Multiple bad decisions.

DunstonSlim

Hello there, long time lurker first time poster. I’m hoping for some advice with a particularly stressful situation I've found myself in. Which is unfortunately all my own doing…. 

First some context:

Approx 15 years ago I purchased a new build flat with a good friend of mine (interest only mortgage). I had come home from living away and he was looking to get on the property ladder. Naively we presumed we could live there a few years, sell and move on with perhaps even a modest profit. Unfortunately, it hasn’t worked out that way. 

15 years later we find ourselves “accidental landlords” renting out a flat neither of us live in (without a buy to let mortgage) finding tenants using social media. The flat is in negative equity, worth approximately 15k less than the outstanding amount on the mortgage. Since day one it has never made money (we could prove this if necessary). The rent we receive covers the mortgage, some bills with virtually nothing left over at the end of each month. With the current increases in mortgage payments, we are putting money in to keep the place going. 

We’ve looked into converting to a buy to let mortgage but this would take a considerable cash injection which we don’t have. We can’t change the mortgage as this would involve some uncomfortable questions/more bare faced lies to our lender. So, I’m trying to work out what my actual options are (or even who I should be speaking to), other than a long walk off a short pier

Many thanks

comeandgo

Could you not just sell it and accept the loss?  

El_Torro

Sorry to hear about your situation. Probably best to sell the place and chalk it up as a bad investment. I know you say it's in negative equity, though taking that loss is probably easier than injecting enough money into the place to get a 25% deposit on a BTL mortgage. 

I don't know how long it would take for each of you to save up enough money to sell the place and pay off the mortgage, seems like the best thing to do in this situation though. 

eddddy

Out of interest - what has stopped the value of the flat increasing over the last 15 years? The indexes suggest that average property prices have increased by around 40% to 50% over that period.

user1977

eddddy said:

Out of interest - what has stopped the value of the flat increasing over the last 15 years? The indexes suggest that average property prices have increased by around 40% to 50% over that period.

Lots of properties are below average. Especially if you start with a newbuild with ambitious pricing and sign up to it just before the 2008 crash.

NameUnavailable

Negative equity after 15 years????

NameUnavailable

Before thinking of selling, have you done everything correctly in terms of letting (i.e. can you actually get your tenants to leave if you wanted to?).

What is the lease? Ground rent? When and by how much does the ground rent increase (a big issue with saleability at present). Any cladding issues?

If you need to, can you increase the rent (and still be in the right amount for the property/area)?

jonnydeppiwish!

NameUnavailable said:

Negative equity after 15 years????

Interest only mortgage hasn’t helped!

custardly

1) Sell the property
2) Share the area and details with the HPC forum, they love this sort of stuff. 

MultiFuelBurner

Some properties of course do not rise substantially in value (Flats are one example) that's why whenever someone comes to this board as a FTB many say get a house if you can afford it.

We have flats that we rent out in a struggling economy town and yet in the last 15 years they have still added approx 33% to their value and that's a now realistic sale price not the 50% uplift many estate agents will start the price at. The reason we chose flats in this particular area was the rental yield (10.7%) 

It would be interesting to get some more details from the OP

freesha

No such thing as an accidental landlord. You CHOSE to do that, no matter what the reason.