To renovate or not to renovate!

[Laura]

I bought a very inexpensive property about 6 years ago with the intention of renovating it and eventually renting it with a view to topping-up my pension.  However, I have decided against renting (appears to be too many problems and much hassle) so will sell instead.  Over the past few years have completely gutted the property (it had been occupied about 8 years ago - though I would not have considered it habitable!) and completed a few minor, inexpensive renovations with the intention of having a concerted effort over the next six months, spending about €6000 on materials, etc, doing the majority of work myself, and putting it on the market next spring.  In view of the recent changes to CGT on second properties, I have recalculated the various costs ( as much as one can)  and think perhaps it is best to sell the property once I have completed a few more minor renovations so a purchaser could, literally, just come in and start rewiring, replumbing, etc, without the need to clear the property.  I realise that as far as CGT is concerned, there are still a lot of "i"s to be dotted and "T"s crossed.

I would be grateful for any advice, helpful opinions etc as whether it is best to try to sell the proper next year, hold on to it for a few more years without doing major renovations or do the renovations and then sell.   Due to the low value of the property, there would not be a large profit regardless of how I sell.   I intend to discuss this at some time with an agent but there are several points on which I have been given, over the years, contradictory information and again would be grateful if anyone's advice.   I had previously understood that the cost of materials purchased by me for the renovation would be deducted before CGT was calculated.   Also, that a percentage would be allowed for my time doing the renovation - I was anticipating that about 90% of the work would be done by me and artisans only used for, say, checking and connecting and installing an electric metre (I would do the main running of cables etc).   The latest information/advice seems to imply that any materials purchased by and work done by me will NOT be taken into account.   Obviously, this makes a tremendous difference to any profit I may make:  if I had to employ artisans for all the work required, the profit, if any, would be negligible and certainly not worth the hassle.

I would add that I am permanently based in France and recently started drawing my pension.

Thanks in advance for any advice/comments.  Am at a stage where my mind is just going round in circles!

[NormanH]

"I had previously understood that the cost of materials purchased by me

for the renovation would be deducted before CGT was calculated.   Also,

that a percentage would be allowed for my time doing the renovation"

Just on one point. I believe that only work done by registered tradesmen could be taken into account before, not work done by yourself.

As you will be aware the new regulations about what will be allowed are not yet clear, but I doubt that they will be more generous

[Anton Redman]

Neither materials purchased by you or work done by you is allowed against tax.

My first action would be to start a list using say ‘Selonger’ you need a column for each of Count, Ref, House Area , Price, Pieces, Bedsrooms , Land if any, Per MQ, Grade ,Notes, Agency, Price Cut.

Count is simply how far up or down the list the property is.

I use five marks for Grade 1 = Disgusting, 2 = How can people live like that, 3 = Just about OK, 4 = Fine but dated, 5 = As good as it gets.

Per square metre is a reasonable indication of value for money.

Notes contain enough description to identify the house such as ‘Very Pink’ or ‘Home Cinema’.

Reference is the number of the house when it was first listed and will show how long the house was for sale.

You need to use price and area to keep the list to a manageable size. Sometimes postcode work for others a specific town.

When you first prepare the list you will be amazed at how many houses change size, number of rooms and price as they move between agents. You then update the list each week and move to a separate list those houses which have either been withdrawn from the market or sold. After a couple of months you will have some idea of :

Which local agents are actually selling houses and what type of houses.

What kind of price you can hope to ask.

There is a huge gap in France between the cost to the purchaser and what the vender walks away with even ignoring tax. Say € 120,000 from a total cost to purchaser of € 138,000.

Also under the current rules every € 100 you spend on materials will mean € 29 of the added value disappears as tax, if you recover the costs from enhanced value of the property.

Without knowing the size, condition, what you hope to achieve and local of the property I cannot form a view of the € 6,000 budget. However unless it already has main electricity, water and sewage you will probably need to double that figure.

