LandlordZONE

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Nov, 2014

Monday

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  1. #1

    Default Argh. Accidental landlord losing nerve: should I hold or sell?

    We bought a house after downsizing our residential property, and my partner's mother, who was ill at the time and needed to move, lived there until she died. We couldn't sell at that point and the market was rising still so it seemed wise to hold onto it.

    Then things crashed, and our various fixed residential rates ended. We were moved onto an extra per cent rate by our rental mortgage company, who stopped offering BTL mortgages at that point. They would not offer us any further discounts/remortgages. We are now paying 5.99%, property could probably sell at 140k, mortgage 95k. Part repayment, part IO.

    We let it out taking in approx 500 pm after agent's fees, which means we make a small loss every month, given insurances etc.. House is about 10 years old with low maintenance changes on a desirable family estate with a good primary school and we have a good long term tenant and a decent agent.

    On our residential mortgage we are now almost in negative equity - bought for 250k with repayment mortgage of 220k just 4 years ago and house now worth 225k: not sure what dent we've made into the balance but it is not much. Our mortgage rate on this is not very favourable either.

    We earn a decent joint salary of about 100k.

    The main problem is we're overextended (isn't everyone), with also about 20k of credit card debt. I just don't think, in the current climate, anyone is going to offer us a remortgage on either property with these figures. Or am I mistaken.

    We are stuck about whether to try hard to change the mortgages, whether to cut our losses and sell (we might just break even on the rental property overall, but I'm not sure how to work out how much, if any capital gains tax we'd be liable for - we have never made a profit - in fact considerable losses in the years we paid the mortgage with no rent - in any year we've had it and it has risen 23k above the original purchase price of 117k)

    ...or whether to do as we originally planned which was to hold onto it for 15-20 years whatever happened to the housing market, in the hope it would gradually creep up in value...

    Sorry to ask what is probably a really dim set of things to a professional landlord, but as you can tell, I'm not one...

  2. #2
    Join Date
    Jan 2010
    Location
    Central south coast
    Posts
    2,975

    Default

    You are almost answering your own question. Sounds like you were not cut out to be a LL.

    Lloyds are offering and cheaper BTL mortgage right now but if you want out you should sell and clear that massive CC debt. Am I the only person in the world who pays theirs off every month?

  3. #3
    Join Date
    Feb 2011
    Posts
    210

    Default

    Oddly enough I find dawn still breaks every day even with only a debit card...

  4. #4
    Join Date
    Aug 2010
    Location
    London
    Posts
    1,098

    Default

    Have you got your figures right?

    The situaton doesn't look that bad. Reads more like you need to sit down and do some proper financial accounting and planning. You've got £45k equity in one property (about 32%) and £5k in another.

    You don't say whether the mortgage values are those outstanding or just the value taken out.

    I don't see how you're going to make a loss on the £140k property if you sell. Any capital gains will only be on the profit made so if there's £10k profit then that's what you pay tax on.

    £20k on credit cards although a large sum is certainly manageable. Be a card tart and off load it onto a lower rate card. Moneysavingexpert . com has lots of clear and helpful information. The important thing is to not keep spending on them (see below).

    Given your combined income you should easily be able to 'afford' this situation. Sounds like you just need some basic home economics.
    There is always scope for misinterpretation.

    If my posts can be interpreted in two ways, one that makes you feel angry and one that doesn't, I meant the latter.

    Everyday is an opportunity to learn something new.

  5. #5
    Join Date
    Aug 2008
    Posts
    3,433

    Default

    The simplest way to cut debt is to cut up your credit card and sell one of your properties.

  6. #6
    Join Date
    Nov 2012
    Posts
    533

    Default

    You could always sell the lot, get a ticket to vegas and put it all on red or black. Ive heard worse ideas....

  7. #7

    Default

    You've got a really good joint income. Rein in the spending for a year or two -- go without the latest phone, tv etc... get the credit cards paid off and hang onto the properties for the long term.

    Our joint income is about £40k but we are holding onto a property where the rent is only just covering the mortgage (after fees but before tax and maintenance). We have a third property which brings in about £280 pcm after agency fees. Overall they just about cover each other really. If/when interest rates start rising then I may need to pay off the agencies and management them myself.

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