equity nose dive

D

dilemma man

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Hi all,
like alot of others I'm becoming very concerned about a buy to let I have since 2006.its on interest only of 300K for the whole term less the last three years when it returns to an annuity mortage, its at a sdv rate of 4.7% and rising. Interests only repayments are 1250 with incoming rent of 1050 and the tenants are looking for another reduction which I'm not willing to give. Im subbing it already and reckon the extra payments for the next 12 months and maintaneance are around 5K a year and thats with tenants. If I consider holding onto it for another 10 years , thats 50K on what could then be worth 220k.It's probably worth about 270K and dropping. Do I cut and run by borrowing the negative equity amount before it gets too far down the road ( is it even possible) or do I have a jem of an investment and just need to sit tight and wait for the recovery?

Dilemma man
 
Only you can know if you have got a gem or not. Why did you buy this particular property? Did you just jump on the buy-to-let bandwagon or did you do your research and chose the property carefully, because of it's location, yield, potential, whatever?

Generally my advice would be - if you have made a bad investment decision, cut your losses. If the decision was good but the timing was bad and you can afford to ride out the storm, keep it.

You are lucky that your mortgage is on interest only for a long time, unlike a lot of posters here, so you are not in as much trouble as if you suddenly had to come up with capital repayments as well as interest.
 
Thanks Greta,
its a nice 4 bed semi in a decent area and like alot of others I pulled the equity out of it and moved up. I suppose I'm just trying to get a handle on the long term. Losing out now and taking on a substantial personal loan and being rid of it or keep subbing it and hoping at some stage the property prices will start rising again.. It's the NOT KNOWING that is keeping me awake wondering am I just throwing good after bad. On a brighter note all booms and bust seem to be cycical which would imply that it will improve, but when?
 
Wouldn't we all want to KNOW?:) But if we all knew, then there wouldn't be any profit for those who are willing to accept risks:)

I'd say if you are well able to subsidise your rental property and ride out the bad times and it's a nice house in a nice area, keep it. Something will improve eventually - either the house prices or the rents. Maybe not in the short term, but 10-15 years is a long time, things change a lot.

If this used to be your PPR and you moved up to a better house, would you be able to move back in and rent out your current house if things got very tough? I am not saying you should to this now, but if you can, it's providing you with that bit of extra safety net and peace of mind.

Try to build up a decent emergency fund, to make sure you can take care of any unexpected expenses.
 
I appreciate your postivity and good sense Greta, yes alot will happen in the next 10/15 years. Moving back into this original house just isn't an option, the mortgage is about the same but on .85 above the ecb rate which I would surely lose. Maybe I'm thinking too much about it all but may consider talking to a financial person for extra insight in terms of morgages , other investments and so on. My exposure for my family just easn't sitting well with me but your helpful insights and positivity has helped alot.
 
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