Why buying and selling houses is hot property
For the last few years the property market has been in somewhat of a bubble, with house prices rising and banks offering high loan to value mortgages. But now it seems we could be at the start of a sharp decline. And whilst this isn’t great news for people looking to sell their primary residence, now is the perfect time for property developers – both novices and professionals alike, to snap up some bargains.
According to Companies House in 2020, 468,371 new businesses were registered, of those 16,747 were set up in the field of buying and selling real estate. But, in order to make the best of your position as a buyer or seller, you must have a firm grip on the true state of each market you’ll be buying and selling in.
Before you go out house hunting for that project that’s going to net you some extra cash, it’s important to know what you’re getting into – and more importantly understand the tax implications of owning more than one property, especially if you end up in a position where your renovation project doesn’t sell in the time-frame you’d predicted.
As of 1st April 2016, anyone buying an additional residential property worth more than £40,000 has to pay more Stamp Duty Land Tax (SDLT) to the tune of 3% of the properties purchase price.
With all this uncertainty is it worth it?
The reason real estate is a popular prospect for many people is that it can provide more predictable returns than stock and bonds, providing you know what to spend the money on, and where to save.. The equity produced following the sale of real estate will give you additional working capital that can then be invested in another property which could offer a greater yield; or give you the additional capital to fund another venture.
What’s needed to get started?
Whether you plan on doing all the work yourself, or you intend on hiring professionals, there are still a few things you’ll need to start your property business. Before you go getting yourself on estate agents mailing lists, think about the type of property you’re looking for and whether you’ll be flipping it for active income, or you’ll be renting it out for a passive stream – as this will affect the final refurbishment you’ll want on your investment.
Next, it’s good to have a basic understanding of the costs involved in property development, and not just leave it to an accountant. Researching different mortgages, equity release, and tax implications is a good place to start, as well as costing up goods and labour.
Even if you’re not a dab hand with the DIY there are somethings you can do that won’t require the cost of labour if you’re willing to get stuck in. Stripping wallpaper and removing paint with a heat gun whilst laborious, will save money in the long run. Equally you can rip out fitted cupboards, as long as there’s no live wires or water pipes nearby.