Help – Money Pit Portfolio?

by Readers Question

15:35 PM, 30th August 2018
About 3 months ago

Help – Money Pit Portfolio?

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Help – Money Pit Portfolio?

We have a portfolio of nine properties all over UK, bought in 2007, interest only mortgages. Half are nice little earners, no problem tenants, but a couple have been nightmares with one in particular costing us a fortune.

Everything has gone wrong with the house itself. We’ve had to evict every tenant, and the house is now in negative equity.

Four are currently untenanted and we feel like the little Dutch boy with his finger in the dam while our money pours out daily.

It would be nice to hold on to three of them, but currently we are sorely tempted to just hand the lot over to one of those companies that just buys up portfolios for silly money, even though I’d probably cry myself to sleep over all the wasted potential.

Any suggestions?

Penny



Comments

Neil Patterson

15:39 PM, 30th August 2018
About 3 months ago

I am sorry to hear of your difficulties Penny.

First of all though you can't just sell a property in negative equity without the ability to repay the difference between what you sell for and the outstanding mortgage amount. The lender will come after you for the difference even if they sell the property themselves under LPA receivers.

You also need to consider before you sell if any CGT liability will be more than the equity left. Probably not if purchased in 2007 with at least 15% deposit.

If you do decide to sell there is no immediate emergency, situation dependent, so you would always get more trying to sell yourself individually without a middle man taking a profit.

Darlington Landlord

17:07 PM, 30th August 2018
About 3 months ago

Hi Penny
Check how your asking rents compare, It can work out better to let at a lower rent than have long voids, but I would recommend you think hard about the areas the properties are in, if there is a common thread to the problems you have had, and the potential "clients", sometimes its worth just getting out, especially with universal credit becoming widespread. I have just sold a property with a 10% plus yield on paper but in practice it was a nightmare due to ongoing damp problems (despite a dpc and tanking) and the fact that a previous tenant had put the word round it was haunted (it was a very "local demand & on benefits" area) meant long voids.

Monty Bodkin

17:07 PM, 30th August 2018
About 3 months ago

It must have taken a lot of organisational skill to research, source and mortgage your first ever 9 rental properties, spread all over the UK, all in one year. Not to mention the huge ready sum of money for all the deposits, legals, re-furbs etc as releasing equity wouldn't have been realistic for most of them.

And some balls to go all in on property just in one year. A bit like betting your life savings on red at roulette!

But what unbelievably bad luck to have done it all in 2007, one of the very worst possible years.
-And it must have all been early on in 2007 'cos BTL lending completely dried up towards the end of the year.

On the bright side, house prices are up 20% on average since then. If one of them is down 20% (to put you in negative equity), there's a fair chance another one is up 40%, in a portfolio spread about the country.

You could offset the CGT on the dog against the gain on the winner.

Plus rents have gone up and interest rates have gone down.

Lending criteria in 2007 was stress tested at around 125% @ 6% apr, so you can't be doing too badly.

Concentrate on getting the voids filled first and then calmly and rationally look at the best way to proceed from a position of strength.

Gary Dully

9:47 AM, 31st August 2018
About 3 months ago

Pass your empty property to Lettings Supermarket (on this website) and let them get on with it.

Also you could consider contacting your local council and see if they are looking to House anybody urgently, that isn’t on drugs, in monumental rent arrears or under a banning order because they are social misfits.

Please remember to tell all your friends that you have failed in your business, because you have been driven to the edge by Section 24, Shelter, your local councils new Licensing scheme, the legislation you can’t afford to comply with and you have been accused of being a rogue Landlord and apparently you also have bad breath.

You will probably hear a round of applause in the background from the people at Shelter and generation rent.

But at least you tried to be a success, so well done you!

Chris Novice Shark Bait

16:22 PM, 31st August 2018
About 3 months ago

Hi Penny, having bought so many so quickly would I be correct to assume you were buying from so called gurus that sourced them for you? If so I would be interested to hear where your problem properties are located and perhaps from whom they were purchased if not a private deal. We had our fingers burnt around the same time and are still trying to find a solution 12 years on. Not sure if this helps but you are not alone.


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