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Building three in place of one or not. Considerations.


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Current position.

My mother owns a house outright that she wishes to sell. It has been valued at £300k. I've offered to buy it. I want to start a portfolio.

Essentially what I'm getting is a market value house/plot with a £300k deferred payment which is payable on completion of my project.

In an ideal world, Id like to knock it down and build a set of three terrace houses on it, sell two to cover the cost of the build and pay my mum, then rent the 3rd one.
 

Obviously this plan depends on getting my maths right and understanding all of the costs involved. Ive no idea where to start.

What are the financial considerations when building three houses where there once stood one?

Capital gains?

Affordable housing contribution?

Will the build be VAT exempt?

Will mum have to pay any sort of tax on the £300k?

 

I guess my real question is, what terms do i need to input into google to find somebody to talk to? Property consultant? Surveyor? Architect? Accountant? All of the above?

Ive no idea where to start, but I do like a challenge.

Finally, are there any obviously better plans that building 3 houses in terms of either a final profit, or the start of a portfolio?

Adam.

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Sounds like fun! 

 

To answer your question - all of them. 

 

But I'd go in stages; 

  • Local Agent - check there's demand for what you are planning - FREE
  • Property consultant (multi-disciplinary) or experienced investor who can sense check what you're considering - £000's
  • Finance broker - figure out how you're going to pay for everything (demo, professional fees, build, sales costs) - £00's
  • Accountant - heads up on what the implications are for the level of profit you're expecting - £00's
  • Planning consultant to check local plan and give you a sense of what's achievable - £00's
  • Architect once you're confident you can get planning, get everything drawn up and submit plans. - £000's
  • Surveyor, act as project manager / employers agent once you're up and running and ready to get tender documents into the market - £000's

It's a lot to take on, so best piece of advice is get someone with experience in your corner to help point out the hurdles before you run straight into them. Better to learn from other peoples mistakes hey? :-) 

 

Sounds like a cool project though, and because of the family link, you've got a lot of great options available to you! 

 

Cover off a couple of your other questions though;

Financial considerations.... you're going to be sinking a lot of money into building these things, but you can get finance to do it if it's a good project. 

Capital gains - yep. Depends how you structure it from an ownership perspective, but you can mitigate it to an extent because of the link with yo Momma

AH - nope. Too small a development. 

VAT - should be zero rated so long as it's a genuine new build and self contained

Tax - if it's her primary residence, then nope it's all tax free baby! 

 

If you want to talk in more detail - get in touch. I've done a bunch of these over the years. 

Damien Fogg
MRICS CeMAP CeFA

Email: damien@theepinvestor.com

Web: www.theEPinvestor.com

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