Property Developing 2nd Career

[st_files]

A couple of my office bound friends have jacked in their 9-5 jobs and gone off to 'develop' properties over the last 6/7 years. Unfortunately they are both now doing other things as they could not make it work - seems the market was flooded with clueless people in the same boat over bidding on developable properties thus meaning no one is able to make a profit on said development.

Is there anyone here who's given it a go as a 2nd career over the last 5-10 years, or even more recently? How did/is it go/going? Do you think there is still a market for people to renovate/develop properties and make some decent cheddar?

[soad]

Not property developing as such, but my good friends continue buying up houses at the cheaper scale of the market (some in bad areas), to be let out to students and EU migrant workers. It's going well from what i've heard, they're up to 10 properties now, not had to sell a single one yet.

They do have regular jobs by the way.

Edited by soad on Tuesday 26th January 12:15

[Jasandjules]

Property Development in a falling market? Hardly a wise decision.

Of course, the catch is waiting until the market has hit the bottom then get buy low, do up, and sell in a rising market.. If it were that easy.......

[st_files]

Jasandjules said:

Property Development in a falling market? Hardly a wise decision.

Of course, the catch is waiting until the market has hit the bottom then get buy low, do up, and sell in a rising market.. If it were that easy.......

Is the market still falling though....seems to have stabilised recently, well, in and around London....

[Targarama]

st_files said:

A couple of my office bound friends have jacked in their 9-5 jobs and gone off to 'develop' properties over the last 6/7 years. Unfortunately they are both now doing other things as they could not make it work - seems the market was flooded with clueless people in the same boat over bidding on developable properties thus meaning no one is able to make a profit on said development.

Is there anyone here who's given it a go as a 2nd career over the last 5-10 years, or even more recently? How did/is it go/going? Do you think there is still a market for people to renovate/develop properties and make some decent cheddar?

This is a result of too many people watching Sarah Beeney's breasts and not actually listening to what she was saying. I always thought it amusing that many of those house improvement programs resulted in a value gain similar to what they would have made if they had spent nothing and resold the property as-is 6 months later.

[st_files]

Targarama said:

st_files said:

A couple of my office bound friends have jacked in their 9-5 jobs and gone off to 'develop' properties over the last 6/7 years. Unfortunately they are both now doing other things as they could not make it work - seems the market was flooded with clueless people in the same boat over bidding on developable properties thus meaning no one is able to make a profit on said development.

Is there anyone here who's given it a go as a 2nd career over the last 5-10 years, or even more recently? How did/is it go/going? Do you think there is still a market for people to renovate/develop properties and make some decent cheddar?

This is a result of too many people watching Sarah Beeney's breasts and not actually listening to what she was saying. I always thought it amusing that many of those house improvement programs resulted in a value gain similar to what they would have made if they had spent nothing and resold the property as-is 6 months later.

True....every week she would roll her eyes and try and explain that despite their comical attempts to ruin the property the rising market meant they'd got ridiculously lucky...

[Celt]

How much do you usually make if you rent properties out? Seems like and easy enough way to make money. I know there will be alot of different problems but if you get a long term client who can pay the rent, and doesnt trash the place.

[marsred]

Possibly the best indicator that the market has hit the bottom is when Beeney disappears from our screens, as she'll be making proper money developing again. More reliable than Rightmove at least.

[WorAl]

Celt said:

How much do you usually make if you rent properties out? Seems like and easy enough way to make money. I know there will be alot of different problems but if you get a long term client who can pay the rent, and doesnt trash the place.

Depends what sort of house and where really, can vary from a couple hundred to quite a few thousand a month.

My house - 3 Bed Farm house 15 miles from town centre - £850/month
Similar sized house in Town Centre - £1200/month
Similar Sized house in Darras Hall (5 mins from mine but full of stuck up twunts) - at least £1800/month.

[AUDIHenry]

Develop means different things to different people. Buying to lease/let is not development, it's investment. Buying something, knocing it down, putting something else in its place IS development.

Doing the former will bring you good returns but not great ones. Doing the latter, while riskier, is where the money is. Or it can kill you.

[Lefty Two Drams]

I own a few flats personally and have just bought one through my Ltd co (I'm a contractor so have no real business expenses).

My plan is to keep buying flats with low mortgages (no more than 40%LTV).

So far it's been working out pretty well, bought my first flat in 2001 and now have 5 as well as our barn conversion and neighbouring croft.

It's not really property development (well, the barn conversion was but it's my house - not converted for resale).

Monthly income from the flats has never been less than 3k. Can't decide whether or not to sell my flats to my company though.

[Eric Mc]

Lefty Two Drams said:

I own a few flats personally and have just bought one through my Ltd co (I'm a contractor so have no real business expenses).