[Val_2]

Renovations are our bread and butter and the properties when re-sold by their owners never ever come near what the owner paid us for the renovation works. You cannot renovate to recouperate investments here and end of day, people will only pay what they think its worth to them regardless of all the unseen necessary works and fittings.

[Chancer]

[quote user="NormanH"]


Just on one point. I believe that only work done by registered tradesmen could be taken into account before, not work done by yourself.
As you will be aware the new regulations about what will be allowed are not yet clear, but I doubt that they will be more generous


[/quote]

Actually Norman the info that the OP had was correct until about 2005 or 6 IIRC, I bought my place on that basis, back then you could DIY, collect all your material reciepts including a reasonable amount for consumables, small tools, hire costs etc and multiply the sum by three to arrive at the defiscalisation or tax free allowance.

I dont think that the current system has benefitted anyone other than the artisans who have raised their prices to the stratosphere, the net result, around here at least is that buyers are looking at old houses and getting devi's for everything that needs doing, this has been exarcebated by the new electrical and energy efficiency diagnostiques, they are affectively looking for the seller to pay to convert an old property into a brand new one, when the cost of the devi's exceed the asking price for the property which is often then the properties rest unsold.

There are some real bargains to be had and I reckon there will be even more in the future, especially business premises like restaurants or hôtels that have to be brought up to the latest normes before the new owner can operate them, I think that Théiére is shrewdly looking at some of these at the moment.

My gut feeling is that the OP will be better of renovating an selling the house in a good condition, it does however depend on what value they place on their time and if they think they may have to underwrite their works for a further 10 years.

good luck with whatever you decide.

[Anton Redman]

Agree with Val - the moment you start paying a third party who in turn is paying taxes and cotisations it is very hard to make renovation pay. Possibly if you turn the thing on its head and run it as a business.

I have just been through the diagnostiques on our maison secondaire for electricity and broadly it is far less onerous than a CONSUEL inspection and if a property did not pass I would not want to live in it.

[Anton Redman]

Val - Do they expect to cover their costs or do they blunder into it using their preconceptions from the UK ?

[Laura]

Thank you all for your advice/comments.   The rules regarding allowances against taxation have obvioously changed (and are still changing) since I bought the property.  The property is a terraced house in a large village, which has/had basic utility supplies, and originally had French occupants.   I was well aware that there would not be a large profit in renovating it - as mentioned it was primarily going to be for rental income (rented by French as opposed to holiday rental) but I have heard too many horror stories to now go down that route.  As several of you have commented, most of us have come across purchasers (particularly Brits) who buy very cheap renovation properties only to find the cost of renovation is out of all proportion to the eventual value of the property.   My inclination at the moment is towards selling it next year, after completing a few more minor improvements.   It is not a disaster - it would have just been nice to have a small additional income as well as a reasonable profit when I came to sell!

Many thanks.

[Val_2]

Goodness knows. The problem for many folks who buy here and know nothing about construction is the cost of unseen works such as damp proofing, properly constructed concrete floors before tiling, insulation, raking out and re-pointing stonework before insulation, plumbing, drainage and electrics to french normes and plasterboarding etc. Materials are a horrendous price and artisans like us have to charge a minimum of €35/hour to survive although we always price for a job or labour charge where only necessary. Folks do not realise also that all this work will never be recouped if they sell and many try to add these costs to the asking price only to be left unsold for years. If you buy something that is damp, has no roof,no insulation or services then you must be prepared to spend big bucks to make it habitable whereas most of the time it is actually cheaper to do a new build with less future maintenance. Many renovations we have done have surpassed the €80k mark without any decor or furnishings.

[AnOther]

[quote user="Anton Redman"]Neither materials purchased by you or work done by you is allowed against tax.

My first action would be to start a list using say ‘Selonger’ you need a column for each of Count, Ref, House Area , Price, Pieces, Bedsrooms , Land if any, Per MQ, Grade ,Notes, Agency, Price Cut.

Count is simply how far up or down the list the property is.

