Buying property to sell before before completion

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Parnell

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Has anyone any ideas on this one- I have 40,000 to invest and have been advised that I should consider buying a property in a prime location 'off the plans'; pay my deposit of 10% of the purchase price and after 1 year when the property is due to be completed, sell my interest in it,at a profit of course. Thanks in advance for your advice.
 
What if property prices collapse? Or just level out? What if the purchase price that you agree proves to be way above the real market price for the end result?
 
What would happen about stamp duty in this case? As an investor you would be liable but if property was sold on before you complete, would you still have to pay this ?? I'm wondering how you would actually go about selling a property that was 'in progress' and just before draw down of final loan ??
 
As an investor, as you clearly are, you will pay stamp on the purchase and CGT on the profit (after deductions for the Stamp, Professional fees etc )
As far as I know a lot of contracts will not allow you to sell prior to closing anyway, hence you are forced to pay the stamp to close.

Its a chancy way and you had better do you sums on the numbers and research the resailability of the property.
 
Thanks for the advice-I am just throwing it out there- Ive heard it can be done,is being done and I have yet to hear of somebody who got burned.
 
Parnell,

Don't know where you are buying the property, but my experience is as follows. Generally with off-plan projects you have 3 contracts; Preliminary, Final Sales & Agreement and Handover. If you are able to sell your apartment before the second stage (Final Sales & Agreement), you do not need to pay the stamp duty..you would transfer the rights of ownership to the party in question. It is true that a lot of developers do not allow this, mainly because it allows others to sell "their project" at a different price than they may be "currently" selling/marketing it for. However, if it is allowed, you will see a clause in the preliminary contract that details this.
 
Thanks Expathungary, that makes it very clear as to the process involved-how is one fixed for CGT on the profits one may accrue on the transaction?
 
Fair point Rainyday-I take it then that you are sceptical about the merit of considering such an option .
 
Parnell said:
Fair point Rainyday-I take it then that you are sceptical about the merit of considering such an option .
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Its called "flipping" the property and has been a popular way of realising a return in recent times. It only works in booming markets so you need to be sure of your market.

Rainyday is right - you will never hear about the people who have been burnt. i don't know of anyone personally who has gained or lost from this practice. But I wouldn't imagine its something to make a habit of - my own view is that property is a long term investment. If you want quick access to cash or something more liquid, probably best to invest elsewhere.
 
Parnell said:
Has anyone any ideas on this one- I have 40,000 to invest and have been advised that I should consider buying a property in a prime location 'off the plans'; pay my deposit of 10% of the purchase price and after 1 year when the property is due to be completed, sell my interest in it,at a profit of course. Thanks in advance for your advice.
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Parnell

It is old hat and can be done succesfully very easily with the right advice.
 
Theo said:
Its called "flipping" the property and has been a popular way of realising a return in recent times. It only works in booming markets so you need to be sure of your market.

Rainyday is right - you will never hear about the people who have been burnt. i don't know of anyone personally who has gained or lost from this practice. But I wouldn't imagine its something to make a habit of - my own view is that property is a long term investment. If you want quick access to cash or something more liquid, probably best to invest elsewhere.
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Have you ever flipped a property?
 
dubinamerica said:
What would happen about stamp duty in this case? As an investor you would be liable but if property was sold on before you complete, would you still have to pay this ?? I'm wondering how you would actually go about selling a property that was 'in progress' and just before draw down of final loan ??
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Depends solely on where you buy. In the States for example all taxes are paid on closing (completion in our terms) you can sell your contract before closing hence you dont pay the purchase taxes. You cannot get away from CGT in any region, apart from thso handful of regions exemot from it. I have done this personally if you want more info PM me
 
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