Unexpected extra costs on new BTL

[Grampa]

Well I completed on my latest BTL acquisition 14 days ago which is a 3 bed terrace house. Bought for a little under market, value but not hugely. 

It is having new kitchen, bathroom, carpets, consumer unit, electric shower fitted above bath and some other elecy work. I will do all the decorating and ripping old units out but contractors for the rest which is all budgeted for. 

But you always know there will be some unexpected extra costs when doing a project like this and so far.

1. Repairs to a leak in the roof (UNEXPECTED)

2. Flat roof above porch replaced ( I was going to patch myself but as the roofer was here i bit the bullet and replaced) 

3. Condemned lounge gas fire (I got a gas engineer in early to do a gas cert just in case which passed the boiler but fire is kaput)

4. Blocked flue which is in the wall cavity for the gas fire (UNEXPECTED. so replacing with electric fire, surround and hard wired in which is a lot cheaper option)

5. Sun room at the rear of the house needs replacement double doors as they are rotten as a pear. ( I knew these were a bit suspect but hoped I could get couple more years out of it  but they are too bad)

About 2.5-3k extra for the above SO FAR. I'm hoping there will be no further surprises.

[Richlist]

You should have a very nice property after all that work and one which won't need any serious expenditure for many years.

Make sure you account for the expenses & offset against income tax &/or future CGT.

One area that I didn't notice mention of was central heating.......perhaps now might be a good time to consider any work that's needed.

[Grampa]

11 hours ago, Richlist said:

You should have a very nice property after all that work and one which won't need any serious expenditure for many years.

Make sure you account for the expenses & offset against income tax &/or future CGT.

One area that I didn't notice mention of was central heating.......perhaps now might be a good time to consider any work that's needed.

Central heating is in good condition with fairly new ( under 12 months) worcester greenstar boiler.

I have a  dilemma regarding the downstairs toilet. It appears to have been added/fitted in to the downstairs  cloakroom cupboard at a later date. Its perfectly functionable  but small  with out a basin or space to fit one. Do I keep it or rip out?  I'm leaning towards keeping it but unsure.

 

[Grampa]

11 hours ago, Richlist said:

 

Make sure you account for the expenses & offset against income tax &/or future CGT.

 

Is there any advantage of one over the other. Being no expert regarding tax I'm assuming I can allocate the cost for one or the other.  

[kerbut]

19 minutes ago, Grampa said:

Central heating is in good condition with fairly new ( under 12 months) worcester greenstar boiler.

I have a  dilemma regarding the downstairs toilet. It appears to have been added/fitted in to the downstairs  cloakroom cupboard at a later date. Its perfectly functionable  but small  with out a basin or space to fit one. Do I keep it or rip out?  I'm leaning towards keeping it but unsure.

 

On one of our holiday lets I opened up the old outside loo as the drain  pipe was still there capped off( people requesting an additional loo), there was not enough room to fit a hand basin but from Amazon I bought a cistern with a hand washing facility built into the top , as the cistern fills the water flows out of the "tap", you wash your hands and the water exits via the pan

[kerbut]

Cistern with an integrated sink.

 

 

Brand: GrandeSys

[Richlist]

21 minutes ago, Grampa said:

Is there any advantage of one over the other. Being no expert regarding tax I'm assuming I can allocate the cost for one or the other.  

I assume you have an accountant to handle your business accounts and it might be advisable to ask him to deal with the tax return on your private development. The rules can be a bit complex depending on what you do & when you do it.

It's sometimes worth delaying some work if that's possible until after the property has been let. The reason is that e.g. a new like for like kitchen or bathroom would normally be offset against rental income. But if you carry out that work before your first let, then the cost of that work becomes part of you acquisition cost i.e. it gets to be offset against CGT when you eventually sell.

The other consideration is ....do you want to claim 20% / 40% against income or 18% / 28% against capital gain at some point in the future.

 

[Grampa]

42 minutes ago, kerbut said:

On one of our holiday lets I opened up the old outside loo as the drain  pipe was still there capped off( people requesting an additional loo), there was not enough room to fit a hand basin but from Amazon I bought a cistern with a hand washing facility built into the top , as the cistern fills the water flows out of the "tap", you wash your hands and the water exits via the pan

I have seen these type of toilets but not just the option of buying the cistern as in your link. My only concern was the soap residue from your hand washing clogging up the works inside the cistern after a period of time. Or does that water go directly into the toilet bowl bypassing the inner workings.? 

