Accessing Finance for project to refurb a property and sell it on...

Puzzled89 said:
If you’re going to have a go at someone’s view, at least get your numbers right. - Investment is €350,000 - at best an asset worth €450,000 at worst a newly renovated 3 bed semi in Dublin.

Point taken that may need to hold house until renovation costs paid back by rent.
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Oh dear...

If you look at the relevant posts, you’ll see that the house is bought for €350k, and then there are finance costs, building costs, and selling costs of €99,500. So the property ‘costs’ €449,500 and, with a fair wind, is worth €450,000.

Unless the €99,500 of additional costs can be covered by magic beans or something similar? And what about the individual’s time?
 
Puzzled89 said:
Point taken that may need to hold house until renovation costs paid back by
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Again, you need to be clear on whether you're flipping or investing.
If you want to keep it, you need at least 30% deposit, and get a mortgage from the start. There's no way around it.
If not, the interest cost is higher than the rental income.

In terms of a business partner, if the numbers stacked up, and you'd a proven record of doing this successfully, I'd lend the money to purchase at 12%, with the house in my name. You finance all the costs after purchase, and I get paid first from the sale - you get what's left after I pay legal fees, estate agent, and get my 12%. Or, alternatively in terms of a split of profits, I'd want 80%+ if I was putting in all the capital.

But I'd want to see a properly costed plan.
 
RedOnion said:
Again, you need to be clear on whether you're flipping or investing.
If you want to keep it, you need at least 30% deposit, and get a mortgage from the start. There's no way around it.
If not, the interest cost is higher than the rental income.

In terms of a business partner, if the numbers stacked up, and you'd a proven record of doing this successfully, I'd lend the money to purchase at 12%, with the house in my name. You finance all the costs after purchase, and I get paid first from the sale - you get what's left after I pay legal fees, estate agent, and get my 12%. Or, alternatively in terms of a split of profits, I'd want 80%+ if I was putting in all the capital.

But I'd want to see a properly costed plan.
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Red would 12% return within 12months not be too high ?
Maybe 8-10% within the year which is still a very good return for whoever who decides too give the Op the chance of trying.
Op have a watch of the programmer homes under the hammer which might give you some ideas in regarding raising the cash.
Some borrow from family (but I think that's risky ) in case there is delays or issues along the way.
 
Pinoy adventure said:
Red would 12% return within 12months not be too high ?
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Why don't you give him your money so?

Small builders, borrowing 1m plus on greenfield sites are paying 8% interest.

I might consider 8% on the 2nd one, if we get on well with the first.

Actually, maybe 12% is high. I'd go for 8% if repaid within 1 year, and 8% per annum thereafter, plus whatever the increase in the property price index is in the period, floored at 0%. But the house registered in my name.

Sound fairer?
 
The return needs to be ‘equity like’ in order to justify the risk.

If it goes well, you get your interest, and if it goes badly, you‘re effectively an equity investor.

There are companies specialising in this area (e.g. Lotus) but my sense is that €350k is too small.
 
There isn't a business proposition that a sceptic cannot poke holes in. The point is to consider all those holes and understand if they apply and how you can deal with them.

If you still think you can add €100k value for €25k cost after you have considered all the issues raised keep on.

RedOnion said:
And you are carrying out a trade, so any profit is subject to income tax.
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IF you are carrying on a trade.

Doing this once would probably not qualify it as a "trade'.

If you moved into the house after you had done it up and lived in it, made it your PPR, there would be no CGT.

The facts of "carrying on a trade" and making it your PPR, are dependent very much on your exact circumstances.
 
cremeegg said:
facts of "carrying on a trade" and making it your PPR, are dependent very much on your exact circumstances.
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Exactly. The facts I was commenting on were very much carrying out a trade.

cremeegg said:
If you moved into the house after you had done it up and lived in it, made it your PPR, there would be no CGT.
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This is very misleading in these circumstances. You might read up on tax legislation - the PPR relief does not apply where the acquisition was made for profit.
 
In quoting me above did you deliberately reverse the order of my sentences so you could find a point of disagreement.


