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Hi, just wondering if any of you out there have any input? I've just finished a redevelopment and the long term goal being to retain and rent.The development came together better than I first thought meaning the properties have a decent value if sold which results in a poor rental yield.Across the 6 houses there is a potential profit of 600k before tax.If I went down the selling route, can I roll that profit over or will I get hit with a big CGT bill. For an extra note, I carried out the development personally rather than a Ltd arrangement due to poor advice from my accountant.
Hi Timmy,My feeling is that the market is very stagnated, not to mention we are approaching Christmas and people are not looking to move home as it is unlikely to be possible to complete before the Christmas holiday.You could "test" the market by putting one property up for sale and seeing what kind of response you get.Personally, I would rent all six out now and wait for Spring next year to see how the land lies with regards to Brexit impact/market activity.If the market is moving, you could consider selling 3 and retaining 3 or selling 2 and retraining 4 - the numbers will tell you which option works best for you.
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
Timmy, tax wise, if you sell, my understanding is that is not even personal CGT, but considered as trading hence income tax on you, so potentially hitting 40/45% tax above the 20% tax threshold.
You better get proper tax advise at this point in order to decide the best route to take.
Firstly, congrats on the successful development.
I think you need to carefully review your tax position before making a call.
As I understand it, you will be liable for income tax and national insurance if you sell, as you are trading. I fear you may even end up paying income tax if you choose to rent, with CGT being calculated from the base value at the outset of the rental activity.
You also need to review your VAT position, if you rent the properties without transferring ownership in to a company then you may be required to pay VAT on the build costs.
My gut is to say transfer them all to a ltd company at the lowest values you can justify, then rent them, then sell when the market is a little stronger, you could consider selling them as they become vacant.
Thank for getting back to me, I'm planning to register 1 for PPR and will then either sell on or shift into Ltd company. Hold the remaining 5 for a while and then transfer my entire portfolio into a Ltd arrangement, getting around CGT and SDLT, hopefully... I would say poor advice at the start has caused the problem and I should have followed my gut feeling from the start but hey, next time...!
I would get some specialist tax advice, then assuming you can sort that out to a point where you would be happy with the tax liability I would definately sell. We are currently only holding sites that generate very strong yields (10% plus and ideally 12-15%), a downturn is definately coming because the banks are going to make it happen & you only have this one opportunity to gain from the 'everything is new & shiny premium' that newbuild attracts.
You are going to have to wait a long time for a bad yield to right itself, Its a bit like breaking your ankle, It gets better slowly but for years to come you are going to get twinges of pain as a result of it.
Stewardson Developments Ltd.
Burson Land Ltd. & Jennings & Gilchreaste Ltd.
Follow me on twitter - @philstewardson
Thanks Phil, Yes I certainly see that trouble is ahead and especially with flats. There are so many be built from office to residential around here that I cannot for the life of me see who there is out there to buy or indeed rent!