What to do with my flat....

alexpg_2

Hi, I'm in a bit of a quandry regarding what to do with property I've bought, and was hoping some of the wise souls on here may be able to give some helpful advice or suggestions.

Back in the heedy days of 2007 I bought a lovely one bedroom flat near the centre of Wolverhampton for £97,500. At the time the advice was to get onto the property market before it got even more expensive, and I hoped that when I decided to move away or get a bigger place I'd be able to sell up at a bit of a profit.

Unfortunately the week after I completed Northern Rock went bust.

A year and a half ago, getting frustrated at alot of things I won't go into I left the company I was working for and got a better paid job with a company that at least offered some semblance of career progression which meant I had to move away.

As at the time I was still in negative equitity I took the only viable option, letting out my property, paying a permission to let fee to my mortgage company for the privilege, and using a letting agent to take care of matters.

So how has this worked out for me? Rough numbers come out as such:

Expenditure:

Mortgage Payments £8700
Other Expenses (permission to let, estate management fees, etc) £2000

Income:

Mortgage paid off £4000
Rental Income (after letting agent fees) £5400

Whilst I may have been slightly unfortunate that none of my tenants have stayed for longer than seven months (meaning empty time and lots of tenant finding fees), with property prices showing no signs of moving up I'm losing money, as well as having the slight insecurity of having uncertanties with my income (I'm not reliant on rent coming in, but it sure helps!)

When I last renewed my permission to let, my mortgage company implied that they wouldn't allow me to renew it again, either expecting me to move back in (not possible with my job, and not likely to find suitable employment nearby) or move to a buy to let mortgage.

Currently my flat is valued at around £80 k, with around £78 k still remaining on my mortgage. With this sort of hopeless LTV I'm unlikely to find a buy to let which isn't going to push my repayments up ridiculously.

So, what to do? In an ideal world I'd like to hang onto the flat as a long term investment. However, it's already losing me money, and having an extra £200 a month in my pocket would help me with the possibility of one day getting onto the property market where I am now.


So what hope do I have of selling up and not having to pay a ridiculous amount out of my savings to do so? Do the estimated prices on Zoopla reflect the amount properties are likely to go for? How long without a chain at my end at lest would it take for such a transaction to complete?

In my mind my best plan may be to write a begging letter to my mortgage company explaining my situation, hoping to overpay enough of my mortgage that hopefully I'll be able to sell up in a year's time. Are they likely to respond favourably?

How is the Help to Buy scheme going to affect me? Will first time buyers be pushed away from buying existing properties such as mine for cheaper repayments on new builds?

Any other smart ideas I'm missing?

Thanks all in advance, and apologies if this is a slightly rambling message.

G_M

Have you done a proper budget? Your figures are very rough and confused. You have mixed one-off payments (consent to let) with annual (mortgage payments).

you have missed off many costs (is tax in there somewhere?). You have not broken down rental income

etc etc

Before making decisions you need to fully understand your own finances.

How long is your current CTL?

Can you make savings eg by self-managing or switching agent? Are you paying for 'full management' and what does that include? Could you 'part manage' eg arrange your own contractors)

Could you increase income eg securing more long-term tenants (I assume you are offering 6 month tenancies. Why?)

Finally, if you have £2K equity in the property, perhaps you should cut your losses, use this to pay an estate agent, and sell. (DIY conveyancing?)

ValHaller

alexpg wrote: »

So, what to do? In an ideal world I'd like to hang onto the flat as a long term investment. However, it's already losing me money, and having an extra £200 a month in my pocket would help me with the possibility of one day getting onto the property market where I am now.

It is losing you money and not gaining in value. So it is not doing you any favours as a long term investment. Suppose you assume property values will start to rise in 4 years. Will it cost you more to keep it than it would to sell it and buy it - or similar - back?

alexpg wrote: »

So what hope do I have of selling up and not having to pay a ridiculous amount out of my savings to do so?

Think of the amount of savings you would spend to get rid of this property. Set the annual losses on the property against the interest on the savings you would spend. If you would save money by disposing, don't grieve over the savings - effectively you may find that keeping the property means that your savings are getting a negative rate of interest

lessonlearned

I think your first port of call should be an independent broker to see what mortgages might be available. Until you have some facts and figures to hand you can't really make any decisions. They won't charge you for an initial consultation.

Up till now you have been an "accidental landlord". If you can get a suitable mortgage and decide to keep your flat and let it out then you need to think more in terms of being a "professional" landlord.

I would strongly recommend you buy a good tax guide. "How to Avoid Property Tax" published the Tax Cafe is really good. It costs £25 - which is of course tax deductible.......

It's reasonably easy to read for the lay person (as tax guides go:rotfl:), It goes into far more detail than any of the Govt websites and can really help you with tax planning and cash flow.

Hopefully if you can find the best professional advice you can find a way out of your dilemna.

alexpg_2

Thanks for all the replies everyone. To answer some of the questions:

- Currently I'm letting out for £495 a month, which if using the normal ten month occupancy rule will come to just over 6% of the property value.

- Regarding tax, I have been informed that what is taxable is profit after expenses, which as you can see from my figures is zilch. Don't worry, I do have more accurate, broken down figures, but wanted to keep details to a minimum.

- My current CTL runs till the start of November. However, my current tennant's lease expires in July, and I have no idea how they wish to proceed. Obviously if they do decide to move out, I won't be able to get new tenants in on a six month lease without permission (which I may not get).

- I've been using six month leases as that's how my letting agents recommend doing it. Admittedly thinking about it they might just be eyeing up a nice big juicy tenant finding fee every six months!

Fire_Fox

Doesn't sound like much of an investment to me. If you want tenants to stay longer insist on a one year AST with no break clause. You cannot delegate your rights and responsibilities to a letting agent, many are unqualified and legally the buck stops with the landlord anyway.