Unless this is self funded, I beleive you are going to need a construction loan or creative style mortgage on the home prior to the approval of the certificate of occupancy. After the C of O is issued, you can typically convert to a conventional mortgage. Please keep in mind that normal Home Owners Insurance policies do not offer adequate protection until inspections are passed and C of O is issued. This obvisouly varies by carrier, etc.
As for Capital gains, I believe you would have to live in the home for 2 years for it to be considered primary residence and therefore not subject to capital gains. In less than 2 years, it would be subject to normal income, short term capital gains or long term capital gains depending on the duration of the investment.
I would strongly consider brushing up on the 1031 Tax Free Exchange (which is inaccurately named because it is a tax deferral not a tax free exchange). This is also know as a Starker Exhcange (or a reverse Starker depending on the transaction).
Most real estate books cover this very superficially (and inaccurately) due to some of the complexity of the provisions. They really are not that complicated with regard to what you are attempting to do. When you start trading properties, it becomes much more complicated. I have done a 1031 Exchange on a property that saved me thousands in tax obligations. The beauty of the transaction is that the longer you roll the gains, the lower the tax liability becomes at the time you cash out.
I did make the assumption that this was a US driven decision. I see that Stanners is from the UK but nothing in his/her post points this to a UK driven decision/strategy.
Can you point out where you feel I was inaccurate as you state "Second the advice they offered is inaccurate when it comes to when you can use a 1031 even if this was a US real estate deal."?
I think it's better to be down to earth. Flipping houses are not a way to be successful. It's more like a gamble & speculation rather than seeing it as a business opportunity.