Case study investment property in arrears but I have €55k in savings

D

day

Guest
Personal and income details

Net currently receiving jobseekers of €233 per week
I took redundancy in November 2012 as I was part-time and company couldn't offer me a full time position.

Net income spouse: €20,000 part time
Number of children: 3
Amount of child benefit received; 390

Home loan
Lender: NIB
Amount outstanding: 320,000
Value of home: 380,000
Interest rate: tracker .75 above ECB rate
Monthly repayment: €267 (interest only, capital & interest would be €1,580)
Amount in arrears: none

Have been on interest only since buying 2007, that was the banks condition on giving us a second mortgage.

Investment property -
Lender: NIB
Amount outstanding: 360,000
Value of property: 150,000
Interest rate: variable 4.950%
Monthly repayment: €1,000 (agreed repayment arrangement with bank since 2009, interest only would be €1,190, interest & capital inc arrears would be €2,300)
Amount in arrears : €10,000
Monthly rent received: €0, Tenant refusing to move out and not paying rent, I am pursuing this matter through the PRTB but it could take up to 6 months before she is evicted.

Other loans and creditors
Credit Card: €2,000
management company: €6,000

Other savings and investments

€55,000 from redundancy

How important is retaining the family home to you?
We really want to keep the family home, but not with a huge amount of debt attached to it.

Any other relevant information
I took redundancy in November 2012 with the plan of starting our own business as our combined salaries were not enough to sustain our family so we would not consider using any of that money towards the investment mortgage until the business was offering us a stable income. I am currently in the process of starting this business.

What is your preferred realistic outcome?
I doubt we will ever be in a position to repay the investment loan, but we would like to stay in the family home.
 
So you have 60K in positive equity in your family home. You have 55K savings in the bank. Yet you are 10k in arrears on your investment property. This is therefore a case of strategic "won't pay". It seems to me you want to have your cake and eat it.
 
As somebody who owns a second property and is update date on all payments to the bank + management company + revenue and also involved it the collection of monies for the up keep of a private estate - Owing 6,000 to the management company with 55,000 in the bank is a disgrace, why should the other residents who I presume all don’t have 55,000 in the bank, subsidise your property? Agree with goingforgold "won’t pay"
 
I don't have €55k in savings, that is a redundancy lump sum that I took to start a business, it would be very shortsighted to pay arrears with it and then have no job and no capital to start a business. I need a long term strategy
 
If your business is viable then go to the bank with a business plan and borrow the money to set it up.

Use a small amount of your redundancy to pay what you owe. Keep the rest as 'rainy day' money to cover emergencies and paying either mortgage for a period if required.
 
Thats a good idea but bank would not lend money to me as my credit rating is ng because of arrears which date back two years when for a period of six months we could not pay apartment mortgage as my husband had no work and my part time salary was barely enough to keep us going & apartment was vacant, we were trying to rent it out at the time.

My plan in taking redundnacy was to start to repay interest, capital and arrears monthly and to also start paying interest and capital on family home, but also to start a business to generate a decent income for our family.

I'm sick of kicking this can down the road and do want to deal with it but not at the longterm future of my family.

This tenant has thrown a spanner in those plans as she is refusing to move out, her rent allowance is stopped and she isnt paying her part of the rent. Im trying to get it sorted through the PRTB which could take 6 months.

The money from my redundancy is our only opportunity to turn things a round for us. I have to protect that at all costs.

I'm not looking for sympathy. We have already lost €100k real money in that apartment, nor am I interested in moral judgements. I have woken up with genuine money worries every day for the last four years and took a huge risk in taking redundancy and know that we are going to have to work our asses off to make a business successful but this is our only viable option for our family.
 
If not the bank then look at other methods of funding.

Advertise for a silent partner to put the money up, ask family and friends to form a consortium to invest in the business. If you really want to make it work you will come up with a way.

I am sorry that you constantly have money worries and I also agree that you have to you and your family first, no one else is going to.

However you have to appreciate there are many many people in a similar position to you who don't have a big lump sum and who have used any saving or the potential to save due to paying debts.
 
TRS30 said:
If your business is viable then go to the bank with a business plan and borrow the money to set it up.