RedOnion said:
Exactly. The facts I was commenting on were very much carrying out a trade.
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Something done on a one off basis is not 'carrying out a trade'.

RedOnion said:
This is very misleading in these circumstances.
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As I said, immediately after I made the point, it depends on the exact circumstances.
 
From https://www.charteredaccountants.ie/taxsource/1997/en/act/pub/0039/tb/sec0021-1-tb.html

Guidance as to what constitutes “trading” is available from case law and from a set of rules known as the Badges of Trade



From https://www.accaglobal.com/my/en/te...dges-of-trade.html#THE-NUMBER-OF-TRANSACTIONS

THE NUMBER OF TRANSACTIONS
A single transaction can amount to a trading activity, it is more indicative if there are repeated and systematic transactions.

I cannot find an equivalent Irish source


Finally

'the Revenue Commissioners are prepared to give an opinion on the classification of income as trading in accordance with the guidelines issued in Tax Briefing Issue 48 - June 2002 on Seeking Revenue Opinions on Tax Consequences of Certain Complex or Unusual Transactions.'
 
cremeegg said:
THE NUMBER OF TRANSACTIONS
A single transaction can amount to a trading activity, it is more indicative if there are repeated and systematic transactions.

I cannot find an equivalent irish source
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Yes, the number of transactions is just one of the factors in considering if something is a trade.
Read the rest of them too.

The piece underlined above makes your absolute statement earlier incorrect.
 
RedOnion said:
Again, you need to be clear on whether you're flipping or investing.
If you want to keep it, you need at least 30% deposit, and get a mortgage from the start. There's no way around it.
If not, the interest cost is higher than the rental income.

In terms of a business partner, if the numbers stacked up, and you'd a proven record of doing this successfully, I'd lend the money to purchase at 12%, with the house in my name. You finance all the costs after purchase, and I get paid first from the sale - you get what's left after I pay legal fees, estate agent, and get my 12%. Or, alternatively in terms of a split of profits, I'd want 80%+ if I was putting in all the capital.

But I'd want to see a properly costed plan.
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Yes I can send you a properly costed plan - what is your contact email?
 
I've either made a mistake in my calculations or explanation if it still makes sense.

Basically on a 350k purchase, closing sale after 18 months, the first 433k would go to the finance partner. Out of the balance you need to pay for all materials and labour, and what's left over is yours. If the house sells for less than 433k, you've lost a lot of money.

Not something I'd personally do at the moment, I'm trying to negotiate on a property myself but things are slow moving.
 
NoRegretsCoyote said:
I would start with a generalised decline in house prices.......
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downside is to have a 3 bedroom semi-d in Dublin where the rent is currently €3k - that worst case scenario you can potentially live in - my point is that a 3 bed semi in a decent area in dublin will never be worthless either financially or personally. If you can keep borrowings below €400k in Dublin on a solid house in a liveable area 20 mins from city centre I don't realistically see a long term downside - or am i the only 1 with this point of view on this risk? Rents will for the forseeable future cover the borrowing costs even with substantial drop...
 
RedOnion said:
I've either made a mistake in my calculations or explanation if it still makes sense.

Basically on a 350k purchase, closing sale after 18 months, the first 433k would go to the finance partner. Out of the balance you need to pay for all materials and labour, and what's left over is yours. If the house sells for less than 433k, you've lost a lot of money.

Not something I'd personally do at the moment, I'm trying to negotiate on a property myself but things are slow moving.
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Yeah I think you've made a mistake with you calculations
 
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Puzzled89 said:
If you can keep borrowings below €400k in Dublin on a solid house in a liveable area 20 mins from city centre I don't realistically see a long term downside -
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But I thought you wanted to flip? This is a short-term play!

PS: private rents fell 25% 2008-2010 which the world seems to have forgotten about.
 
RedOnion said:
House purchase: 350,000
Stamp duty: 3,500
Legals: 2,000
Survey: 500
Insurance: 1,000
Total: 357,000
Interest: 64,260 (12%, 18 months)
Estate agents: 8,300 (1.5% + VAT)
Legal fees: 1,500
Total: 431,060
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Interest: 64,260 - not an actual cost -
 
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