Buy in phase 1, sell when complete

candyman said:
Wondering if anyone has any experience of this situation? Buy off the plans in phase 1 of a development, pay usual booking deposit. Wait a year for development to complete and then sell off the purchase and hopefully make a profit.

Asides from the market turning against you, can anyone else see any holes in this?

Would the property be considered second hand at time of sale even if no one has ever lived in it?
Click to expand...



Depends on where you buy and payment schedule. You need to have an idea of timing and buying marets to plan your exit strategy. I have done this before. Not in the UK or ireland though isn't vibale there anymore in my opinion. I use a UK based investment company have mentioned them before but dont want to be seen to advertise.
 
Hi currently Looking at flipping seriously

purchase price (250) phase 1 deposit €15 ........ completion Dec 2006 current phase 2 price 300k anticipating phase 3 higher at approx 315 .... looking to flip and avoid paying SD .... what do I need to do next?
 
If no stamp duty paid before flipping is the difference in price from original contract price also subject to VAT(as per all new property) ?
 
I too want to 'flip'. The purchase price for the property was €265K & i have paid €10K deposit. It won't be ready until the end of the year. Exact same property in phase 2 is €300K. Can someone please outline the steps involved in selling on??
 
I'm assuming that you can only sell 'flipped' houses to FTB's. Otherwise the person purchasing the phase 1 house at phase 2 prices will be liable for stamp duty on the purchase. This will make it decidedly unattractive for the purchaser compared to the genuine phase 2 houses on the market, with no applicable sd.
 
If you can get your original vendor to waive non sub sale clause in original contract then you sell to 2nd party through your solicitor. It is perfectly legal if you have permission from original vendor (estate agent) or if there was no clause saying that you may not do it.


I'm fairly sure thats it anyway
 
sub sale is legal ... i asked my solicitor and a solicitor friend who knows about these things (obviously i hear you all say)

obviously you make money if the market keeps rising but if you can't get a buyer to take your property then you will have to buyt it because i doubt any builder will just let you pay a booking deposit and not sign a contract. they want signed contracts to get the money from the bank...also you are liable for CGT at the end of the transaction
 
I am aslo keen on flipping my property, but am unsure how:
1. you can legally avoid the stamp duty &
2. why you should be restricted to selling on to a FTB?

couls anyone please explain?
 
you avoid the stamp by not actually owning the property at all..you do the inital work finding the property and putting on a deposit,then the auctioneer (or you) finds you a buyer and a new contract is put in place ,but i am not sure of the legal terms/phrases....

also there is no need to flip on to a FTB anybody who wants the property will be ok.and they will have to pay a stamp unless they are a ftb
 
therave said:
you avoid the stamp by not actually owning the property at all..

...

and they will have to pay a stamp unless they are a ftb
Click to expand...
This does not make sense to me. Why, if the property was never previously owned, would a non FTB pay SD? I suspect that even if such a transaction is technically feasible and not classed as tax evasion, Revenue could feasibly determine that it falls foul of their anti-avoidance rules.
 
Clubman, if you are not a FTB then surely you have to pay stamp duty on any property that you buy .when you pay your deposit and 10% and sign contracts you are committing to buy but your contract with your purchaser then negates your contract and mentions that x amount is payable to you and the balance (the agreed price you have with the builder) goes to the builder...
it's definately not tax evasion .the one part of this type of transaction i am not up to speed on now is the floor area plan certificate and where it comes into the transaction,maybe it's nothing but then again in the past i have heard it mentioned in the transaction..
flipping/ sub sale is legal and all a matter of timing and a good estate agent.the only illegal part of this is if you are liable for CGT and don't pay it..
also if you buy in phase one at 250k and phase 3 is selling at 300k then the agent/builder has done all the work for you and you could slip your place in at 295k..
i would recommend a very good solicitor if you are even attempting this.
 
therave said:
Clubman, if you are not a FTB then surely you have to pay stamp duty on any property that you buy .
Click to expand...
No - non FTBs are exempt from SD on the purchase of a new property under 125sqm and effectively exempt from SD on new properties over that up to some limit (due to the way that the chargeable consideration is calculated). The issue here is if/how a new property being "flipped" is actually a new property as far as the ultimate owner occupier buyers is concerned. I have my doubts that it is but I don't know the answer.
when you pay your deposit and 10% and sign contracts you are committing to buy but your contract with your purchaser then negates your contract and mentions that x amount is payable to you and the balance (the agreed price you have with the builder) goes to the builder...
it's definately not tax evasion .
Click to expand...
Seems to me that this is not a normal owner occupier sale (by the person initially contracted to buy the property but who "flips" it on to another owner occupier buyer) and, as such, the proceeds would not be exempt from CGT and may, in fact, be assessable for other taxes. Maybe the ultimate buyer is safe in that it is a new property but the seller may have tax issues. Also even if no evasion is involved here otherwise legitimate avoidance can be deemed unacceptable if it falls foul of the Revenue anti-avoidance rules.
the only illegal part of this is if you are liable for CGT and don't pay it..
Click to expand...
And possibly other taxes (e.g. VAT, income tax etc. perhaps?)?
i would recommend a very good solicitor if you are even attempting this.
Click to expand...
Definitely!
 
I have to concur with Clubman, imo unless the developer waives the no sub-sale clause in the contract then stamp duty would have to come into play - cgt may not unless the vendor already has a ppr.
 
thanks for clearing up the SD question. as i had said i was unsure of this and also i did say that there was a question of the floor area.
the property of course would be a new property in a sub sale scenario but obviously not if you have to buy it and then flip it on.the reason it would be in a sub sale scenario is that you do not complete on it but your buyer is the one who becomes the reg owner,not you.
a sub sale is not a normal owner occupier sale,the builder and his solicitor must agree in the contract that a sub sale is allowable in the contract to you.
maybe my wording on CGT is incorrect in my previous post,i contacted the revenue when i did this and CGT must be paid but this is the only tax payable no VAT OR INCOME TAX, you are hopefully going to make a profit and therefore CGT tax is payable.
i don't think it matters if you have a PPR residence or not in the sub sale scenario as any gain would be a taxable one because you will never actually buy the property.I'm not a solicitor but i do work very closely with mine when i invest and i take advice from some friends who are solicitors .i have no legal training and i am only imparting what information i can here, it's up to anybody interested in doing this to ask their own legal advise
 
a sub sale is not a normal owner occupier sale,the builder and his solicitor must agree in the contract that a sub sale is allowable in the contract to you.
Click to expand...
Therave, your answer makes a lot of good points and and seems pretty logical, the only thing i have an issue with is the above - why would a developer allow this, unless he was trying to pay off a mate at a low tax rate - what's to stop him giving a couple of apartments to subbies in part income - it's win, win for everyone - cash flow wise for the builder and tax efficient for the subbie (assuming that revenue don't deem this as part of his trade - which they probably would'nt).
 
You must log in or register to reply here.
Back
Top