To sell or not to sell?

To sell or not to sell?

14:05 PM, 28th November 2013, About 8 years ago 41

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First of all thank you for all your suggestions and opinions. I have a property in negative equity, which I don’t live in, in a different area of country to where I am now located. I owe the mortgage lender £130,000 and I have it on sale now for £103,000. I have a buyer and I am now 5 months in to the process. However, I am considering withdrawing because it has taken this long to get to this point in sale ans we still have not exchanged contracts. This is mainly due to everyone assuming I have an abundance of time at my expense. I have been paying out about £700 a month in mortgage and council tax. To Sell or Not To Sell

The property itself is a 2 bed which lets at about £550 a month. It is near a good school, hospital, small shopping area, 15 minutes drive from a big ASDA. Decent local transport links as it is in the West Midlands. It is a nice area near a big park, 15 minutes drive to a motor way which you cannot see or hear from the property. It has private parking. The main issues is that there is probably an excess of similar properties in the area.

Running costs are £1,000 a year management fees, £150 a year ground rent, £650 a year consent to let fees as the mortgage lender does not do BTL mortgages and won’t cut me a special deal so far.

If I sell I probably stand to personally lose £20,000 to £30,000. If I keep it I’ll lose £3,000 a year, possibly more if maintenance is needed. I have lost about £5,000 (over 6 months) so far just in the process of this current sale as currently there are no tenants as the estate agents don’t sell with a tenant in-situ.

I know the markets will recover eventually….. well maybe.

The question is should I just get rid of it or keep it and hope for the best?

Thanks

Dan



Comments

by Michael Barnes

15:35 PM, 29th November 2013, About 8 years ago

Asyou are on a repayment mortgage, it is not clear if if you are making an operating profit or loss (income less expenses excluding capital repayment).

If it is an operating loss, then HMRC may not consider that it is being let with a view to making a profit and not allow expenses to be deducted from income. In that case it may be that continuing to let is not a reasonable option.

You also say that you are after a quick sale. Does that mean the property is realy worth more?

An option, buty I have not thought through the pros and cons, is to continue letting and pay down some of the capital on the mortgage to reduce outgoings.

by Ben George

19:08 PM, 29th November 2013, About 8 years ago

Went and looked at the property today for the first time in about a year. Despite 6 months being empty, it is in good shape, and I am sure my glasses were not excessively rose tinted...................... It looks v, good. Needs a clean and a few other things, but can be up and running quickly for rent. Main negatives are mortgage of £607 a month, with a likely rental income of £540-£560. Other costs of 1800 a year, plus any repairs needed and also if interests rates go up??

If I could find a BTL mortgage might be able to fix the rate, but think this is highly unlikely as I have no equity in the property (as pointed out from mortgage adviser).

However not selling now frees up £30,000 for down payment for a mortgage in another property.............. I think I will probably keep it.

by Marilyn Solomon

20:27 PM, 29th November 2013, About 8 years ago

I think you've come to the right decision. Invest in another property, wisely (right location, high rental demand). Hopefully the profit from the new investment will more than pay the monthly deficit on your problem property, and in the forthcoming years you will hopefully gain capital growth on each property. I would also advise you to look again at putting a Tenant Buyer in, since you're going to re-let, clearly all Rent to Buy (or Rent to Sell) are not all the same. A tenant-buyer will go in on a normal AST, the morg will remain in your name hence you make the payments (hence pass on money from rental income), so long as you've permission from your Lender to let - clearly you have - this is all they require. You'll have no need for management costs, no minor repairs or maintenance issues and the tenant buyer starts the agreement by a lumps sum payment to you.

by Ben George

20:54 PM, 29th November 2013, About 8 years ago

Reply to the comment left by "Michael Barnes " at "29/11/2013 - 15:35":

Hi Michael, The property was last valued at £115,000... However, the market is not biting "Yet" at anything more than £95,000 - £100,000. Maybe with the new help to buy scheme things will improve.

I can pay down the capital, but it will take something like £30000 to get the monthly amounts down to about £450, which may be an option, but I think I get more value out of investing properly in a new place.

by Ben George

20:56 PM, 29th November 2013, About 8 years ago

Reply to the comment left by "Marilyn Solomon" at "29/11/2013 - 20:27":

Hi Marilyn, where do you suggest I get more info on how to get tenant buyers and what to look out for per se, cause this is something I have no experience with at all.......... Regardless of what happens, this property is a great tutor for me really.

by Ben George

21:00 PM, 29th November 2013, About 8 years ago

Reply to the comment left by "Mark Alexander" at "29/11/2013 - 07:44":

Hi Mark, thanks for all the advice, been reading your life lessons and property strategies...... You like to make things "interesting". I have visited the flat again today.... i am definitely swinging round to keeping it. Just want to reflect overnight.

by Mark Alexander

10:25 AM, 30th November 2013, About 8 years ago

Reply to the comment left by "Dan Grainger" at "29/11/2013 - 20:56":

I consider Glenn Ackroyd at EweMove to be one of the most knowledgeable in this area - see his member profile here >>> http://www.property118.com/member/?id=594
.

by Alex Russell

19:10 PM, 30th November 2013, About 8 years ago

Hi Dan,

I have been in this situation but even worse. You are doing the right thing. Talk to the bank and cry poverty. Don't tell them you have the money and just keep negotiating with them. I was in negative equity for £95,000. In the end I paid back £35k. Which I know is a hell of a lot but it's a lot less than I owed. Remember the banks want their money back and to get 30p on the pound is good for them. They would sell that debt for a lot less.
If I would have listened to the prices will rise soon again shout I would have paid out over the last 5 years £18,000+ and still had a flat in massive negative equity.

Good Luck.

by Marilyn Solomon

18:45 PM, 3rd December 2013, About 8 years ago

Reply to the comment left by "Dan Grainger" at "29/11/2013 - 20:56":

Hi Dan

There is a national company that operate this way called renttobuy.co.uk. I should say I'm a Agent but do not personally benefit by giving out this info as your property is not in my area. Good luck.

by Mark Alexander

18:59 PM, 3rd December 2013, About 8 years ago

Reply to the comment left by "Marilyn Solomon" at "03/12/2013 - 18:45":

Hi Marilyn

I believe Grant Schapps, former Housing Minister actually endorsed tryitbuyitproperty.com - see this press coverage >>> http://www.mortgagestrategy.co.uk/news-and-features/sectors/regulation/regulation-news/grant-shapps-supports-rent-to-buy-scheme/1029003.article

I also know that Glenn Ackroyd, who I mentioned previously, also presented his scheme at a CML meeting.

I have not come across renttobuy.co.uk but I would very much like to speak to their Directors to lean more about them if you could help me with an introduction please?

The website looks very professional by the way 🙂
.


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