Another Shared ownership nightmare, feed back welcome

MT

My situation

1. Shared ownership owner since 2007, purchase price 50% 60,000
2. Current valve 65,000-70,000 for 100%
3. Currently allowed to rent out since 2011, now totaling 9 years, rental income doesn't cover costs of Mortgage and rent, losses around 2,000 per year over the 9 year period.
4. Grenfield fire implications, building remedial works(cladding) in relation to my building, additional cost of 3,000k advised.
5. Haven't lived at the property for 9years as living abroad and citizen of another country.
6. Option to sell, still in negative equity on 50% share after 13 years.

What would you do as every which way I turn its Loss, Loss, Loss. I have been fortunate to be able to manage these losses but for how long I could continue is another matter.
Anyway thanks for any feed back 

princeofpounds

Without wanting to push on a sore topic, are you really sure about these assumptions?

It appears that on purchase you paid 120k for 100% equivalent, and now you think it is worth 65-70k. That's a ~44% fall in value. UK house prices, even if you bought at peak in 2007, are up by about 25% to date. 

Even accounting for a newbuild premium, some loss of value on the lease term (have you slipped below 80 years?), generally being a bit naive and overpaying, starting with a tight deposit and an interest-only mortgage (was it?)... it would be hard to be in negative equity by now.

Or, is this current valuation incorporating the possibility that the building is unmortgageable and practically unsaleable due to the cladding issue? If so, the 3k for remedial works on the cladding may be the best 3k you've ever spent. 

It sounds like selling may be the best idea if it's causing a permanent drain on cashflow - your only hope of return being price appreciation - and otherwise of little practical or sentimental use to you. But I wouldn't rush to make that conclusion because everything you have said doesn't quite add up. 

[Deleted User]

I agree.  How could the price drop so far?  There were many years of price increase previous to now.

davidmcn

princeofpounds said:

UK house prices, even if you bought at peak in 2007, are up by about 25% to date.

Only on average, some places haven't really risen since then (especially if they were newbuild).

princeofpounds

davidmcn said:

princeofpounds said:

UK house prices, even if you bought at peak in 2007, are up by about 25% to date.

Only on average, some places haven't really risen since then (especially if they were newbuild).

That's true - Northumberland for example - and I appreciate that it's an average. We still need to understand a 44% fall in apparent value, even if the house prices in this area (and most areas have gone up) have gone nowhere. Perhaps a 15% newbuild premium has evaporated. Perhaps 5% has been lost on the value of the lease. Perhaps there was never any deposit equity, for whatever reason. Perhaps it has been on an interest-only mortgage ever since - although it would be highly odd that there was never any remortgage by now. Perhaps the OP was naive and overpaid by 10% on top of all that. We are still ~15% short of explaining our 44% decline in valuation. 

Besides trying to understand the mortgage and lease situation, I suppose I'm mostly trying to understand if the real big issue here is the cladding. There's also a risk that the OP has had such a bad experience that they find it hard to assess the situation objectively, which is not to criticise them - but if they want objective advice then we need to understand the basis of what we're being told.

eddddy

The cladding issue means it's unlikely to be mortgageable.

Finding a cash-buying, owner-occupier, who is prepared to take on the uncertainties of future cladding costs seems unlikely.

Perhaps the best option is a cash-buying BTL investor who's prepared to to take on the risks of future cladding costs - but they'd want the price to be cheap enough to give them a tidy chunk of 'profit' once the cladding is done.  But does the HA / lease allow BTL investors?

Then there's the question of whether you can get the tenants to leave, if you want to sell it vacant. (The tenants might leave and then the sale falls through, leaving you with no sale and no rental income.)

I guess you could investigate the option of selling it tenanted to an investor...

AdrianC

Sell. Absolute no-brainer.

If you've been making £2k/yr losses for the last 9yrs, that's £18k in itself. Yes, you'll sell at a loss... but you'll stem those ongoing losses. You'll also massively simplify your life - no more mortgage, tax returns, management costs.

Given that it's shared-ownership, will the HA buy-back?

rik111

If you are not living in this country and a foreign citizen, stuff let the bank have the problem and repossess it.

MT

AdrianC said:

Sell. Absolute no-brainer.

If you've been making £2k/yr losses for the last 9yrs, that's £18k in itself. Yes, you'll sell at a loss... but you'll stem those ongoing losses. You'll also massively simplify your life - no more mortgage, tax returns, management costs.

Given that it's shared-ownership, will the HA buy-back?

Thats the one question I have yet to ask, from listening to others the chances are slim, but I guess its worth a go. If I sell Id still likely make a 10k loss including sales solicitor fees, so where does that money come from?

FinallyStoppedLurking

MT said:

AdrianC said:

Sell. Absolute no-brainer.

If you've been making £2k/yr losses for the last 9yrs, that's £18k in itself. Yes, you'll sell at a loss... but you'll stem those ongoing losses. You'll also massively simplify your life - no more mortgage, tax returns, management costs.

Given that it's shared-ownership, will the HA buy-back?

Thats the one question I have yet to ask, from listening to others the chances are slim, but I guess its worth a go. If I sell Id still likely make a 10k loss including sales solicitor fees, so where does that money come from?

You'd need to find it and make up the difference. In order to sell the house you need to be able to clear the mortgage. If the sale price doesn't do this you'd need to put the rest in yourself. 

MT

While its hard to believe, the stats do stand up, trying to do the right thing unfortunately doesn't always add up. Property is mortgaged,. not interest only, Nationwide charge extra 1% on the their rate due to it being let out. I'm screwed which ever way you look at it. As with all share ownership, mortgage does eventually come down, although rent and service charge increase year upon year, making supposed affordable housing now unaffordable.