Something to cheer the renters up

johnny_storm

The fact of the matter is, this was stupid and you are going to lose a lot of money. The amount of money will depend on how quickly you accept this fact, and take action.

You can either bleed £420 a month for some years, or sell now and take the hit in one go.

If I were you, my first port of call would be to chat to my exisiting tenants and see if they might be interested in buying the property with a generous discount. This in my mind is your easiest cheapest way out.

If not, put the property on the market now priced to sell. It will be tempting to try and hold out for more money, but there is a real chance that doing will mean that you dont sell and you will lose more and more.

You maybe tempted to weather this storm out. But ask yourself what happens if house prices do drop by 50%. The couple who currently rent will no doubt want to buy at those prices and you could really struggle to rent it out again. Imagine an empty house with 50% negative equity costing you £1000 a month. That will be the bridge point, you arent there yet thankfully.

I am one of those nasty housepricecrash people, perhaps had you actually used that forum before jumping unprepared into a market you knew nothing about you would not be in this position now.

Good luck with whatever you decide.

moneysavinmonkey

You have been incredibly financially naive and I do feel sorry for you.

You have been unlucky in that your mortgage was with Northern Rock
and you are now on their SVR, but at the end of the day you decided to take an investment risk and have been caught out by the market.

Your property currently has just over a 4% yield. That is absolutely dia.
I think 10% is the minimum a serious investor would consider given that property is an illequid asset and with all the various costs + hassles of effectively letting. A bank account would get you 5-6%!

My advice...
Price the property for a quick sale, & bank any equity you manage to walk away with.
Pay the £5k+ a year you would have had to pay on keeping this property going into a high interest bank account for your kids.

By the time they finish university they will have a sizeable nest egg to help them with any uni debts and deposit on a first home. That's more than most kids get from the parents - and you don't want to spoil them by making it all to easier - they;'ve got to make their own way in life too! I knew people in uni who didn't really bother to apply themselves cause their parents had already bought them a house and they felt they were already pretty set up for life - is that what you want for your children?

It may seem it but I don't really think your situation is all that bad. You haven't missed any payments on your mortgage, your credit record is in tack and your not in negative equity. You just need to re-evaluate you plan for owning 3 houses and decide whether that is realistic or not. The upside of your problems is that house prices are now falling to more realistic prices meaning that you kids will probably be able to afford to buy their own homes - and isn't that what you wanted in the first place!

Hopefully from all this you have learned that whatever decision you make you need to do a lot more research and look at all the options carefully, with a bit more forward planning and risk assessment. Good luck.

dellbouy

ali007 wrote: »

What is the position on your own house? Do you have a mortgage on it? Do you have equity in it? Could you remortgage your own house at a better % rate & use this to reduce BTL mortgage? As long as you can show a clear paper trail (e.g. borrow 75k, pay 75k off BTL immediately) this should be ok with tax man. ...

NO! NO! NO!
Get your own home as far away from the BTL as you can. A good financial advisor would have said the same thing at the start. Sell it if you can't take the financial hit - even if it is at a loss.

Each month, you're losing the interest payments you make to the bank. But if you miss a payment, the bank will look upon the existing capital in the property with a greedy eye. It's their buffer that means they can sell at auction quickly. So, unless you have a lump sum around to reduce that interest payment to the point where
interest * 1.3 = rent
you will be playing with fire for many years. Any slip on your part and the NR will have you - they have a 50bn debt to repay, remember.

MissMoneypenny

kazd, the best advice I can give is to stop worrying about how your children will survive when then are older. We worry about them when they are little. We worry about schools. We worry about letting them out on their own for the first time. We worry when they are out with their friends in the evening. We worry abut them at university. We worry when they are off backpacking. The worry list is endless.

When I look back to all the hours I have spent worrying about my children and now look at the two, early 20s, confident, doing very well in their careers, adults I now have, I wonder why I spent so many hours worrying!

