying, renovating, and flipping a house is much more than just slapping a coat of paint on everything. Working evenings & weekends will take a very, very long time, and there will be plenty of jobs where the professionals will need to be called in.

MultiFuelBurner

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

BJV

We started in property in 2015. 

It is hard. Everyone thinks that they can do it. But it is genuinely difficult. Every time we buy a house we say that we will flip it and every time we end up keeping it and renting it out. We now have quite a few. Never enough though. we go a little overboard on the renovations, and charge a fair rent, to local people, in fact I dont think we have ever put them up. In return 99.9 % ( the 0.1 % has now moved out ) of our tenants are mazing people and they look after the houses.  Only one tenant has ever moved out and they where the 0.1% so we where over the moon when they did. 

However, being handy and being a property developer is very different. The number of houses we have bought where the work was done by the homeowner and our guys have condemned the work - well its a lot. 

I am not saying don't do it BUT be prepared, have a budget and then double it. Raw materials costs have gone through the roof, plywood OMG! plaster, as well as labour rates for electricians, plasterers and plumbers it is almost double what it was when we first started. 

Programs like Homes Under the Hammer make it look so easy. Paint everywhere grey ( !!!! ) recycle the kitchen  buy a new staircase from ebay for £0.10 and off you go.

Sorry, but it is not that easy. 

It is very rewarding when you get it right. I love seeing something transformed and reused and happy people moving in but it will take a lot of hard work.

Good Luck - ooh and yes BTL you will pay tax, there is never any escape from Mr & Mrs  HMRC!

hyundai2005

ProDave said:

If you buy a house, live in it, renovate it and sell it, you won't pay tax.  But if you don't live in it and keep on flipping without declaring it HMRC will catch up with you sooner or later and charge you tax and a penalty.

Thanks for reply, I'd be moving into the house I'm renovating and keep in line with PPR.

hyundai2005

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

hyundai2005

BJV said:

We started in property in 2015. 

It is hard. Everyone thinks that they can do it. But it is genuinely difficult. Every time we buy a house we say that we will flip it and every time we end up keeping it and renting it out. We now have quite a few. Never enough though. we go a little overboard on the renovations, and charge a fair rent, to local people, in fact I dont think we have ever put them up. In return 99.9 % ( the 0.1 % has now moved out ) of our tenants are mazing people and they look after the houses.  Only one tenant has ever moved out and they where the 0.1% so we where over the moon when they did. 

However, being handy and being a property developer is very different. The number of houses we have bought where the work was done by the homeowner and our guys have condemned the work - well its a lot. 

I am not saying don't do it BUT be prepared, have a budget and then double it. Raw materials costs have gone through the roof, plywood OMG! plaster, as well as labour rates for electricians, plasterers and plumbers it is almost double what it was when we first started. 

Programs like Homes Under the Hammer make it look so easy. Paint everywhere grey ( !!!! ) recycle the kitchen  buy a new staircase from ebay for £0.10 and off you go.

Sorry, but it is not that easy. 

It is very rewarding when you get it right. I love seeing something transformed and reused and happy people moving in but it will take a lot of hard work.

Good Luck - ooh and yes BTL you will pay tax, there is never any escape from Mr & Mrs  HMRC!

Hi BJV, thank you for for giving a lengthy reply. 

I understand its hard work that I wont understand till I get doing it, finding decent tradespeople also seems to be a thing everyone struggle with. 

I have never really watched any programs like that however i should probably research some interior design techniques if im going down this road lol

With your BTLs by charging a fair rent which you rarely increase, do you face issues like poor cashflow, overleveraging etc? 

Many thanks

_Penny_Dreadful

hyundai2005 said:

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

When you buy property to renovate and sell the applicable tax on your profits is incomes tax.  The property being your principal residence does't come into it.

Other than general HPI to increase the value of a property you need to increase the size of the property e.g. with an extension, or buying a property no mortgage lender will touch for cash and sorting whatever it is that needs sorting to allow lenders to use it as security e.g. sorting subsidence.  It's not just a case of installing a new kitchen and slapping some paint on the walls.

Bigphil1474

Penny - There's no income tax on selling your own property. Being the principal residence is relevant, as you don't pay any capital gains tax on your main residence.

OP, you don't have to make a house bigger, but it may help. In the current market, it's likely that buying a run down property in the next few months and literally just installing a new kitchen and redecorating may well make you a tidy profit as the market is in a bit of a lull. If it's timed right for when the market picks up again over the next year or so, could well work - depends when that is though, and nobody has a working crystal ball. I would suggest you start looking at properties that you are reasonably confident you can sell if you put the work in, in areas you know reasonably well. Not so much point trying to flip a one bed flat in an area where everyone wants a 3 bed semi.