Negative equity advice wanted

by Readers Question

17:09 PM, 26th February 2014
About 7 years ago

Negative equity advice wanted

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Negative equity advice wanted

I have two apartments bought a the top of the market which now have £30k negative equity.

With mortgages, ground rent and service charges etc. I’m losing £100 each property every month.

I have 10 years left on the mortgages. Negative equity advice wanted

Should I just hope for the best?

Thanks

Mark



Comments

Mark Alexander

17:14 PM, 26th February 2014
About 7 years ago

Hi Mark

You might not have a choice.

If everything stays the same then you will have supported these properties by £12,000 over the next 10 years.

Will property values recover by more than that?

Will interest rates go up?

Should you be spending a bit more to protect your cashflow, perhaps with RGI insurance?

Are there any ways to reduce your costs, e.g. http://www.property118.com/full-property-management-from-just-14-99-a-month/34413/

Is there scope to increase rents now? See http://www.property118.com/property-search-tool/

Will rents increase over the next 10 years, thus reducing the subsidy or even producing a profit?

These are all the questions you need to provide your own answers to.

Personally, I would hold.
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Mark Alexander

17:51 PM, 26th February 2014
About 7 years ago

PS - I almost forgot to mention. In 1992 I was in the very same position as you are in right now. I did stick with it. 22 years on and here I am, running this forum and living off rental profits 🙂

You can read my story here >>> http://www.property118.com/my-first-buy-to-let-property-investment/
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Simon

18:01 PM, 26th February 2014
About 7 years ago

I think we would also need to know if the mortgage is on interest only or capital and repayment. If the latter then the problem is less as at least you will eventually own it.

You could consider to convert to interest only if it is a repayment so long as the lender agrees. This may would improve cashflow but obviously you would need an exit strategy. It depends on many things ie your age,earning potential over the next 10 years,potential inheritance..so many possibilities.
Simon

Howard Reuben CeMap CeRER

18:29 PM, 26th February 2014
About 7 years ago

Hello Mark (i.e. article writer, not Mr Alexander)

Do you have other properties too? Do you have funds to reduce the current mortgages?

We looked at similar situations for other Property118 Clients recently and by way of a portfolio re-balance we were able to shift BTL mortgage balances across their properties and reduce the balances to a remortgage-able scenario whereby they now a) have an equity stake in each property (keeping the lender at bay and granting peace of mind) and b) we also extended BTL mortgage terms too, so that they no longer have just a few years left and then 'what do I do?' to consider, but instead they have a far greater breathing space for that too?

A portfolio review on an ongoing and regular basis is a fundamental strategy for all business owners, and that includes BTL owners as well.

If you have equity in other properties, maybe we can help rebalance yours too?

Howard.

Mark Alexander

18:44 PM, 26th February 2014
About 7 years ago

Reply to the comment left by "Howard Reuben" at "26/02/2014 - 18:29":

Superb post Howard 🙂
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Jeremy Smith

19:48 PM, 26th February 2014
About 7 years ago

Dear Mark,

Tell me,
Why is it now making you a loss every month, but when you first bought the properties, I am assuming, it was not ?

Interest rates have fallen, overall rents have gone up, if it was repayment, then some capital has been paid off....
why is it NOW like this ? and it wasn't before ?

just because the property value is lower, doesn't suddenly make your mortgage repayment rise !
You must have bought in 2008, but no!, your mortgages have 10 years to go...?
1994...1999....2004... ?
When did you buy?

mark walsh

19:58 PM, 26th February 2014
About 7 years ago

Reply to the comment left by "mark walsh" at "26/02/2014 - 19:54":

And rents have gone from 600 down to 500pm due to apartments getting repossessed and being bought now for 60k and new landlords takeing 450pm now they buying cheaper

Ben George

20:24 PM, 26th February 2014
About 7 years ago

Just curious, are you renting furnished or unfurnished? You could spend a bit of that £12000 upfront. I.e. £1000-£2000 on decent Ikea furniture and rent out furnished to a different group of people.

20:30 PM, 26th February 2014
About 7 years ago

Blimey, £450 pcm rent for a £60,000 property?

What sort of tenants do they attract?

What are the service charges?

Where are they, can you provide a postcode please?
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mark walsh

20:36 PM, 26th February 2014
About 7 years ago

Reply to the comment left by "Adam Alexander" at "26/02/2014 - 20:30":

Great buy at 60k pr1 5jj I was getting 550 last year a few advertised at 70k to 80k but they go for 60k

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