Just concentrate on sorting out your finances and enjoy your children. It will all work out.

wellandpower

I'll tell you before I start I am from HPC so you know, but not going to be nasty about it.

You played, you lost. That's it. Now you need to sort it out.


The main point here is do you want to continue with the gamble, or do you want to cut your losses? At what point would the loss turn into a posistion you could not recover from? 20K? 40K? 60K?

You are taking a 5K a year hit, which might be manageable at the moment with a few cut backs, but what if your flat dropped by 50%? I can show you examples of that where it has happened already.

If you think about it and decide you cannot take the risk, cust your losses however bad they might be, do not risk your entire family's future on an initial mistake.

Pobby

I am a house price bear and post here and on HPC. I have no real vested interest as I have my own home with £5 k to pay off (it`s the only credit line I have). I do feel very sorry for the OP but sadly this is the start of HPI part 2``The Horror Show``! My advice would be to get out as fast as you can. I understand your original plan and if you had done the same thing maybe 5 years ago it might have it might well of worked.

Right now I think speed is of the essence and any hit you take now might well be small compared to what may happen.

It`s a shame that people like cells come here and give HPC a really bad name. There are some very intelligent people who post there.

BLOO_LOO_2

just wondering if You went on an inside track course or anything else to truly learn about the BTL market

BLOO_LOO_2

ncooper1974 wrote: »

You're saying that anyone, not just the OP, can clear a BTL mortgage and still claim relief on the interest element as if the mortgage was still in place?

No, hes saying you can claim back the interest on some of the COST of the remortgage, as if the original were still in place. Remortgaging hasnt removed the NEED for the finance, and its this need that counts as a business cost.
If the lady just repaid the mortgage with cash then there is no interest to claim, even though you are losing interest on the cash.

BLOO_LOO_2

Cant rememebr his name Sir something or other, was on the telly some years ago advising struggling businesses, which is your position now.

One of his sayings, which will ring a bell with you was:

In business, sometimes you have to kill your favourite children.

In your case, you need to either 1 get more rent, or 2 suffer the loss, or 3 get out.

1 and 3 are diffcult from an emotional point of view and are therefore your favourite children.

If it was me and you are not in negative equity yet, then 3 is the sword I would wield.

BLOO_LOO_2

moneysavinmonkey wrote: »

You have been incredibly financially naive and I do feel sorry for you.

You have been unlucky in that your mortgage was with Northern Rock
and you are now on their SVR, but at the end of the day you decided to take an investment risk and have been caught out by the market.

Your property currently has just over a 4% yield. That is absolutely dia.
I think 10% is the minimum a serious investor would consider given that property is an illequid asset and with all the various costs + hassles of effectively letting. A bank account would get you 5-6%!

My advice...
Price the property for a quick sale, & bank any equity you manage to walk away with.
Pay the £5k+ a year you would have had to pay on keeping this property going into a high interest bank account for your kids.

By the time they finish university they will have a sizeable nest egg to help them with any uni debts and deposit on a first home. That's more than most kids get from the parents - and you don't want to spoil them by making it all to easier - they;'ve got to make their own way in life too! I knew people in uni who didn't really bother to apply themselves cause their parents had already bought them a house and they felt they were already pretty set up for life - is that what you want for your children?

It may seem it but I don't really think your situation is all that bad. You haven't missed any payments on your mortgage, your credit record is in tack and your not in negative equity. You just need to re-evaluate you plan for owning 3 houses and decide whether that is realistic or not. The upside of your problems is that house prices are now falling to more realistic prices meaning that you kids will probably be able to afford to buy their own homes - and isn't that what you wanted in the first place!

Hopefully from all this you have learned that whatever decision you make you need to do a lot more research and look at all the options carefully, with a bit more forward planning and risk assessment. Good luck.

How can she have a 4% YIELD if shes LOSING MONEY EVERY MONTH???

Thats like saying I planted a hectare of corn but in order to harvest I have to buy 4% of corn from the market.