AlastairSC
Registered User
- Messages
- 357
Consider this scenario:
A friend is selling his house. It is a Victorian-style cottage on about 3/4 acre, in need of repair. He does not want the hassle of renovation, moving out and has no income with which to work. He hopes to get about E250k and will buy a new build in the next village for E235 and pay off debts with any balance.
We have been in the house many times over the years and know it well. Suppose we bought it, renovated and sold. Costs very roughly as follows:
Purchase price: 250,000
Stamp duty: 12,000
Improvements 85, 000
(we made out a detailed schedule and costed it)
Total cost 347,000
It's value in twelve months could be, conservatively, 450,000 (We spent a few days talking to auctioneers describing the house as it would be and location and this was the minimum of the figures suggested, assuming present or slowing appreciation.) We are aware that no-one can predict this, however.
This could be a gain of 103,000. Less 20% CGT, we make about E82,000, less with costs overruns.
He has been approached over the years to sell so when it goes on sale it will attract some bidding. It is not advertised yet and he has said that if he gets E250k before that point, he will take it as it's fees saved. Other friends have suggested he stay and renovate, as they see the potential too, but he wants to move.
How would we set about raising funds for something like this? 82k made on 347k is around 23%. Bringing our own borrowing back up to 80-90% of our current valuation would produce about 90k. The advantage of this particular situation is that it is nearby, which makes direct labour a good prospect to supervise, as we did with our own. We have worked out a renovation breakdown, based on our own costs two years ago for a bigger job and have overstated them to allow for unforeseens.
The resulting gain, even at worst case scenario, should be over 50,000 - a reasonable lump sum to put into another project or to pay down off our ppr mortgage.
Whaddya think? Interest only mortage? Alternatives? As usual our credit rating is good but disposable income is almost nil so we would have to work with borrowed funds.
We are looking around at other opportunities e.g. other renovations, buy a new build similar to the one he would buy, for investment, with an interest only mortgage, and set off rental against tax. We think that buying new gives the developer the profit, so the renovation means more for us, if we pick the right project.
Is this a reasonable project? How would we set about raising funds for something like this? Should we even consider it?
Replies from the experienced very welcome!!!
A friend is selling his house. It is a Victorian-style cottage on about 3/4 acre, in need of repair. He does not want the hassle of renovation, moving out and has no income with which to work. He hopes to get about E250k and will buy a new build in the next village for E235 and pay off debts with any balance.
We have been in the house many times over the years and know it well. Suppose we bought it, renovated and sold. Costs very roughly as follows:
Purchase price: 250,000
Stamp duty: 12,000
Improvements 85, 000
(we made out a detailed schedule and costed it)
Total cost 347,000
It's value in twelve months could be, conservatively, 450,000 (We spent a few days talking to auctioneers describing the house as it would be and location and this was the minimum of the figures suggested, assuming present or slowing appreciation.) We are aware that no-one can predict this, however.
This could be a gain of 103,000. Less 20% CGT, we make about E82,000, less with costs overruns.
He has been approached over the years to sell so when it goes on sale it will attract some bidding. It is not advertised yet and he has said that if he gets E250k before that point, he will take it as it's fees saved. Other friends have suggested he stay and renovate, as they see the potential too, but he wants to move.
How would we set about raising funds for something like this? 82k made on 347k is around 23%. Bringing our own borrowing back up to 80-90% of our current valuation would produce about 90k. The advantage of this particular situation is that it is nearby, which makes direct labour a good prospect to supervise, as we did with our own. We have worked out a renovation breakdown, based on our own costs two years ago for a bigger job and have overstated them to allow for unforeseens.
The resulting gain, even at worst case scenario, should be over 50,000 - a reasonable lump sum to put into another project or to pay down off our ppr mortgage.
Whaddya think? Interest only mortage? Alternatives? As usual our credit rating is good but disposable income is almost nil so we would have to work with borrowed funds.
We are looking around at other opportunities e.g. other renovations, buy a new build similar to the one he would buy, for investment, with an interest only mortgage, and set off rental against tax. We think that buying new gives the developer the profit, so the renovation means more for us, if we pick the right project.
Is this a reasonable project? How would we set about raising funds for something like this? Should we even consider it?
Replies from the experienced very welcome!!!
