Buy in phase 1, sell when complete

Wondering if anyone has any experience of this situation? Buy off the plans in phase 1 of a development, pay usual booking deposit. Wait a year for development to complete and then sell off the purchase and hopefully make a profit.

Asides from the market turning against you, can anyone else see any holes in this?

Would the property be considered second hand at time of sale even if no one has ever lived in it?

You are probably talking about doing a sub-sale, i presume? Most standard contracts to purchase will prohibit you from doing this unless waived by the vendor.

I guess you could call it a sub sale. Is it possible to actually sell the booking contract to another party. i.e. Today I go down to my friendly estate agent and put 25k down as a booking deposit on a property. Tomorrow I sell the contract to the guy behind me in the que who wanted the property I have.

Is this/can this be done or am I just talking madness....

cheers.

Carpenter said:

You are probably talking about doing a sub-sale, i presume? Most standard contracts to purchase will prohibit you from doing this unless waived by the vendor.

Click to expand...

sounds a lot like the kind of property i bought. phase 2 was on sale at x price, but i found a phase 1 house on myhome being sold even though never actually lived in. the guy selling bought at off the plans prices, or put a booking deposit down for thoses prices anyway, then sold at phase 2 prices. but it was still a first hand house if you know what i mean.....

how it worked was, we got mortgage for phase 2 price and paid developer phase 1 price and paid difference to the guy who put down original deposit! he walked away with bout €20k profit just for having the spare cash to put down deposit in the first place. know of at least one other property in my block sold in the same way by the same guy and i remember at the time site manager saying the whole block had been bought in this way! suppose its called selling your interest or something!!

sounds slightly underhand but i never really thought about it at the time, and mortgage company didn't think it wierd! Unless things have changed radically in the last 3.5years you should be able to do it, but as i say, the advantage was that phase 2 went on sale after block 1 was fairly well advanced, hence show apt was available for viewing and hence price of phase 2 went up, so you'd have to be prepared to invest for about a year to make max profit! HTH

sloggi - had the original buyer signed a booking deposit contract?

dont know to be honest, but you'd imagine the developer wouldn't have gone on blind faith for a year or so! He had a snag list completed etc so was proceeding as if he was buying the property! we then got to do our own snagging. it was a bit of a tripartite meeting when signings were happening!! But we agreed price with the speculator and contracts issued between his and our solicitor. we paid a booking deposit to speculator, but becasue of the speed of the transaction, we never paid a 10% deposit. As i said above, the last transaction involved a payment to the developer and a separate payment to speculator! Was very green at the time so never questioned the legalities of the transaction but assume our solicitior, though useless, was looking after our interests

candyman said:

Asides from the market turning against you, can anyone else see any holes in this?

Click to expand...

If the development is done in multiple phases, you may find it difficult to sell a Phase 1 House (second hand so SD applicable) as long as the developper is releasing new houses from Phase 2, 3, etc... as the latest are not subject to SD (or may not - see SD rules)

This kind of speculation is usually known as flipping, it happens all the time, investors have made huge profits from the practice over the last 10 years or so. Flipping is easier and cheaper if there's no stage payments.

If the markets turns you're in trouble - though you also will lose money if the market "only" goes up by a couple percent and reselling the property takes longer, due to agent charges and interest.

The builders don't mind because it helps them fully sell out a unbuilt scheme and eliminates risk, also someone planning to flip a property isn't going to be on the phone to foreman every week trying to get every detail right.

sloggi - you didnt have to pay stamp duty did u?

bacchus said:

If the development is done in multiple phases, you may find it difficult to sell a Phase 1 House (second hand so SD applicable) as long as the developper is releasing new houses from Phase 2, 3, etc... as the latest are not subject to SD (or may not - see SD rules)

Click to expand...

nope no stamp duty...and that was before the new rule about any property up to €317k being outside the stamp duty loop for FTB! so it wasn't considered 2nd hand so to speak!

it WAS just after the abolition of the FTB's grant...remember being quite bitter aboutt hat one!!!!

