Mortgage advice for poor BTL investments

BudgetBoy

I posted this below in the House buying, Renting and Selling forum. I received a couple of differing suggestions on using my saving to pay down the BTL mortgages, or remortgaging my own home at a better rate. One of the replies advised posting on this forum for more detailed info - so any replies to my dilema below will be gratefully received.
Thanks in advance.


Hi All

I would appreciate some advice please. I am an amateur BTL landlord who regrettably bought 2 x properties back in 2005/6 that are now in negative equity to varying degrees. I’m sorry I ever bought them to be honest. I know I should have done more research and not been seduced by “easy profits” promoted by Sarah Beeney and the glut of property programmes on telly at the time! The purpose of this post is not looking for sympathy and not really looking to be told I’m an idiot / serves me right etc. I would just like to see what people would advise they would do given the situation I lay out below…..

My main mistake was buying a 2 bed apartment off plan in a development that is literally full of BTL properties now. I paid £125K before the crash and would be lucky to get 85K now. Rental is nowhere near what was quoted at the time – I am able to achieve £475 versus the £550 that was “predicted” by the advisor. Monthly management fees for communal areas are £70 per month.

My second property is a 2 bed house in a nice street close to me. Paid £105K for this and could probably sell for 90K so not so much of a hit. This rents for £475 as well. There are no communal charges, and I manage both properties myself so no agent’s fees.

Flat has a BTL mortgage of £86K interest only @5.99% (lenders variable) with monthly payments of £432. Loan to value is essentially 100% so I am unable to remortgage to a better deal. Add the £70 per month communal fee and this is running at a small loss each month. I feel like I have thrown away £45K on this L

House has BTL mortgage of £80K interest only on a better rate and costs £316 per month so there is a little profit from the £475 rent. Knock off the annual insurance and corgi gas check and it’s not much though.

So that is my 2 “investment” properties!!

The properties are jointly owned. I am a 40% taxpayer (just) and my partner is 20%.
Our own home is worth approximately £150K and is fully paid off – no mortgage at all. We have no other debts – cars are owned outright and monthly credit card is paid in full each month. I don’t earn a lot but we live within our means and are careful with what we spend.

I have 60K in savings. 30K in a cash ISA and 30K in share funds within an ISA. These don’t make anywhere near as much as the interest I am paying out on the BTL’s.

I hope I have provided enough detail to generate a response. What would you do in my shoes? I had considered paying down the BTL mortgages using my saving so more profit is generated each month which would in part make me feel a little better, but is this just throwing more money at the problem? I could potentially see myself keeping the house but selling the flat if prices eventually rose to the point of getting £110K back (and taking the smaller loss on the chin). I could do nothing and bumble along waiting for house prices to rise but could be in for a long wait.


Any constructive advice or thoughts would be gratefully received.
Thanks

ACG

Can you not see if the lenders have any retention deals to get the rates down? That will increase the profit margins which means you can either throw that money at reducing the balance or increasing your balance.

Speak to an accountant, it might be worth putting the bulk of the property in your wifes name as she pays less tax.

Givens

I'd sell the flat. Cut your losses, you're losing money every month. Obviously if prices were increasing in the area then you may feel you want to keep it but without having any detailed info on the location than it seems obvious to me to sell it.

Use some of your savings to reduce your mortgage on the house and remortgage for a better deal. Transfer your share in the property to your partner to minimise tax and opt for a repayment mortgage mainly because you have paid have paid of your own mortgage.

Thrugelmir

My starting point would be are the actually properties making any money or are they in fact losing me money. The hardest decision that investors struggle to make is when to sell badly performing ones. You need to detach emotion along with your heart saying the price will recover one day. Too would biting the bullet and selling one or all make financial sense. Ok depletes your savings in the short term. Longer term you can expend your time and money elsewhere.