Things to consider when renovating, renting, and future capital gains

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Things to consider when renovating, renting, and future capital gains

    I have inherited a property from my father. It needs TOTAL refurbishment and Is suited to conversion into two self contained, three bedroom flats. My plan is to rent the flats out once refurbished. I realise there are many things to consider and am finding it overwhelming at the moment. I initially assumed the title would have to be split into two separate titles but then questioned that. I think I will have to get some professional advice on all of this and speak to Land Registry, Inland Revenue as well but would be grateful if anyone with experience in any of these areas can help with suggestions of where best to start. I will have to employ an architect for plans, apply for planning, etc but am trying to grips with all the things I have to consider from a financial/tax/planning/ Land Registry/Capital Gains perspective. What order to proceed in, etc. Thank you to anyone who can help me get this less muddled. I want to ensure I haven’t missed out anything I should have considered both from the start and along the way.

    #2
    1. Check with 3 separate local estate agents if the property sale price and rental income is worth more as 2 x 3 bed flats or as one large house with 6 bedrooms.

    2. Get estimates of the conversion costs and then decide if you want to proceed on doing the conversion and have the finances to cover the costs..

    Comment


      #3
      Originally posted by Phyllis View Post
      I think I will have to get some professional advice on all of this and speak to Land Registry, Inland Revenue as well but would be grateful if anyone with experience in any of these areas can help with suggestions of where best to start.
      First of all, while your instinct is right, neither of those organisations should be considered as professional advice - the land registry will decline to give advice and HMRC are not a disinterested party.

      First of all, you should consider your basic plan. It sounds counter intuitive, but having a spare property is often the worst possible reason to consider property development or investment, Why not just sell the property and enjoy the benefit of that?

      If you are determined to proceed, you start with a basic business plan and should probably talk it through with an accountant. In parallel talk to a local architect about the conversion, because there may be planning issues which mean its a non-starter.

      Gordon999's advice is good; you really sound like you've made a decision and are filling in the gaps, where the "gaps" are actually the information needed to make the decision.
      It would take a great deal to dissuade me from simply selling the property.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        Thank you both. Estate agent said little call for large rental property here and better return on two three bedroom properties. As far as refurbishment costs, I can figure out the cost of doing two separate properties over doing one and feel I can manage those. I don’t see need to separate the titles at this point, only if I decide to sell at later date as two separate properties. I think that’s right. I think planning will be ok but need to check costs. Have architect coming out and will get three so have separate opinions. Capital gains and land title is still bothering me. Someone suggested one property would be freehold and other leasehold if I split title. Can’t see why that would be? Maybe uninformed opinion? Capital gains/ tax issues. Can’t get my head around that at moment.

        Comment


          #5
          Flats can be complex from a title point of view because one of them is dependent on the other, the upstairs flat can't exist independently of the downstairs property.
          You need to get some proper legal advice on how best to administer the title.

          While the letting agent is probably right about the difficulty of letting a single large property, there are other options.
          You could convert the property into a large HMO with several self-contained bedrooms sharing some common space, or you could let the property as a single unit, knowing that demand would be low, but tenant turnover very rare when you had one.

          Or sell it, because this sounds horribly complex!
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            If you start with one house under freehold title and convert the building into 2 separate flats without bank loan, you can rent out .

            If you require mortgage loan , the flat will have to be registered under leasehold title because the Mortgage lender require the flat to be covered by a maintenance contract . The rule for creating a lease is that a freeholder of the property cannot issue a lease on same property to himself. i.e the leasehold title of flat must be issued under different name.

            Therefore if a flat is registered under leasehold title and different name, the transfer is treated as a property disposal , with liability to pay tax on the capital gains.

            Comment


              #7
              All the question you are asking about titles etc... are largely unimportant, at this stage.

