Buy off plans,sell at completion,any advice?

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SPUDZ

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I bought a house about two and a half years ago, which is considered my primary residence. I have some money to invest and am thinking about buying a new house which wont be completed until at least 12 months time. My cash will allow me to pay the holding fee and the initial 10% deposit. I then would get a 2nd mortgage for the new property.
I am planning to sell the new house when it is completed. The idea behind it is to make a quick profit as usually there is a big increase in profit from buying at the first phase of a development. I would expect to make about 20k minimum. Is my reasoning correct? I think I would not be considered an investor during this period as the house would be a work in progess for the next year. Can anyone comment if I am on the right track or just dreaming of making a quick buck! Thanks
 
I assume you have to take legal ownership of the house to enter into a contract with the deleloper, and that if you then sell on you will be liable for capital gains tax, stamp duty, etc. Is this the issue you wish to address? If so, the fact that the house was only in your ownership before it was complete is, I assume, irrelevant.

Perhaps I misunderstand you? What is the nature of your "dreaming?" :)
 
extopia said:
I assume you have to take legal ownership of the house to enter into a contract with the deleloper, and that if you then sell on you will be liable for capital gains tax.
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And investor stamp duty presumably?
 
Suely I won't have investor stamp duty? The house is under 250k, new build, under 125 sq/m, didn't think investor stamp duty applies eventhough its a second home. Also it cannot be considered my primary residence for the next 12 months as it is only being built and I will not be able to live there till completed. If I sell either this property of my current primary residence, at the time of completion, I will only have one house so don't see how stamp duty comes into it. Am I correct or am I missing the point?
 
Regardless of when you sell, surely you have to BUY it before it's complete in order to achieve the profit you mention above? And in that case surely it cannot be treated as your primary residence if you already own a house?
 
If he subsells it on before a transfer to him, he could avoid stamp duty but not CGT.
 
This is partly why more than half 20-30 year olds cant afford to buy houses.
Actions like this forcing the cost of houses up, taking a home that could would be on the smaller side of the scale and holding it for pure profiel.
Then trying to find loophole to avoid tax. I hope you get caught.

 
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Most builders have a clause in the contract to stop you selling on before you take ownership.
 
There may be such a clause which would prevent you selling without their consent- but you could ask for their consent.
 
Vanilla said:
If he subsells it on before a transfer to him, he could avoid stamp duty but not CGT.
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As a layman, I can't fathom the concept of "sub-selling on." Any chance a brief law lesson, please? :D As I understand things, the purchaser enters into a contract to buy the property for a fixed price from the builder/developer. Equally the builder/developer contracts to deliver the said property to the specific purchaser for that price. What I don't understand is how can the builder become under a contractual obligation to sell to a 3rd party unless this is explicitly provided for in the contract? Am i missing something?:confused:
 
Its simple. Developer enters contract with Purchaser number one. Before the closing, Purchaser number one enters into contract with Purchaser number two ( note that the developers consent may be required). On closing Developer transfers to Purchaser number two - thus the only stamp duty is on this transfer, Purchaser number one never achieves actual ownership of the property.
 
Sounds like a gentleman's agreement then? What's to stop the developer shafting purchaser number one by selling straight to purchaser number two at a higher price?
 
Well if there is a clause in the contract preventing the purchaser from assigning the contract to the third party the developer may not give consent. Normally however the clause has a phrase that such consent will not be unreasonably withheld. In reality such subsales are not very common, at least not in my experience.
 
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