[kerbut]

The water goes directly to the WC coming out of the holes where the water comes out when you flush , glowing bowel !!

[Grampa]

31 minutes ago, Richlist said:

I assume you have an accountant to handle your business accounts and it might be advisable to ask him to deal with the tax return on your private development. The rules can be a bit complex depending on what you do & when you do it.

It's sometimes worth delaying some work if that's possible until after the property has been let. The reason is that e.g. a new like for like kitchen or bathroom would normally be offset against rental income. But if you carry out that work before your first let, then the cost of that work becomes part of you acquisition cost i.e. it gets to be offset against CGT when you eventually sell.

The other consideration is ....do you want to claim 20% / 40% against income or 18% / 28% against capital gain at some point in the future.

 

I dont have a preferance other than the most  tax saving way . A chat to big sis the accountant maybe on the cards tommorow. 

[Grampa]

2 minutes ago, kerbut said:

The water goes directly to the WC coming out of the holes where the water comes out when you flush , glowing bowel !!

Well that answers that question. That link you posted is that for a toilet with a seperate toilet bowl that is attached by a pipe? (not a combined cistern and bowl?)

[kerbut]

Yes correct , I made up an adapter to fit a top entry pan , the normal way for the system is a back entry but a 90 degree bend and a bit of plastic and silicone did the trick. 

[Melboy]

I know where you are coming from Grandpa on the unexpected costs that can be revealed after purchasing a property.

Happened to me back in March 2018 when I bought a modern 2 bed house. Quickly went through a £1,000 on items needing to be replaced and it has been ongoing ever since   😀  New fencing, new decking, oven repairs, garage door repairs, new guttering and facia's  and 2 weeks ago £400 for new electrical box and landlords safety certificate.

The chances are it won't end there either BUT I do have a very nice property in a very good location which has risen in value by around £15,000 in nearly 3 years and very nice tenants.

I also have a upgrade project next Spring / Summer when the current rubbish steel bathroom bath needs to be replaced.

All part of the fun of being a landlord. 

[Grampa]

9 hours ago, Melboy said:

I

All part of the fun of being a landlord. 

I know, and the government make it so easy for us with all the changes to legislation.😀 

[Richlist]

Don't you look before you buy ?

I don't mean a quick 5 minute scan of a property i mean a proper look and check of each room. If you don't want to pay for a survey or a detailed condition report then you need to take the time to do it yourself. You may not do it on your initial viewing but you can certainly arrange a second longer viewing.

I mean.....come on.....how can it be a surprise/ an unexpected expense to have to replace decking or fencing......a close look with something sharp will tell you if the wood is rotton or fence on its last legs.  Oven repairs......how difficult is it to check it's all working. Surely you can look/ check everything is working before you buy........the challenge is to find something wrong that you can use as a bargaining tool to get the price down. Things go wrong after you buy property but if parts of it are wrong before you buy them it's only unexpected expense because you haven't looked close enough.

When I buy I certainly have unexpected expenses.......but it's small low cost items I usually deal with not big ticket items.

I'm genuinely shocked that seasoned landlords/ property investors will put their hands up and admit to not doing a very good job.

 

[Grampa]

I know, I'm so disapointed with my unprofessional behaviour I have already signed myself on crash course to become a gas safe heating engineer, quaified roofer and chimney flue inspector.😀

[Melboy]

RL said:

"I mean.....come on.....how can it be a surprise/ an unexpected expense to have to replace decking or fencing......a close look with something sharp will tell you if the wood is rotten or fence on its last legs". 

1. 10 months into the rental time a huge gust of wind last January blew the the fence down... and not only mine.

2. Oven was working fine on inspection but the oven heating element stopped working.

3.The same goes for the gas boiler which had it's system completely checked over before purchase but the gas valve became defective after a couple months and cost me £200 to have it fixed.

All these things are part of the course when you buy a 30 year old property......and yes, you do factor things into the price you pay when buying the property but you never know what the future holds when it comes to defects.

I will have to join Grampa on the same course he has applied for.   😀

[Richlist]

Melboy,    Your fence blew down due to a storm and the oven & gas boiler failed months after your purchase. These are normal maintenance expenses that everyone faces they are not unexpected costs associated with your purchase.

