Finance for puchasing and renovating a house?

Andrew Duffy

Does anyone have experience of buying a house needing extensive renovation as their main home? I think this is the position I'll be in in the next couple of years, and I'm keen to know what the chance of borrowing based on the value of the restored property is - if I have to raise the full restoration costs as well as the deposit and stamp duty (grrr - has to be the most unfair tax of all) I'll be saving for a while yet.

spongebob

your situation is rather complicated.

1. The stamp duty will be at the purchase value
2. There are limited grants for doing up old house, for a Thatched roof for example.
3. There is some pre 1963 legalese as well, dunno the details.

Once you buy , (maybe get grants) and renovate there is no tax liability whatsoever when you sell as long as you live there yourself. Grants are not taxable either.

Older houses are now MORE attractive to First time buyers thatn second time ones in certain ways as the first timers do not have to pay stamp duty under about €190k whereas the others pay 4% or thereabouts.

A company pays feck all stamp duty so 'your' company could buy it, agree to sell it to you at a certain price (not more than €190k) and charge VAT but claim it back on materials. In that case talk to an accountant EARLY in the process.

Some bank managers are cool and some are morons, ask around. As the property ain't finished yet you should get a valuer to look at the renovation plan and to give the Market price for it . Then borrow no more than 70% of that value and the bank should come along with ya. Over 80% and your margin of error is diminished ....I'd say the Bank would duck after that .

If you buy at €150k and spend €150k renovatinng but have a market value of €300k on the Complete House then that is 100% of the Value of the house, you would have to be able to fund €60k yourself in that scenario.

Finally you will have to divide the project into stages and draw them down as they are completed.

HTH

M

Andrew Duffy

Thanks for that. It's comforting to know that it is possible to borrow some of the cost of renovations.

Victor

Once the bank sees that the money is being spent on improving the asset they have a mortgage over they are perfectly happy to loan money. Their only criteria is that you are risking some of your own money.

You *may* need some bridging finance while you are drawing down the mortgage.

Stoner

I have done what you are about to do twice- bought one did it up- sold it , bought another one did a better job on in then the first etc,

The thing to remember is that if you ever intend to get a second house , then you will be taxed on the sale of either one as it would not be your personal home anymore, therefore watch every receipt and be carefull of the cash builders . If you by the house for say 200K and spend 100K on it but have no receipts/proof that you did it up, lets say you then sold the place for 350K. To the tax man the house appears to have gained 150K in value, you'd be taxed on this - but if you can prove that you spent 100K getting it into that condition then only 50K is taxed. I know people who have been cought out by this so dont fall for it.
Another thing , if you are going to do it up with a mix of you and a pro then dont pri-k around with things that will be undone. Example stripping wall paper then getting a bricky or plaster in to refinish or rebuild the thing. and start from the top and work down, also if your replacing ceilings then do up stairs first but have a few floor boards up and a few large holes knocked in the downstairs ceiling so that all the dirt and old ceiling can be swept down, save going up and down stairs. Note cleaning off old plaster and leaving nail free clean joists is something most people can do and it will save you money.

One final thing if you are planing to buy an old house and maybe build on a kitchen or something, watch out for entrance to the place for a digger or mini digger, lots of builders wont go near a job if the foundations have to be removed by hand.

Andrew Duffy

Thanks for that. I'm certainly not in this for a profit - that Property Ladder show put me right off that idea. However, even with two good salaries it's becoming really hard to find anything in move-in condition that I'd be willing to live in for the next ten years. It would also be really nice to come in below the 380k stamp duty boundary, because for a first-time buyer it goes from 4.5% to 7.5% above that.

Stoner

Andrew,

Best of luck with the housing issue, 380K is alot of money so id say you'd have plenty of options unless your zone is small and a nice area- anyway best of luck and buy soon before the people with kids get the "move in before school starts " bug

Victor

Originally posted by Stoner
The thing to remember is that if you ever intend to get a second house , then you will be taxed on the sale of either one as it would not be your personal home anymore, therefore watch every receipt and be carefull of the cash builders . If you by the house for say 200K and spend 100K on it but have no receipts/proof that you did it up, lets say you then sold the place for 350K. To the tax man the house appears to have gained 150K in value, you'd be taxed on this - but if you can prove that you spent 100K getting it into that condition then only 50K is taxed. I know people who have been cought out by this so dont fall for it.

Ah, the best reason not to pay under the counter. Be aware that the CGT exemption for principal private residences may be much reduced in future. Keep them receipts