Buying a distressed property and selling on, what costs/charges are involved?

NIMAN

Not planning to, was only wondering as a property close to me is on the next Allsop auction list.

It has a reserve of €60k.

Say you bid 60k on the day, is that what you pay in total, or are there other charges?

Say I then fix it up at a cost of €10k and in 6 or 9 months time sell it on for 90k, what could my profit be? I know there will be solicitor fees,but is there any other tax like CGT? If so, what % of the 20k profit would be eaten up?

newacc2015

Generally if they go a lot of over their reserve. They are often priced to gain interest.

You will pay stamp duty at 1%, you will have to give an estate agent fees to sell, you have to pay a solictor to look at the documents when buying. Then on the profit you pay CGT of 33%.

sword1

Turning property in Ireland is not as popular as the UK. Mainly due to the extra costs of buying /selling. I may be wrong but I don't think they have to pay stamp duty in the UK

NIMAN

newacc2015 wrote: »

Generally if they go a lot of over their reserve. They are often priced to gain interest.

You will pay stamp duty at 1%, you will have to give an estate agent fees to sell, you have to pay a solictor to look at the documents when buying. Then on the profit you pay CGT of 33%.

So in my example, say you buy it for 60k, then its €60,600 including stamp duty.

Then say you get an agent estate and a solicitor to do their part for €1k each, thats costs up to €62,600.

Then maybe €10,000 to do it up, as a lot of these properties are in poor state. Might need a new kitchen, new sanitary ware etc?

Total cost now €72,600.

And if you were to get it sold for €100k, thats presumably seen as €40k profit from your purchase price? So you lose another 13,200 to the Gov in tax.

So in reality you are only realising a sale price €86,800, and a final profit of €14,200.

Some might say thats pretty good for maybe a few months work, but it sounds like a lot of hassle, which could come with complications along the way.

draiochtanois

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NIMAN

I suppose if you were to turn over 15 - 20k for maybe a few months work, it would be worth it.

But who's to say you'd get it sold quickly?

mickmac76

I don't think It's easy to make a quick profit in property anymore. For one thing a reserve of sixty thousand on your property is very likely to be sold at a much higher price and any property bought is sold as seen. Your new property could have strutural defects that you are not aware of that will completely wipe out any potential profit.

NIMAN

Yeah they are certainly risked involved, considering you can't get any survey or inspection done first.

Add to this the fact that you'll be hearing about the Mica issue in Donegal in the coming years, and this house could well be affected. Its a major defect and some houses are crumbling up here.