Outsourcing or DIY?

To :Contributor : Mr Wisewell Re -your request.

The growth is probably stunted in the USA for the time being. If you are keen and are technically and financially equipped are you prepared to look overseas in safe and reliable countries ?

If so I may be of help to you. You may post your e-mail contact and I will respond.

Tks

Labor Omnia Vincit

I once read about a couple who bought their first home, fixed it up, made it look great.

When someone offered to buy their house for a lot more than they paid for it, they immediately agreed. Then they realized that this could be a great business!

They bought another rundown house, fixed it up (while they lived in it) and offered it up for sale. Now several houses later, they've made a lot of money.

Outsourced? or did they do it themselves?

In the beginning they did everything themselves. Understandable, since they didn't have that much money. Later, they outsourced some of the jobs because they added a couple of members to the family.

It was an interesting read.

Reselling your primary residence and Flipping are separate

If you really want to have grey hair it's the thing to do.

Contracting on renovations is the hardest thing to do because there are so may variables and costs and schedules are impossible to control Everything is a can of worms that can break you.It looks so easy on TV but it isn't at all . Besides the fact the market is overloaded and the likelihood is you picked the worst thing to get into right now.

thanks it seems i have alot off homework to do since i don't even know what capital gains tax is.tv makes it all look easy and the people that don't make money seem really stupid so i thought i'm smart know my way around a tool box and have moderate purchasing power what the heck any more info would be apprieciated

There are many things to consider. On the down side contractors who do remodel work are notoriously poor at accurately estimating costs and work scopes. In part many are deceitful seeking profit to some degree, the work itself is highly variable and inherently hard to define, and residential contractors in general are not typically highly skilled in the necessary project management skill sets to do such things adequately up front (they need to get inside and dig around to see the real problems as they go along). However, if you have some knowledge of the construction process, you can minimize their small frauds and over estimations. Additionally, you want to minimize the time you hold the investment, you should check on the median time to sell such properties in the areas you are interested, and evaluate the interest on loans against the sales profit you must make above all remodeling costs, then see if the remodel is in the current median price range for similar buildings.

Very sage advice. If you don't project manage it, no one else will in my experience, the idea of paying someone else would automatically kill any small project, might be different if you're doing a large country house in the $millions.

The point that estimating is inherently difficult, and that things are revealed that you could not see at the outset are both really, really true, even on what seem small innocent jobs. A good chunk of budget for contingencies is essential and if you think you know how long a job will take, double it at least.

The tax system in the UK reduces the cash that an individual can make by doing this - unless it is one's only home. On the second and additional properties the entrepreneur is exposed to the vagiaries of the Capital Gains Tax mechanism. It might be better to do it as a corporation than as an individual. As always, the advice of an accountant is invaluable before setting out on a venture such as this.

Reports might suggest (October 2007) that the housing market might be weakening, the UK having caught a cold on sub-prime mortgages.

The agent's board has just gone up outside the house my wife, son and I have just spent 10 weeks refurbishing. I suppose in all some 20 or so man-weeks have gone inot it - and of course it's not finished yet! I don't think you can define 'finished'., there's always something you can improve but it is basically fit to move into. PW is right, the amount of money that disappears in taxes and overhead outstrips the cost of input materials. All that VAT we are charged on materials but cannot reclaim, stamp duty, local govenrment charges etc etc. Really one gets the impression that Her Majesty's Gov thinks building should be allowed to decline untill they are demolished as unfit habitation.

There is some merit in such a project but it is obviously less profitable while values are decreasing. That doesn't necessarily negate the fact that improving a property increases it's value. We will only know if anything has been made when the loans have been paid and that we will only be able to guess at when we have a plausible offer. We budgeted for ownership of four months.

My reading-up before hand, incidentally, has me believing that the the rules in the UK treat profit from property refurbishment as income not capital gains. Anyone confirm?

Anyway, to actually answer the question posed, isn't it a question of added value. Outsource everything and you pay a lot of money to someone else on top the the money that the use of capital costs you. On top of that, there are small builders everywhere on the look out for bargain properties to do-up. If you use significant amounts of outsourced labour you'll end up putting in a lot of managerial time to end up with little profit, although if you're aiming really high on the property market scale, there might just be a living.

<My reading-up before hand, incidentally, has me believing that the the rules in the UK treat profit from property refurbishment as income not capital gains. Anyone confirm?>

Gains in value upon realising one's principal, sole, residence are currently exempt from Capital Gains Tax [CGT] in the UK. On second and further residences, the CGT mechanism is applied to any net gain in value over time. Of course, there are limits in the CGT mechanism below which no tax is payable, and there are time limits upon buying a second home before selling the first, within which CGT is not applicable. It is always worth seeking appropriate professional advice on taxation matters. Taxation rules vary from country to country.

I've done a bit of this myself & realised that, although it always seems cheaper to do it all yourself, if you consider the additional time it takes, it's not always the best choice. If you are renovating with a view to rent out the property, you want to let it as soon as possible so it may be best to use the professionals to speed things up. If you intend to sell then perhaps you can do some more of the labour intensive things yourself to save money.

I would think that you would be charged Capital Gains Tax on the rise in the cost of the house minus your cost to refurbish it. Your doing it as a business, so you can claim for materials and the cost of labour, including your own labour, otherwise it wouldn't make any sense for property developers to be in the business.

One of my colleagues at work is just finishing a project like this. Obviously the tax laws are different in the UK but he set up a limited company which you can do here for about £50 then paid himself for all of the labour he put in to the property.

I don't think it's strictly necessary to register a company to get tax benefits, sole traders (and presumably partenships) can do it. I maintain that, from what I could glean from IR info, they regard the proceeds for such an enterprise as income, not a capital gain. Of course it's different if you buy a place to live in, or to keep as an investment looking for the value inflation over time. Of course it may be that the capital gain option proves the more favourable, maybe there's something of a grey area about what the intention was on buying it etc. Circumstances change and you may not be able to sell it as you hoped for instance, or you may intend to rent but hace to sell if no tenant presents him/herself.

I agree that you may take a different view according to whether the intention os to keep it or sell it straight away. In a working week in the 9-5 I probably earn what a good tradesman would have cost per hour, my son perhaps a little less net. There was probably little sense in me taking a couple of weeks off to help, except that I enjoyed it. The hard bit is doing it in your spare time, doing a day in the office then three hours on the project before dinner.

One of my grandfather's sayings was apparently 'bite off more than you can chew and chew it'. Not something to do on a regular basis I would have to tell him if he were here!