I use five marks for Grade 1 = Disgusting, 2 = How can people live like that, 3 = Just about OK, 4 = Fine but dated, 5 = As good as it gets.

Per square metre is a reasonable indication of value for money.

Notes contain enough description to identify the house such as ‘Very Pink’ or ‘Home Cinema’.

Reference is the number of the house when it was first listed and will show how long the house was for sale.

You need to use price and area to keep the list to a manageable size. Sometimes postcode work for others a specific town.[/quote]

Is it just me or does anybody else not have a clue what this means beyond the opening sentence ?

What is 'Selonger' ?

Sorry Anton [blink]

[idun]

Without looking it up there is a Seloger in France, immobiliers and they may have  catagories for properties;

[Anton Redman]

I am suggesting an annotated list,probably best done with a spreadsheet of houses for sale that should allow you to at least find out if properties are selling.

My experience of trying to extract real information from estate agents is that it is hard work and not very rewarding,

[crossy67]

I would say sell it as is.  We spent a fortune updating our bungalow in the UK before we decided we wanted to move here.  It was on the market without even a look for 12 months before we took it off and started renting it.  It may have looked a little more costly than other houses in the same estate but when you look at the cost of new windows, doors, conservatory, fascias, roof repairs, rewire and a top notch kitchen all of witch even done at mates rates cost us £30k.  Then you see a house round the corner that has not been touched in 50 years since being built selling for £10k less you begin to realize people only see the sale price and not what they are getting for their money.

[Lambkin]

Put it another way, a lot of people think "if I buy the one that costs 10k less, I'll have 10k left to spend on doing it up as I want it, rather than getting stuck with a kitchen/conservatory etc which whilst very nice are not exactly what I would have chosen." Some people like white upvc. Others don't.

[cooperlola]

[quote user="Lambkin"]Put it another way, a lot of people think "if I buy the one that costs 10k less, I'll have 10k left to spend on doing it up as I want it, rather than getting stuck with a kitchen/conservatory etc which whilst very nice are not exactly what I would have chosen." Some people like white upvc. Others don't.[/quote]Yup, I'd put myself in that category.  But then we bought for us, not to make money.  Laura's case is quite different as she won't be living in it.

I'm with the majority on here, Laura - get out before putting any more money in.  Money pits are two-a-centime over here.

[Will]

Yes, the market is flooded with started-but-not-completed 'projects' in various stages of completion, or otherwise. You have a much better chance of selling an inexpensive restoration project than a completed shell waiting to be finished off. Plus you, and the buyer, will have less to pay in terms of taxes and fees.

[DraytonBoy]

I have to agree with Val. Unless you can do most of the work yourself you will always lose out.

[Laura]

Thank you all for your advice and comments.   Certainly the best option apears to be to sell the property in its current state - though I will wait until the spring, by which time the finer points of CGT should be known.    Due to the type of property it is, there was never going to be a large profit on selling the property - it was bought primarily for renting (to a French person/family) to provide a "top up" for my pension as well as some gain in its value when I came to sell - but even in the present market should provide me with some profit. 

Thanks again.

[Val_2]

Unlike the british mentality, the french don't tend to tart their houses up for sale. Its not unusual to try to sell a property here with rubbish insitu, in a disgusting mess or just generally very tatty. Putting a coat of paint on a wall and asking another £10k is not in the french mentality.

[Laura]

Yes, I have seen placed like that Val:  dirty dishes still in sink, beds not made after being slept in, rubbish everywhere, etc, despite properties being vacant for months.  My home was not cleared out but previously being part used as offices, the rubbish was paperwork, including personnel files, prior to 1946!  It did have one benefit though as I found, in perfect condition, old French newspapers ranging from 1895 through to 1945, which was/is fascinating reading.   There were also old blueprints, copies of correspondence between UK and French companies during the late 1800's to 1945, together with various product brochures. 

[Val_2]

You may want to contact the dept archives in case they are interested in those letters etc.