Some dangerous talk here...There is a similar thread here discussing this with more detail.
Contracts usu cannot be flipped (sub sold) these days, Why would the deveoper let people compete with them for sale of their own development?
If you close and sell ( with no one ever living in it , unless primary res ) you are liable for stamp on purchase ( assuming you are already an owner and this is an investment ) and the buyer also for stamp and you for CGT on the gain.
If some one bought from some one who "flipped " and paid no stamp it is likely that the vendor was someone known to the developer.
The original contract can effectively be destroyed with consent of developer and a new one drawn between the new buyer and the developers mate. Then it was effectively sold as new. as the first contract "never existed".
Do all the research first hand before doing it.

candyman said:

I guess you could call it a sub sale. Is it possible to actually sell the booking contract to another party. i.e. Today I go down to my friendly estate agent and put 25k down as a booking deposit on a property. Tomorrow I sell the contract to the guy behind me in the que who wanted the property I have.

Is this/can this be done or am I just talking madness....

cheers.

Click to expand...

Have to say I am saddened to see your post. Whilst I am all on for entrepreuneurship (sp?) and 'making money' as well as 'askingaboutmoney' nevertheless with property prices so off the chart nowadays and many young people desperate to get on that ladder, it's sad to realise that there are those willing to do whatever it takes to make a fast buck.

Estate Agents (not all but a lot) are the lowest of the low in my book. Their behaviour, for the most part, is inexcusable. Just a personal opinion!

I'm sure many here will disagree with me (it's an open market, jump in if you see the chance and make your money etc) but what you are outlining doesn't seem right.

However, if it's legit and it's what you want to do....

Jeanne said:

Have to say I am saddened to see your post. Whilst I am all on for entrepreuneurship (sp?) and 'making money' as well as 'askingaboutmoney' nevertheless with property prices so off the chart nowadays and many young people desperate to get on that ladder, it's sad to realise that there are those willing to do whatever it takes to make a fast buck.

Estate Agents (not all but a lot) are the lowest of the low in my book. Their behaviour, for the most part, is inexcusable. Just a personal opinion!

I'm sure many here will disagree with me (it's an open market, jump in if you see the chance and make your money etc) but what you are outlining doesn't seem right.

However, if it's legit and it's what you want to do....

Click to expand...

What the difference between doing this with properties or doing this with shares on the stock?
Shall we give money to FTB so that they can get on the ladder? why can they not accept that they can not buy, and simply rent like many other Europeans do? FTBs are so desperate to "own" (in 35 years!) that they fuel the market with their desperation and price themselves out.

But are FTB really priced out or are they simply getting too fussy about where they want to buy/live.? D4 is not for everybody, full stop.

At the end of the day, buyers are responsible for the price increase , not sellers....

You make a good point that first time buyers are so desperate to purchase that they seem willing to almost sell their souls to own property thereby pushing prices ever upwards. And there seems to be no voice of reason out there explaining how their 'logic' is really not in their best interest.

But there are so many others willing to hop on the bandwagon to cash in....it's unsavoury. Is this what we've come to.....

Anyone care to predict if it will all come to a sorry end? The million dollor question.

Maybe there is another thread on this.

Try The Great Financial Debates section. It's more suited to some of the issues raised here.

Jeanne said:

You make a good point that first time buyers are so desperate to purchase that they seem willing to almost sell their souls to own property thereby pushing prices ever upwards. And there seems to be no voice of reason out there explaining how their 'logic' is really not in their best interest.

Click to expand...

It is not so long since the only single people that owned a house were those that had inherited one but now even the single people seem to think that it is a "must have". It is a catch 22 situation. As long as the price keeps going up every body seems to think that they must buy now and as long as everybody thinks that they must buy now, the prices will keep going up.
I agree that it is the buyers that are causing the problem. I never recall a time in my life when I went out and bid on more than one family home at the time. I decided which one I wanted and bid on that. If it did not work out then I went looking for another one. Todays buyers are bidding against each other on lots of properties at the same time and causing a false market.

Jeanne - I understand and accept your points. The property market and the way it is going is sickening in many ways. Nevertheless property is a very real business and as such money can be made from it. My thoughts above are not original, I just wanted to gauge their validity from some intelligent people here on AAM.

Thanks for the input all the same...

Folks, this isn't a debate on the rights and wrongs (if any) of what the OP is proposing.

Keep any other views for The Financial Debates or Letting Off Steam please.

can we get back to the 'flipping' ...

is it possible?
is is legal?
How is it done? (If it is legal)

smurf said:

can we get back to the 'flipping' ...

is it possible?
is is legal?
How is it done? (If it is legal)

Click to expand...

agreed. could someone maybe list the things that must happen for a successful "flip", i'll kick it off with...

1. house prices keep rising
2. there is a significant gap between phase 1 completion and phase 2?
3. prices go up between phase 1 and subsequent phases
4. ?