Buying a property, renovating it and reselling it has become a real phenomenon in recent years, particularly amongst property investors. Although this may seem like a lucrative venture, it is important to understand the financial implications of this process before getting started.
Notary fees, registration duties and property tax
Buying a property requires a significant financial investment. Whether you are using your own funds or taking out a mortgage, it is important to be aware that the costs are not limited to the purchase price of the property alone. There are additional costs such as notary fees, registration charges and council tax. It is important to take all these costs into account to determine whether the investment is viable.
Setting a renovation budget
Starting a renovation can quickly become expensive. It is therefore important to set a clear budget and stick to it as closely as possible. Costs can easily spiral out of control if you do not keep a close eye on your spending. The work may include fitting a new kitchen, refurbishing the bathroom, repairing the roof or plumbing, as well as repairing floors and walls.
You should also take into account the time and labour costs involved. If you are not an experienced DIYer, you will probably need to hire professionals to carry out the work. Labour costs are high, and it is important to factor this in when drawing up your budget.
Registration duties
The rise in property prices has not yet been sufficient to cover the registration duties you paid when you purchased your property. This means that, when a property is resold, the registration duties are often not recouped. It is important to note that registration duties amount to 12.5% of the sale price in the Walloon Region.
You can still reclaim part of the registration duties
However, you can reclaim part of the registration duties paid at the time of purchase if you sell your property within two years of buying it. In Wallonia, you can reclaim 3/5 of the registration duties. To be eligible for this, the sale must have taken place within two years of the purchase and you must not have benefited from a reduced rate at the time of purchase.
And what about the tax allowance?
If you sell the property quickly, you will have to repay the amount if you have benefited from a reduction in these registration duties. If you fail to meet the condition entitling you to this tax relief – namely, living in the property for at least three years in Wallonia – you will have to repay the relief, except in cases of force majeure. In Wallonia, the allowance applies to the first 20,000 euros of the purchase price. Consequently, if you have benefited from this tax relief, you will have to repay 2,500 euros in Wallonia.
The home insurance premium
The housing grant is a form of financial assistance available from Wallonia to carry out energy-saving and renovation work on a property. To qualify for this grant, you must follow the sequence of works recommended by a housing inspector approved by Wallonia. This inspector will identify any issues in your home that need to be addressed. This assessment will tell you where to start when improving your home.
In Wallonia, you must undertake to remain resident in the property for 5 years in order to qualify for this housing grant. This period begins after the date on which the first progress report on the works is registered.
Capital gains tax
If you sell your home at a profit, you will not have to pay capital gains tax on the property if it is considered your main residence or if you inherited it. However, in other cases, such as second homes or investment properties, a tax of 16.5% applies to sales made within five years of purchase.
In conclusion, it is important to bear in mind that recouping the initial purchase price, as well as legal fees and renovation costs, when reselling a property is a rare occurrence. Although renovation can increase the value of the property, it is essential to weigh up the costs and benefits to avoid incurring significant losses. Ultimately, it is crucial to plan carefully and be realistic about profitability expectations before embarking on a property renovation project.