              You need to work out if it is worth converting into flats (which I assume you will want to rent out). You need to apply for planning permission, will the council give it?. Find builders (who are the good and trusted ones). Separate the utilities. Get the utilities to dig up the road for gas, water and electric. Do you have financing? It could take 18months by the time you finish and have a tenant move in. When you have dealt with the hassle, you have to figure out if it was all worth the hassle. May be just sell the house and buy two ready made properties.

              You can't plan for tax, as they will keep changing the laws. You could transfer to a limited company, now. If you want to enjoy your money and withdraw from the company, you will have to pay tax. So you need to figure out what you long term plan is.

              Bear in mind regulations for landlords have gone up. Labour even proposed offering Right to Buy for private tenants, so may end up selling for less it cost you.

              Comment


                #8
                My experience is that it's not worth converting to flats anywhere other than London, due to the high cost of all the sound and fire proofing required.

                Comment

                Latest Activity

                Collapse

                • Could we be more tax efficient!
                  by bobcat
                  Hi all,

                  We are currently completing the annual tax return for my wife and just wondering whether we could be more tax efficient! We no longer have any loans on the properties or major replacements planned so our tax payable is more than previous years. I don't mind paying tax but am wondering...
                  09-12-2019, 17:40 PM
                • Reply to Could we be more tax efficient!
                  by JK0
                  It's only if you have an agent running the place, the flat is assumed to be managed from there, so your trips to the agent are deemed to be you 'travelling to work'. (Sounds nonsense to me, but there we are.)

                  If there is no agent. or you are between lettings, I'd say you can claim mile...
                  13-12-2019, 12:10 PM
                • Reply to Could we be more tax efficient!
                  by jpkeates
                  An employer can pay an employee £4 a week without it being taxable to cover the additional costs if the employee works from home.

                  So I make the claim on the same basis and have done for years.
                  No one's ever queried it.
                  It's not consistent with the HMRC advice for small businesses,...
                  13-12-2019, 10:55 AM
                • Reply to Could we be more tax efficient!
                  by bobcat
                  Hi everyone, thanks for all the advice and apologise for the delay in responding.

                  I think of all the possible things mentioned the only things I don't claim for at the moment are mileage, home office and apportioning a phone bill so will look at those in more detail.

                  In terms...
                  13-12-2019, 09:53 AM
                • Responses from HMRC
                  by AndrewDod
                  Is anyone getting any responses from HMRC these days at all. I sent then two R17 forms with certificates of postage -- one a year ago, another a month ago. No response or acknowledgement at all....
                  11-12-2019, 17:51 PM
                • Reply to Responses from HMRC
                  by Gordon999
                  You can call the tax office hotline , quote your tax reference and ask if your recent letter / form R17 has been entered under your file ?...
                  12-12-2019, 22:56 PM
                • Reply to CGT Online Tax Return Question
                  by Gordon999
                  For calculation of capital gain after sale, the gain (= "sale proceeds" minus "acquisition costs" ) and you want to include the cost of 6 additional buildings and not kept the receipts, you still show the calculation in the tax return but you declare the acquisition cost is based...
                  12-12-2019, 22:50 PM
                • CGT Online Tax Return Question
                  by Tricky19
                  I have a couple of questions relating to my online self-assessment for the CGT calculation on a rental property i have sold.

                  I originally lived in the property as my primary residence and had some improvement works done which added to the value of the property. I will be deducting these...
                  06-12-2019, 14:53 PM
                • Reply to Responses from HMRC
                  by tatemono
                  my wife and I filed paper returns in August and received our tax statements on the same day in November. Hoping not to hear from them again for a while ;-)
                  12-12-2019, 21:46 PM
                • Existing property and existing Ltd Co - Tax question
                  by Iceboy74
                  Hi All,

                  I have a LTD co, via which I have been doing consulting for 12 years. About a year a go I asked my accountant to change the SIC codes to include property development, rental etc.

                  I have just refurbished a house and the Estate Agent has asked me if I want the agreement...
                  10-12-2019, 11:39 AM
                Working...
                X