Complete house renovation
Discussion
Looking at a 5 bed house which is a complete wreck and would need gutting and renovating. Floor layout is fine, but would most likely put 1/2 ensuites in and open the kitchen slightly (remove a large pantry etc). Needs new windows, garden landscaping, etc, etc (basically everything save from the roof - as far as I'm currently aware)
Cost is around £300k. Value finished (worst case) is £450k. Cost of works being estimated now but I'm guessing upto £100k (worst case scenario) which leaves a margin of £50k potentially. I'd get builders in to do the majority of the work and catch up with them every morning and end of day, any less and it isn't worth getting out of bed for considering the amount of work, time, stress involved for 6-12 months. With other investments frankly I'm considering if it is even worth it for that considering the stress, but I really fancy doing it for the experience.
Survey being done. Japanese knot weed in the garden which means its a cash only deal which is annoying (without that and if it were slightly better condition it would be "habitable" for a mortgage)..
Hoping you guys can give me some words of wisdom on taking on such a project. Has anyone on here completed something similar within 6-12 months? (is that realistic?)
Cost is around £300k. Value finished (worst case) is £450k. Cost of works being estimated now but I'm guessing upto £100k (worst case scenario) which leaves a margin of £50k potentially. I'd get builders in to do the majority of the work and catch up with them every morning and end of day, any less and it isn't worth getting out of bed for considering the amount of work, time, stress involved for 6-12 months. With other investments frankly I'm considering if it is even worth it for that considering the stress, but I really fancy doing it for the experience.
Survey being done. Japanese knot weed in the garden which means its a cash only deal which is annoying (without that and if it were slightly better condition it would be "habitable" for a mortgage)..
Hoping you guys can give me some words of wisdom on taking on such a project. Has anyone on here completed something similar within 6-12 months? (is that realistic?)
Eric Mc said:
Will the profit be taxed under Income Tax rules or Capital Gains Tax rules?
Good question. Just checked. You get allowance of £11,000 per year (tax free), then the remaining amount is taxed at 28% (for higher rate tax payer, or 18% for lower rate tax payer) - which is better overall than higher rate income tax!Edited by parkranger on Monday 15th September 11:53
BUT ONLY if you didn't buy the property with the intention of selling it on at a profit. That would constitute a trading transaction and the profit would be taxed under Income Tax rules.
On the other hand, if you buy a property, renovate it, and then do nothing with it for a number of years - or let it out - then you could argue that the project was a capital investment rather than a property development.
Property developers are traders and they should pay Income Tax (and Class 4 NI too) on the profits from their property development trading.
On the other hand, if you buy a property, renovate it, and then do nothing with it for a number of years - or let it out - then you could argue that the project was a capital investment rather than a property development.
Property developers are traders and they should pay Income Tax (and Class 4 NI too) on the profits from their property development trading.
Eric Mc said:
BUT ONLY if you didn't buy the property with the intention of selling it on at a profit. That would constitute a trading transaction and the profit would be taxed under Income Tax rules.
On the other hand, if you buy a property, renovate it, and then do nothing with it for a number of years - or let it out - then you could argue that the project was a capital investment rather than a property development.
Property developers are traders and they should pay Income Tax (and Class 4 NI too) on the profits from their property development trading.
Good point. But 60% of something is better than 100% of nothing. We all have to pay tax so it will be paid correctly - I'm more interested for now in others experiences of similar projects.On the other hand, if you buy a property, renovate it, and then do nothing with it for a number of years - or let it out - then you could argue that the project was a capital investment rather than a property development.
Property developers are traders and they should pay Income Tax (and Class 4 NI too) on the profits from their property development trading.
You do need to be very aware of the taxation of such enterprises as the tax bill you end up paying makes a substantial impact on the return on that investment - both capital return and return on effort and time.
This aspect of "property development" is almost always ignored in the property programmes on TV.
Also, if you make a LOSS on the project - which is not altogether out of the question - what you can do with those losses various massively depending on whether the project was in the nature of a trade or a capital investment.
You need professional advice.
This aspect of "property development" is almost always ignored in the property programmes on TV.
Also, if you make a LOSS on the project - which is not altogether out of the question - what you can do with those losses various massively depending on whether the project was in the nature of a trade or a capital investment.
You need professional advice.
Eric Mc said:
You do need to be very aware of the taxation of such enterprises as the tax bill you end up paying makes a substantial impact on the return on that investment - both capital return and return on effort and time.
This aspect of "property development" is almost always ignored in the property programmes on TV.
Also, if you make a LOSS on the project - which is not altogether out of the question - what you can do with those losses various massively depending on whether the project was in the nature of a trade or a capital investment.
You need professional advice.
Thanks Eric - accountant coming back to me with some comprehensive advice.This aspect of "property development" is almost always ignored in the property programmes on TV.
Also, if you make a LOSS on the project - which is not altogether out of the question - what you can do with those losses various massively depending on whether the project was in the nature of a trade or a capital investment.
You need professional advice.
Can I have some feedback from others on here who have done such a project on my earlier points?
parkranger said:
Thanks Eric - accountant coming back to me with some comprehensive advice.
Can I have some feedback from others on here who have done such a project on my earlier points?
Would you not be better posting in Homes and Gardens (or whatever it is called)? You are bound to attract more advise like Eric's here.Can I have some feedback from others on here who have done such a project on my earlier points?
