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Property Renovation Business Start Up

Advice Needed Please

post 22.May.2015, 04:37 PM
Post #1
Joined: 2.Oct.2010

Hi Localers,

Checking to see if any of you have experience in developing a business here in Sweden that renovates, rents out and sells property on a small scale?

Cut to the chase, I run my own business (F Tax) as a business consultant herein Sweden, but I have survived financially mainly by renovating apartments I live in and selling them on. I would like to develop into a business alongside my consultancy business.

I am in the process of discussing with my bank but I normally get blank faces when discussing this kind of thing in Sweden so hoping some of you out there in Local land might have experience in this?

My plan is, I would like to rent out the apartment I live in now and buy a house I have my eye on that needs renovating. So I would work and live in the house whilst taking income from apartment rental and running my other business.
The issue I have is, the bank will only lend for the new house based on our past income / tax returns, the normal stuff. Which is max 2,55m. The house is 3.5m plus renovation costs. I can put in some cash but not enough.

So to get a bigger loan, would I be able to add the future rental income on the apartment to my income pot and get the bank to approach the loan for the house as more of a business loan?

So in effect my F tax business becomes a property renovation business, and therefore the loan would not be under the normal property loan rules of being able to pay up to 7.5% interest etc?

Also Pantbrev??? Am I right in thinking it
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post 22.May.2015, 05:59 PM
Post #2
Joined: 26.Feb.2014

First and for most that is a huge amount of money for a house that need renovating.
Why not just buy cheaper houses, people are more likely to buy something that wont cost a arm and a leg.
Secondly what do you mean by renovating and how much do you do your self?
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yet another brit
post 22.May.2015, 06:03 PM
Post #3
Joined: 5.Jan.2013

I know where you're coming from, and know people who make money the same way.

Private individuals doing buy-to-let is quite challenging here (whether that is a good or bad thing is another discussion). Mostly because it is difficult - legally and practically - to let, let alone buy-to-let, a bostadsr?tt. It is perfectly legal to buy the *freehold* of flats, or of a house, and then let though.

So with your plan - the bank has no security that you have any rental income if your flat is a bostadsr?tt and even less if it is a hyresr?tt. They're a business. You might be better off living in your apartment (at least on paper...) whilst buying, renovating, renting and in the end selling a house as a business proposition. That way you get an income that is legal enough for the bank to feel OK about moving on a step to the next one.

Still, you need to find a bank that will play ball. This will be difficult so shop around. Whether the bank will lend to you as a business is part of the same discussion (but if you are a sole trader it is not a very clear cut distinction) . They're a business - so you make a business case!

You may also (actually) find it better to make the case as a private person. As long as you don't do it often enough to attract the attention of the ever-vigilant taxman, it could be better in the short term. This is a bit complex. If you make a profit on a property using your privately already taxed money, you pay property profit tax and then walk away, 22% or whatever. If you can find a way to use "company" money, you'll pay company profits (also about 22%) on the transaction, but then have some discretion about how to handle the rest. The effective tax rate could be both higher or lower depending on circumstances and the moral compass of your and your accountant. I am told (but don't have hard evidence) that the taxman will let a private person do four property transactions in a tax year before they will tell you it is a business whether you like it or not.

To your last point - the pantbrev is (literally) the mortgage. The banks (as in the UK) don't really give a flying fuck about this. What they want to know is that you can service your liabilities.
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post 25.May.2015, 10:48 AM
Post #4
Joined: 20.Sep.2011

I would echo some of the above in terms of how to borrow and starting smaller. If you do manage to find a bank to loan the money, handelsbanken has been excellent for us, you will still be stretched with your target house and leave little margin for anything sending you over budget. Plus, the higher the property price, the smaller market you are selling to, the lower the price, with higher the internal quality and you'll have people fighting for it, pushing the price up, or rather your margin up. We had assets to loan against, but less in terms of cash, so for the first year or two handelsbanken we happy to give up a pretty big (700,000kr) overdraft / bridging loan against property / future income, provided we started paying it down after 1 year, or converted it into a fixed loan. This was at a smaller local branch though.

I've renovated a few entire houses in the UK and some here. It's not my core trade or skill, but I've acquired my skills since labouring a school kid on weekends and evening for others, so I can do 99% of the work myself with just an electrician to approve and sign off electrics, or work in partnership with them. If you aren't skilled enough to do a very large percentage of the work yourself, then at 500kr/hr plus moms minimum you'll be throwing away potential profit. But, it's your call on your skill level. A note though, low quality looking workmanship, won't help it sell. I'll presume from your flat renovating experience you can present a professional finish to the property.

Houses, different fish to flats. A you often have to consider chimneys, heating, sewage, water, roofing etc. and these can each easily cost you 100,000kr each to rectify if in poor condition. I know as our old house has needed all of this, but we did also know in advance, so we didn't go in blind. I don't see your business plan having the funds to provide a buffer for this level of expenditure.

It's down to lifestyle choice. But, if I wanted max profit, from the least working pot, I would buy smaller houses within an hour of large cities, live in caravan on site. Find those is really poor condition, or turn under winterised houses into full season ones. Find some local contractors who will advice and let you do much of the work yourself in advance of them turn up, leckies etc. or someone with a digger for sewage works and so forth. The right house would target both locals and tourist for 2nd homes. Or old tired farms. Split the land or forest from the farm house to sell off separately, many are already sold with the option of individual or joint lots.

Your plan will work, if you have the skills and you leave yourself a working pot. If the house doesn't sell instantly, you really need a buffer that allows you to move on with the next property, taking any left over materials with you. This allows you to buy in bulk and get discounts with local merchants. Avoid the national chains. If you establish yourself locally with traders etc. then word will spread that X is renovating etc. and they've bought this and that for the house... it's like a free rolling advert for your future sale.
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