Grampa,   A leaking roof should be evident if a proper check is carried out. The rotten doors could have been discovered by checking more closely and your flat roof repair wasn't really unexpected as you had already identified it and intended to repair it yourself.

Perhaps you should feel fortunate that the added expense is only £2.5/3K, seems to me it could have been so much worse.

[Grampa]

There is always an element of risk when purchasing property and a decision on weather to spend the best part of a grand on a full survey or make a decision based on your experience and level of risk you prepared to take.

The roof leak was 2/3 tiles letting in water close to the soffit which wasn't noticeable from the road. The damp patch it had previously caused in the bedroom was bone dry appeared to be an old leak that had be repaired some time ago and unbeknown to me the previous owner had put a container in the loft to catch the drips which hid the leak & allowed the ceiling to dry out.. My contractor yesterday cut down the section of damaged plasterboard and ended up with a full bucket of rainwater on his head. A surveyor wouldn't have spotted it as the roof pitch was is so low restricting access in the loft and the container was hidden with insulation. 

The French doors I agree I should have looked a more closely and should have realised they were knackered. I have repaired/patched them up to functional level and fitted a new lock but I will only be revisiting the issue in 6-18 months if I don't replace now which was the plan in the long run anyway.

However, on the plus side I have discovered the access road to the garage compound area which is at the rear of the property has an overgrown scrubby area next to my garage which I can cut back, fit a gate into my garden fence and have a extra parking space so potential could rent the garage separately. The garage compound area is overgrown not maintained and  no one takes ownership of it (though I have right of access). As you can see the garage hasn't been used for some time.    

[Richlist]

Looks like you have a good opportunity there......which is a bit of a plus.

Have you looked inside the garage ?  It might be full of either rubbish or preferably valuable automobilia.

They often have a corrugated asbestos roof. If so, be careful if it's you removing the overgrowth......at least wear a good mask.

[Melboy]

A good few years back I was renovating a property that had a similar set up to you Grampa in your picture.   Garage with a strip of land to the side but I did not legally own it. The previous owner use to to park his car on this strip of land alongside the garage for many years clearly visible by the deep tyre ruts in the earth and clearly nobody had complained.........so I set out 18ft x 8ft of 6 x 2 treated timber and gravelled the base along side the existing garage wall to make it look finished off as an additional parking space. Never got any complaints at all and the property buyer who bought from me was well chuffed to have 2 parking spaces. Added value at it's very best.

 

[Grampa]

There is another garage to the left of that green car which is the neighbours and we have agreed to concrete the area between the two which is big enough for 2 cars+  and split the cost.  

[Grampa]

On 11/10/2020 at 1:04 PM, Richlist said:

Looks like you have a good opportunity there......which is a bit of a plus.

Have you looked inside the garage ?  It might be full of either rubbish or preferably valuable automobilia.

They often have a corrugated asbestos roof. If so, be careful if it's you removing the overgrowth......at least wear a good mask.

Garage is empty, a fairly recent replacement felt roof (2/3 years old) so no asbestos. Garage door needs some work but I budgeted for a new one anyway. 

[Grampa]

Well property is now refurbed (finished about a week ago)

Myself and wife did the decorating top to bottom and garden clearance. I hate decorating but why pay someone if you can do it yourself and I'm glad its finished.

New Kitchen, Bathroom (+ elecy shower), flooring throughout (carpets & laminate), Lounge fire & surround, UVPC Patio doors, x3 replacement window units, curtain rails, door hardware, roofing works, new consumer unit and loads of electrical works and bit of plastering. So had a quick tot up last night and be looking at approx 12.5k. So quite happy with that. Without the roofing, patio doors and fire costs which wasn't planned for I could have knocked about 2.5k off that but you cant plan for everything.

All that's left is the garage door which is being fitted today £250 and a UVPC access door (labour only as already purchased)

The contractor (who I know anyway) is moving in this week paying 6 months upfront as we have just sold his house. So fairly pleased with a 12 weekish turn around from completion,, refurb, to new tenant moving in.

The only thing I think I would do different next time is get a decorator in and bite the bullet on the extra cost.

[Melboy]

All good then Grampa  👍     I would be doing the same this month but outgoing tenant had to have an extra month due to mortgage money hold ups. So next month I too start my upgrading with painting and electrical upgrades and a new boiler plus all the other things you have to before a new tenant moves in. 

I'm looking forward to it as I am housebound with the current lockdown and beginning to suffer from cabin fever.