If it's a complete wreck do you think £100k will do it?
What if it costs more?
What sort of finish do you want? If good, you're looking at £20k+ for kitchen alone, similar amount for 3 bathrooms.
My last renovation of a 7 bed in relatively good condition cost me c£200k. I'd assumed £100k, thankfully was able to complete and still make a profit
What if it costs more?
What sort of finish do you want? If good, you're looking at £20k+ for kitchen alone, similar amount for 3 bathrooms.
My last renovation of a 7 bed in relatively good condition cost me c£200k. I'd assumed £100k, thankfully was able to complete and still make a profit
Where is the property?
Who is target market?
£100k isn't a lot to do a 5 bed house with any degree of reasonable quality - but is enough if you are using basic kitchens, bathrooms, cheap doors, skirting a etc, no landscaping and so on. If it is a wreck, wing it need a full rewrite and re-plumbing/heating.
5 beds will mean ensuite bathrooms - so at least 2/3 showers to provide high pressure hot water - so plumbing alone will cost £15k.
Anyway, good luck.
Who is target market?
£100k isn't a lot to do a 5 bed house with any degree of reasonable quality - but is enough if you are using basic kitchens, bathrooms, cheap doors, skirting a etc, no landscaping and so on. If it is a wreck, wing it need a full rewrite and re-plumbing/heating.
5 beds will mean ensuite bathrooms - so at least 2/3 showers to provide high pressure hot water - so plumbing alone will cost £15k.
Anyway, good luck.
parkranger said:
Cost is around £300k. Value finished (worst case) is £450k. Cost of works being estimated now but I'm guessing upto £100k
Survey being done. Japanese knot weed in the garden
If it's only worth £450k completed, needs complete renovation and has a Knotweed problem, I don't think there is enough money to be made. it's probably pretty much unsaleable at the moment and will be put through auction.Survey being done. Japanese knot weed in the garden
Is £100k possible? Unlikely - just add up materials. I assume interior doors, handles, skirting, light fittings, etc will all need doing? Complete re-plumb and re-wire? Kitchen? Plastering? It could be possible, but I would think you'll need to compromise one of time, quality (you could do it yourself) or budget.
Personally, I don't think there is enough profit. I'm sure you know about Knotweed - depending on the spread, it could take a big chunk of your budget to deal with. I'd walk away. It is possible to deal with, but why take on such an unknown problem?
clarkey said:
If it's only worth £450k completed, needs complete renovation and has a Knotweed problem, I don't think there is enough money to be made. it's probably pretty much unsaleable at the moment and will be put through auction.
Is £100k possible? Unlikely - just add up materials. I assume interior doors, handles, skirting, light fittings, etc will all need doing? Complete re-plumb and re-wire? Kitchen? Plastering? It could be possible, but I would think you'll need to compromise one of time, quality (you could do it yourself) or budget.
Personally, I don't think there is enough profit. I'm sure you know about Knotweed - depending on the spread, it could take a big chunk of your budget to deal with. I'd walk away. It is possible to deal with, but why take on such an unknown problem?
This would be my thoughtIs £100k possible? Unlikely - just add up materials. I assume interior doors, handles, skirting, light fittings, etc will all need doing? Complete re-plumb and re-wire? Kitchen? Plastering? It could be possible, but I would think you'll need to compromise one of time, quality (you could do it yourself) or budget.
Personally, I don't think there is enough profit. I'm sure you know about Knotweed - depending on the spread, it could take a big chunk of your budget to deal with. I'd walk away. It is possible to deal with, but why take on such an unknown problem?
clarkey said:
If it's only worth £450k completed, needs complete renovation and has a Knotweed problem, I don't think there is enough money to be made. it's probably pretty much unsaleable at the moment and will be put through auction.
Is £100k possible? Unlikely - just add up materials. I assume interior doors, handles, skirting, light fittings, etc will all need doing? Complete re-plumb and re-wire? Kitchen? Plastering? It could be possible, but I would think you'll need to compromise one of time, quality (you could do it yourself) or budget.
Personally, I don't think there is enough profit. I'm sure you know about Knotweed - depending on the spread, it could take a big chunk of your budget to deal with. I'd walk away. It is possible to deal with, but why take on such an unknown problem?
You're right. Met with 2 separate builders today. Estimate £100-125k easy for a "reasonable" job leaving a meagre profit for 12 months of time/stress and no contingency fund, so basically no profit. There were a lot of other people viewing as well, many of whom were the type of people who may get their own people in at £20-30 a day cash in hand, so there's no chance of making a margin or even getting an offer accepted when you're up against that. The level of interest puts me off anyway as some silly sod will put a higher offer in and end up making £10-20k and its just pointless. Is £100k possible? Unlikely - just add up materials. I assume interior doors, handles, skirting, light fittings, etc will all need doing? Complete re-plumb and re-wire? Kitchen? Plastering? It could be possible, but I would think you'll need to compromise one of time, quality (you could do it yourself) or budget.
Personally, I don't think there is enough profit. I'm sure you know about Knotweed - depending on the spread, it could take a big chunk of your budget to deal with. I'd walk away. It is possible to deal with, but why take on such an unknown problem?
Nice one to consider but I think I'll keep looking for something at least habitable with potential.
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