What about less obvious costs that you might not consider? They, too, can dent your profit.
Insurance
You will have to pay for buildings insurance to cover the cost of rebuilding the property in case of fire or other disasters. Your mortgage lender will require you to take out this type of insurance. Your lender will allow you to make your own choice. Compare buildings insurance policies at www.moneysupermarket.com and www.moneyfacts.co.uk.
Some firms offer a complete package of renovation insurance that includes buildings insurance, public liability insurance, personal accident cover and legal expenses cover. Policies vary, but you will be able to receive insurance for the whole project, whether you intend to carry out the work yourself or employ others.
You will have to pay for any initial connection charges and any gas, electricity and water bills while you are working on the property or waiting to sell a property. Compare providers at www.moneysupermarket.com and www.simplyswitch.com.
A professional property developer has to pay income tax on profits. Help sheets are available from HM Revenue website. Sarah Beeny, in The Developer’s Bible (£17.99, Talkback Thames), recommends checking out the allowability of expenses with your local tax office as all cases are different. Sarah also advises if the property is not your place of residence you are also liable for capital gains tax (CGT), although you are allowed to make capital gain a percentage of the profits (£9,600 in the 2008/2009 tax year) before you are liable to pay CGT. Any gain above this limit is charged at different rates depending on your circumstances (although not more than the top rate).
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