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Buy to Sell property renovation

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paulw1028

New Member
Hi everyone I am Paul, I am looking to make a start in property renovation. Buy - Renovate - Sell for profit.

I have cash from the sale of my own property so mortgages and buy to let are not my interest at this stage. I am full time employed (4 on 4 off shifts) so this venture is purely to raise capital for a future without a mortgage and maybe a few rentals down the line in time for retirement. ( I am a dreamer I know!!)

I have a good skill set having completed the majority of refurbishment work on my own property myself. I also have a very skilled Step father who is a joiner and still works self employed. so he will be contracted to work on the properties.

As I am full time employed I pay tax. I am close to the 40% tax band but rarely go over. I have been doing some research regarding tax but I am coming up short in finding what is best suited to my situation. Paying CGT seems the best option that I can see but is there a better way to minimise the amount I pay if I make a profit of 8k - 18k per property? I would be looking to complete 2 properties per year using the cash from each sale to fund the next.

Regards

Paul
 
Nicholas Wallwork

Nicholas Wallwork

Editor-in-Chief
Staff member
Premium Member
Hi @paulw1028 - welcome to the forum!

Feel free to ask questions as you go and we'll try and help you with every aspect of your journey!

Now firstly I have to say I'm not an accountant so please take specific accountancy advice for your own personal circumstances...

Now I've said that here are a couple of points to ask and raise with your accountant:
- CGT could be split between spouses (using a deed of trust or buying in joint names. This will allow you to use both of your CHt yearly allowances. Buying this way (in personal names) will have various tax implications when buying after April and if you're developing for resale and do this often I'm not sure it's the best option...
- buying I a Ltf company and developing and reselling and this carrying out a trade will incur circa 20% corporation tax and nothing else if you leave the money in the company to grow and re-invest it. If you take the money OUT of a company you'll then be paying income or dividend tax and it gets back up to 40% (I.e. Less efficient than just CGT tax max of 28% buying in personal names).
- ask about entrepreneurs relief. This is 10% but you have to hold each property for a reasonable amount of time (1 year or more) in a business and you have to sell the whole (1 property min) business at the same time. Possible via share transfer of a Ltd Co although the sole traders can sell as well. Check the exact mechanics with your accountant but depending on the length of projects the tax saving might be well worth the wait!

That's the main tax considerations for your "structure" I can think of but others may add more...

In terms of using no mortgage I think this could hold you back... Why not so two projects comfortably with just a manageable 50% LTV (Loan to Value) loan on each one? Build a small team of trades men and make double to cash? Maybe do one or two first to get the hang of it for sure but then don't rule out a mortgage. Without using OPM (other people's money, ie banks, other lenders etc) I wouldn't have grown our businesses so quickly and we've created some amazing win/win deals... Finance is the key to grow Ming a larger and more successful portfolio of you can master it.

Anyway good luck and please take the correct accountacy advice BEFORE you buy your first property as mistakes can be expensive to rectify. Also get more educated in property first as this will make or save you 10's of thousands of £'s in the even short to medium term.
 
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