Use a small amount of your redundancy to pay what you owe. Keep the rest as 'rainy day' money to cover emergencies and paying either mortgage for a period if required.
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Thats a good idea but bank would not lend money to me as my credit rating is ng because of arrears which date back two years when for a period of 6 months we could not pay apt mortgage as my husband had no work and my part time salary was barely enough to keep us going & apt was vacant, we were trying to rent it out at the time...my plan in taking redundnacy was to start to repay interest, capital and arrears monthly and to also start paying interest and capital on family home, but also to start a business to generate a decent income for our family.. I'm sick of kicking this can down the road and do want to deal with it but not at the longterm future of my family..this tenant has thrown a spanner in those plans as she is refusing to move out, her rent allowance is stopped and she isnt paying her part of the rent...Im trying to get it sorted through the PRTB which could take 6 months...the money from my redundancy is our only opportunity to turn things a round for us..I have to protect that at all costs, I'm not looking for sympathy..we have already lost 100k real money in that apt nor am I interested in moral judgements...I have woken up with genuine money worries every day for the last 4 years and took a huge risk in taking redundancy and know that we are going to have to work our asses off to make a business successful but this is our only viable option for our family..
 
Hi day

You came here looking for advice, and then you were abusive to people who gave you that advice. We deleted your abusive posts.

You made a speculative investment. It hasn't worked out for you. You must face the consequences. You can't just magic them away.

You have €55k in cash. You don't need any advice here. It's very clear. You are able to pay your debts as they fall due and you should do so.

How on earth can you justify withholding payment of the management charge on the apartment?

There are many people in huge financial difficulty who face losing their home. You are looking for some magic solution. It's not there.

If you continue to mess the banks around, you might well lose your home and your tracker mortgage.

You have enough money to clear all your arrears and you should do so. You may get a deal from the bank which allows you to sell the investment property. You should use what is left of your €55k to reduce the shortfall. They will then put any remaining shortfall on your home.

The way you are going, you are in danger of losing your tracker mortgage.
 
I must say that I have to agree with everyone here including the OP.

Its all very well sitting on the fence and shouting at the OP to use his 55K to pay down arrears and management charges. If he uses up all his money in this way , what will he do then ? 55K makes the waking up every morning that little bit easier and the wolf from the door for now !!

Personally I think the smart thing to do is to hold that 55K until his situation stabalises a bit. Starting up a new business in this climate is not at all EASY.

The 55K is a redundancy payment, a compensation for loss of employment.The money should be used in the same way as it would have been used, if it had come to him in a monthly pay check (for the support of his family)
 
Brendan Burgess said:
Hi day

You came here looking for advice, and then you were abusive to people who gave you that advice. We deleted your abusive posts.

You made a speculative investment. It hasn't worked out for you. You must face the consequences. You can't just magic them away.

You have €55k in cash. You don't need any advice here. It's very clear. You are able to pay your debts as they fall due and you should do so.

How on earth can you justify withholding payment of the management charge on the apartment?

There are many people in huge financial difficulty who face losing their home. You are looking for some magic solution. It's not there.

If you continue to mess the banks around, you might well lose your home and your tracker mortgage.

You have enough money to clear all your arrears and you should do so. You may get a deal from the bank which allows you to sell the investment property. You should use what is left of your €55k to reduce the shortfall. They will then put any remaining shortfall on your home.

The way you are going, you are in danger of losing your tracker mortgage.
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Hi Brendan,
You're correct, I did come looking for advice but all I got initially was moral judgement, not much use to me, I'm afraid. Sorry if you felt I was abusive, I don't think I was and now no one else will be able to decide as you deleted them...I appreciate your response to my situation but feel that its heavily influenced by your own personnel opinions and therefore not very good as opposed to being objective which is really what I'm looking for...I'm not going to be a fool and use redundancy money to pay off debt and then be left with no income, no capital to start a business and still in debt, to address your points.. I am in arrangement with management company paying 150e monthly as are 90% of apartment owners in this development. I am aware that there are lots of people in financial difficulty as I would see myself as one of them who is trying to get take control and turn things around "You have enough money to clear all your arrears and you should do so. You may get a deal from the bank which allows you to sell the investment property. You should use what is left of your €55k to reduce the shortfall. They will then put any remaining shortfall on your home." What then Brendan? I'm looking for good, independent & longterm financial advice...this is not it. you obviously have a problem with people who bought a second proerty when it seemed like a good idea and your advice is clouded by this...no doubt you'll delete this for being abusive!! it must be great to be king!
 
@day, it's fairly simple, you made a big mistake, a mistake that was probably bloody obvious the day you made it buying that second property. You should suffer the consequences of that mistake.