My plan is to keep buying flats with low mortgages (no more than 40%LTV).

So far it's been working out pretty well, bought my first flat in 2001 and now have 5 as well as our barn conversion and neighbouring croft.

It's not really property development (well, the barn conversion was but it's my house - not converted for resale).

Monthly income from the flats has never been less than 3k. Can't decide whether or not to sell my flats to my company though.

I hope you've discussed carefully with your accountant the tax ramifications of running a rental property through your limited company.

Edited by Eric Mc on Tuesday 26th January 19:23

[Lefty Two Drams]

Hmm, only briefly Eric, he seemed to think it was a reasonable thing to do with "excess cash"...

What's your view?

[Plotloss]

Erm, where did the last decade go?

Anyone?

I appear to have lost 10 years or so.

[_Batty_]

lets think shall we?
professional developers losing jobs left, right and center, building firms going bust, just scraping out of recession, banks hauling lending back in....

want a map?

seriously i would advise against it as a sole job, let alone a 'hobby'

[Eric Mc]

Lefty Two Drams said:

Hmm, only briefly Eric, he seemed to think it was a reasonable thing to do with "excess cash"...

What's your view?

You may find it not so clever when you go to sell it - esppecially from the Capital Gains Tax point of view.

Also, how does it fit in with the "trade" of your company, assuming it is still a "trading company" and not an "investment company" - which is what in can become if it derives more income from investments - such as properties - than it does from doing "work".

Edited by Eric Mc on Tuesday 26th January 20:22

[Lefty Two Drams]

Eric Mc said:

Lefty Two Drams said:

Hmm, only briefly Eric, he seemed to think it was a reasonable thing to do with "excess cash"...

What's your view?

You may find it not so clever when you go to sell it - esppecially from the Capital Gains Tax point of view.

Also, how does it fit in with the "trade" of your company, assuming it is still a "trading company" and not an "investment company" - which is what in can become if it derives more income from investments - such as properties - than it does from doing "work".

Edited by Eric Mc on Tuesday 26th January 20:22

No plans to sell the property in the short term at least, income from the property will obviuoisly be taxable but the purchase price helped somewhat with my corp tax liability for last year.

The company will never make more money from the investments than by trading, unless I suppose, by selling off assets.

I'm no accountant so value your opinions Eric, thanks.

[TVR Andy]

I bought a 1930's semi in Oxford May 2009,for 178k. Did a total job on it; new plumbing,electrics,bathroom,put new kithen/dining room on the back & turned the existing kitchen in to a utility room. On the market late Nov 285k, accepted an offer of 275k to a cash buyer today.Will clear 45k. Not bad part time.

[Eric Mc]

Lefty Two Drams said:

Eric Mc said:

Lefty Two Drams said:

Hmm, only briefly Eric, he seemed to think it was a reasonable thing to do with "excess cash"...

What's your view?

You may find it not so clever when you go to sell it - esppecially from the Capital Gains Tax point of view.

Also, how does it fit in with the "trade" of your company, assuming it is still a "trading company" and not an "investment company" - which is what in can become if it derives more income from investments - such as properties - than it does from doing "work".

Edited by Eric Mc on Tuesday 26th January 20:22

No plans to sell the property in the short term at least, income from the property will obviuoisly be taxable but the purchase price helped somewhat with my corp tax liability for last year.

The company will never make more money from the investments than by trading, unless I suppose, by selling off assets.

I'm no accountant so value your opinions Eric, thanks.

How come you were able to offset costs incurred in acquiring a property for the company against the comapny's trading income? That sound like what you may have done.

Definitely not allowed.

If and when the company sells the asset, it will (hopefully) make a gain on the disposal
When that happens, the company will be liable to Capital Gains Tax on the gain. The rate of tax it will pay will be the Corporation Tax rate (usually 21% at the moment - and not the special 18% CGT rate available for individuals).
Companies do not get the personal Capital Gains Tax allowance (currently £10,100)so all of the gain is taxed.
Finally, after the company has made the gain and the cash is in the company bank account, the individual will want to extract the money out of the company for himnself. When that happens, he may be subject to Income Tax on the withdrawl.
So, the gain may end up being taxed twice - once at Corporation Tax rates (21%) and then again at Income Tax rates (possible 20% and/or 40%).

The Income Tax hit can be mitigated by some jiggery pokery using Dividends and Director's Loan Accounts but you need to be very careful.

Edited by Eric Mc on Tuesday 26th January 21:57

[Ribol]

Plotloss said:

Erm, where did the last decade go?

Anyone?

I appear to have lost 10 years or so.

Is it possible some of it might have gone here:

59,958 posts

99 months