Flipping – Legal but is it moral?

Flipping – Legal but is it moral?

9:54 AM, 23rd September 2019, About 2 years ago 16

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Flipping is back with a vengeance. It is quite legal and involves a house purchaser completing the purchase of house, moving in, then putting the house back on the market often for profit. I have seen examples of 40% profit and accept that is achievable.

It is trading in the “futures market”. I note that houses built in 1999 and sold, off plan, for under £100,000 are now achieving well over £300,000. Usually they are “flipped” within between four to twelve months. After that period, it is my Opinion that it should not be, considered to be, Flipping.

All the time the owner lives in the house and then resells it is his main residential home and there is no Capital Gains Tax liability.

As to morality I am unsure about it. It does force house prices upwards and there is no doubt about that!

Does it deprive first time buyers? Not in the sense of numbers. It neither adds to no reduces the number of houses available.

Does it price first time buyers out of the market? In many cases I think the answer is Yes.

It is a “Free Market” which is influenced by market forces. For many it is a “Cottage Industry” to supplement, tax free, their main income. In many cases the profit from Flipping exceeds their man income.

I must stress there is nothing illegal about Flipping.

Fergus Wilson



Comments

by Beaver

17:42 PM, 23rd September 2019, About 2 years ago

Reply to the comment left by Michael Barnes at 23/09/2019 - 16:49
Whether it's relevant or not I think depends upon whether you rent the property out before you 'flip' it (i.e. make it your main home), or whether you purchase the property with a BTL mortgage before 'flipping' it. I knew somebody years ago who would buy a property on a BTL mortgage, revalue it, remortgage it then buy another property with the proceeds of the remortgaging, strip all the rads out of the original property and start the process over again. So he built up a portfolio of "BTL" properties with a high paper value but not all of them were actually rented. It wasn't socially useful and as you may guess, it did not end well.

But "flipping" is relevant to BTL properties.

by Andy Morgan

21:32 PM, 23rd September 2019, About 2 years ago

Like most things Fergus Wilson says, the content is archaic. Flipping properties in the style he describes was a once a thing. But, that was a very long time ago. HMRC require 18 months of ownership and more than a couple of matched utility bills for it to be valid for election as the Principal Private Residence. Anyone suspected of "flipping" on more than one or two occasions in succession risks being investigated, will be considered as a property trader and taxed accordingly. All so much easier for the tax man now that digitisation allows former silos of information to be linked and cross-referenced. Mr Wilson's claim are out of touch with the modern world.

by Michael Barnes

16:03 PM, 24th September 2019, About 2 years ago

Reply to the comment left by JJ at 23/09/2019 - 17:42
That is not "flipping"

by colette

20:24 PM, 24th September 2019, About 2 years ago

Reply to the comment left by JJ at 23/09/2019 - 10:12
JJ, so if I sell my main residence and give the dosh to my only child (I fully understand gifting under IHt) and then move into another property (I have never lived in) which I have rented out to tenants for several years and make that my main residence and then at a future point sell it then there is no cgt to pay or at least, based on what you say, there is a £40k uplift? Also how long would I have to stay in it as my main residence before selling it

by Beaver

16:23 PM, 25th September 2019, About 2 years ago

Reply to the comment left by colette at 24/09/2019 - 20:24You need to check the details with your accountant but the last time I looked at the rules there was no time limit on how long you had to be in the property but it did genuinely have to be your main residence; you needed to be registered to vote there, your bank statements need to be there, you need to be paying the utility bills. Whilst as I remember there was no time limit you do need to check current rules and interpretation of rules that you actually have to live there and check that there is still a £40K uplift. But clearly there would still be a liability to CGT and this would be reduced if you lived in the property longer; the CGT is apportioned according to the ratio of how long it was rented vs. how long that you have lived in it.


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