Advice on whether to ‘do up’ interested house

seans_elysees

I’m about to legally inherit a 2 bedroom house and it’s in somewhat disrepair. 

The roof is needing an immediate fix to make water right, and resultant damage to one bedroom ceiling needs work. Windows are single glazing and very poor state. Bathroom is archaic and needs completely ripped out. The other general condition is probably needing plasterwork, electrics checked and a good clean and redecoration from top to bottom. 

What I’m trying to decide is whether I want any of the headache, or just to get rid.  

If I do want to maximise value, what do I need? 

- Builder (who can advise on roof, internal repairs, and bring in other trades as necessary) to provide estimates. 

- Estate agent to provide ‘as is’ estimate 

Is the estate agent the best person to advise on what work is/isn’t worth pursuing? 

Is there a % return I should realistically be considering when evaluating spending on repairs. I.e. if I’m spending £15k to make £30k then that’s maybe worthwhile, but not so much if my return is only £5k profit. 

Appreciate this is very general. 

RelievedSheff

Have a sit down with several agents and ask their opinion on current value and value if the upgrade works are carried out.

Then get the costs from a few builders to do the work.

You will probably find it isnt worth the hassle of having the work done and you are better off selling it as it is.

RAS

Worth checking the CGT situation and SDLT before you even take ownership.

Firstly, the deceased's estate had no liability for CGT up to their death, but if the property increases in value between death and sale, the estate may have a liability.

If you take ownership:

You become liable for any CGT on increase in value during your ownership unless it is your primary residence. You can't reduce this by making repairs, only capital improvements. So that eats into any profit.
If you don't already own property, you lose your first time buyer status regarding SDLT.
You'll be liable for Council Tax, possibly at an enhanced rate.

It could be much better for the estate to sell the house directly rather than transfer it to you.

It may be worth just getting a quick fix of the roof to prevent further deterioration given we are heading into winter, if it's a few missing tiles or rotten flashing. Clear junk and a basic clean. Clean the windows if you can reach them?

And air the place if you are visiting. 

mebu60

As @RAS said. 

seans_elysees

RAS said:

Worth checking the CGT situation and SDLT before you even take ownership.

Firstly, the deceased's estate had no liability for CGT up to their death, but if the property increases in value between death and sale, the estate may have a liability.

If you take ownership:

You become liable for any CGT on increase in value during your ownership unless it is your primary residence. You can't reduce this by making repairs, only capital improvements. So that eats into any profit.
If you don't already own property, you lose your first time buyer status regarding SDLT.
You'll be liable for Council Tax, possibly at an enhanced rate.

It could be much better for the estate to sell the house directly rather than transfer it to you.

It may be worth just getting a quick fix of the roof to prevent further deterioration given we are heading into winter, if it's a few missing tiles or rotten flashing. Clear junk and a basic clean. Clean the windows if you can reach them?

And air the place if you are visiting. 

Thanks. 

Who decides on the current house value for legal purposes? I had initial meeting with lawyer (who held the will) this morning. Neighbouring property sales over the last 5 years are avg £70-80k , with one outlier about £115k. Lawyer talked about putting in the est. value. Is it as simple as that?

It’s clearly not going near IHT thresholds and there’s no other assets in estate and only £5k cash. 

FreeBear

seans_elysees said: Who decides on the current house value for legal purposes? I had initial meeting with lawyer (who held the will) this morning. Neighbouring property sales over the last 5 years are avg £70-80k , with one outlier about £115k. Lawyer talked about putting in the est. value. Is it as simple as that?

It’s clearly not going near IHT thresholds and there’s no other assets in estate and only £5k cash. 

When I went through probate for *this house, I just looked to see what neighbouring properties sold for in the last year or so. Then knocked ~£20K off to account for condition and potential repair costs. Was well under the IHT threshold, and the valuation went unchallenged.

A lawyer will probably accept valuations from a couple or three local estate agents - If he wants a better estimation, then a RICS surveyor would be needed (at an extra cost).

With local property values in the £70-80K bracket, yours might come in around £50-60K - If repair/renovation costs come in at £20-30K, there is little "profit" to be had. You might get away with throwing £10K at it for basics, and then slap a bit of paint on the walls for a quick tart-up. But the next owner would be cursing you for ever more.

RAS

Since you are no where near the IHT limit, put a higher end value for the house. Then if it sells for £6-10k more than you think it's worth, the estate could avoid the CGT liability.

Keep_pedalling

It’s a risk I would not take, any increase in value is likely not to cover the costs of the work especially after CGT is taken into account. In your shoes I would get the administrator of the estate to sell and take you inheritance in cash. That way you don’t even have the hassle of selling the place, unless you happen to be the executor.

FlorayG

Honestly just sell it. My house was not in such disrepair but was old and I had been happy with it being old fashioned (to the extent I didn't have central heating even). I sold it to a builder who pretty much gutted it and made £60k profit - but it was six months work for him and he told me it COST nearly £30k. It's a LOT of work to take on; at least my house was inhabitable it sounds like the one you have isn't. Plus you have all the hassle of keeping an eye on contractors if you don't have one you  know and trust absolutely - the guy who bought my house was there every single day to make sure everything was done how he wanted.

Albermarle

As above, especially as you seem to have no experience in this area.

thegreenone

When I sold my late Mum's flat the EA told me not to touch a thing.  It needed total renovation.  It sold for the asking price, several times over.  However, that was a GF flat and no roof to worry about as it was replaced a few years previously.

But if I was in your shoes, I think I would get the roof and the bedroom ceiling repaired.  As it's a 2 bed it might be in the FTB range and for many, roof repairs will send them scurrying to the hills.  Roof = big job = loads of money - aaaaarrrrrrhhhh.  The rest can be done bit by bit.  

Definitely talk to the EA for advice though.