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  • Property-a-holics

    Just got a good deal ! Flip or hold ?

    Hi everyone just managed to bag my first purchase of the year after finishing a successful small development which is now doing well on the serviced accommodation scene.

    I have picked up an 8 year old 3 bed house  in Liverpool  for £81 k  which was 4k below guide price with bank as vendor.  An identical house sold last September on same street for £124k  and one is currently listed on rightmove at £135k .  I am due to complete in 2 weeks . My total costs with SDLT will work out to £85.5k .

    Options

    It will let at £600 pcm

    Refinance same day after lick of paint and expect valuation probaly not far off purchase price  and rent . This will probaly end up leaving £22 k in. ROI 17%

    Wait 6 months and get higher valuation approx £110k this will then leave me with approx 5.5k . Obvously caveat being that brexit doesn't  effect much . Even higher ROI

    Flip on straight away for £110 -£120 that is of course if potential buyers can get finance as i wouldn't have had property for 6 months.

    Wait 6 months then sell ?  Only thing then do i rent it and then open myself up to cgt or leave it empty so it can be classed as a trade ?

    Lots of options not sure which way ill head !

    Opinions please

    Wonderwebb

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    Refinance same day after lick of paint and expect valuation probably not far off purchase price  and rent . This will probaly end up leaving £22 k in. ROI 17%

    I am not aware of any mechanism where you could do this.  No lender would knowingly allow this.  This "daylight" remortgage was stopped in 2008 when the property crash happened.  Lenders like to see "seasoning" of title and it was also stopped as it was being used for money laundering.

    Wait 6 months and get higher valuation approx £110k this will then leave me with approx 5.5k . Obvously caveat being that brexit doesn't  effect much . Even higher ROI

    Again, you can wait six months, and, as you have not added any value by significant refurbishment, it is highly probable that any surveyor will value it for the same or a little bit more than you paid for it.  When you bought it at £81K you set the market value.

    Flip on straight away for £110 -£120 that is of course if potential buyers can get finance as i wouldn't have had property for 6 months.

    Any purchaser's surveyor would want to know what you paid for it and would probably value it at that, meaning your buyers would have to put in a far bigger deposit.

    Wait 6 months then sell ?  Only thing then do i rent it and then open myself up to cgt or leave it empty so it can be classed as a trade ?

    Eh?!!?

    I think you need to work the numbers based on keeping it as a BTL or doing a refurbishment on it, and then selling it on.  None of the options you mention above make any sense to me as they are not viable options.  Sorry.

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    Just checked and yes you still can remortgage from day 1  as i did

    https://hub.kentrelianceforintermediarie...remortgage

    As for the "eh!!"

    Its my understanding that if you let a property and then sell it you will then be liable for cgt by just buying and selling it with no rental element its classed as a trade  and does not attract cgt and will be taxed as income. I could be completely wrong ?

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    Last year i refinanced within a month of purchase for the price i paid and not its market value . This was a cash purchase . So  im sure this option is still viable.  Paragon being the lender

    I also purchased a flat from auction 2 years ago  for 51k did nothing to it at all waited 8 months and then had a valuer come in an value flat at £85 k . This left me with a surplus of £13 k .  Kent reliance.

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    The house will be refurbed very lightly at a minimal cost.

    So are you saying that as i have managed to get this repossession at a low price the whole street of identical houses are all now going to be valued at this low price ? .

    If that is the case ill be keeping it then and enjoying the return.

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    There is possibility to refinance at the price you paid within a shorter time-frame, but not at market value.

    It was possible to sit on properties and then re-finance at a higher price later a few years ago, but I don't think that is very likely in the current market conditions.

    Valuers are being cautious and often down-valuing, as recent threads on Property Tribes confirm.

    Who can I complain to about a low valuation?

    Stunned by Down-Valuation in 2018 

    Best to be conservative in your estimates due to the current market conditions.  If you out-perform those, then that would be the icing on the cake.

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    So are you saying that to flip and make a profit is not possible by just buying well  Due to prospective buyers valuer knowing what i paid ?

    I up until now have never sold a property. Just refinanced and recycled my funds so am not familiar

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    For clarification .... you can buy a property at below market value, do nothing to it, and put it on the market at a higher value.

    You may well find someone willing to pay that higher value.  Their lender's valuer will want to know how long you have owned the property and they will also research the last transactional price.  If they find out that the property was bought recently for a much lower price, they may down-value.

    The sale can still go ahead at the higher price, it just means your buyers will have to put a bigger deposit in.  If they are very keen on the property and have the funds, they may be willing to do that.  Or they may get cold feet about the down-valuation and make a lower offer because of it.  Or they may walk away.

    It is well worth attending the valuation and explaining the circumstances of how the property was originally purchased below market value and also providing some comparable actual sold prices.  Some valuers will take it on board, others will be making up their own minds, no matter what evidence you present them with.

    So, in essence, I am saying that you can buy low and sell high, but it may not all be plain sailing, and, in the current market conditions, it is likely that your property will not be valued at the purchase price as the valuer is obliged to value the property at the purchase price or the market value, whichever is the lower.

    Hope that makes sense?

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    I would hope a valuer should value a property at its market value and not be influenced by what you paid?  If as a vendor you weren't present at the valuation, how would the valuer know you didn't get a good deal by buying from a family member for example?  I am sure if you had overpaid they wouldn't be influenced by what you paid and would be very quick to value lower.

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    I've no idea which option is best, they all seem to have good potential.

    More importantly, thank you for sharing. Its always encouraging to hear of someone that is doing well.

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    Not sure about ‘trade’ but very clear the point here from Vanessa is ‘may’. I don’t let risk distract me if the upside is good. Good luck!

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