On the other hand, from your point of view I can totally see why you would want to, in fact need to, hang on to the 55k as much as possible to basically act as an income while you are out of work.

If life were fair however, at least half of that would be taken off you to repay some of what you owe and the other half you retain to try and support your family until you find work.

Part of the reason why many posters are annoyed here is because in Ireland there are usually very few consequences for well, anything, and you holding on to that 55k just echos that.
 
day said:
Hi Brendan,
You're correct, I did come looking for advice but all I got initially was moral judgement, not much use to me, I'm afraid. Sorry if you felt I was abusive, I don't think I was and now no one else will be able to decide as you deleted them...I appreciate your response to my situation but feel that its heavily influenced by your own personnel opinions and therefore not very good as opposed to being objective which is really what I'm looking for...I'm not going to be a fool and use redundancy money to pay off debt and then be left with no income, no capital to start a business and still in debt, to address your points.. I am in arrangement with management company paying 150e monthly as are 90% of apartment owners in this development. I am aware that there are lots of people in financial difficulty as I would see myself as one of them who is trying to get take control and turn things around "You have enough money to clear all your arrears and you should do so. You may get a deal from the bank which allows you to sell the investment property. You should use what is left of your €55k to reduce the shortfall. They will then put any remaining shortfall on your home." What then Brendan? I'm looking for good, independent & longterm financial advice...this is not it. you obviously have a problem with people who bought a second proerty when it seemed like a good idea and your advice is clouded by this...no doubt you'll delete this for being abusive!! it must be great to be king!
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OP I tried to offer you some non judgmental advice as I felt sorry for you. However the tone of your posts and especially your attitude had made me change my mind.

An internet forum will give you peoples own opinions and their advice, you must have realised this, if not then you are very naive.

If you want 'good, independent & longterm financial advice' then go to a qualified financial adviser and pay for it. You have the money.
 
Hi Day

You are getting good financial advice.

Pay your debts before you lose your tracker or your house.

Running a business requires a lot of skills - especially financial skills. It would seem from your post, that you don't really understand the basics of finance. I would be very worried that you will blow the €55,000 and have nothing to show for it. You will lose your home and regret that you did not take the "moral" advice you were offered.

Brendan
 
day said:
would it not be better to use my redundancy to start a business with a view to employing 2 or 3 people.
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Look even in good times about 9 out of 10 start up businesses fail, so there is a far greater chance that your 55K will be wiped out than you will ever employ two people for any serious length of time. And even if it is successful it's very unlikely that you will enjoy the benefits of it, while your creditors remain unpaid - you can bet they're going to take a large chunk of it.

I think you are just building up more trouble for yourself down the road by failing to address your current situation now. It is very likely that in 3 or 4 years time you'll find yourself in a situation where the 55K is blown, plus some more to booth, because that is what usually happens in start ups. More accumulated debt on the investment property and your house under threat as well...
 
Pay your management fees - its completely unfair to expect other owners to subsidise you. I manage to pay mine and I don't have 55k sitting pretty :( . I presume the owners are paying for block insurance, refuse disposal, common area maintenance, water supply (water tanks/pumps) Public Liability Insurance etc etc.
 
day said:
They are a lot of businesses out there that are successful and I believe that mine will be one of them.
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I've never met a startup that did not say that, but the reality is that you only see and hear about the 10% the survive and of those it usually takes several years before the are in a position to produce sustainable profits...
 
day said:
If you read a previous post, you would know that 90% of the owners including myself have an agreement with the management company to pay 150e per month, this arrangement has being in existence for 2 years and has another year to go.
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How will that pay off that arrears? Presuming(?) you are now paying your current fees, 150 euro a month will only pay off 1800 of the 6k.
 
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A very interesting and strange thread.

You are of course quite entitled to set up a business and I think anyone that has posted would wish you all the very best with it. Any start up, no matter how great the offering etc, is risky. There are no sure bets and you have to be prepared to loose all the money you put into it-and possibly more if you have to give guarantees for credit etc. Having already acknowledged that you made a mistake with the imvestment property, going full into this business with all your cash may not be the wisest thing either.
Ultimately, you will have to decide this yourself.

What I don't agree with is you thinking it's perfectly ok to ringfence a substantial amount of money away from creditors. I think it's unfair to think others will subsidise your start up. I don't think it's relevant that 90% of other owners have arrangements with the Mgt Co-most probably don't have the money you have in the bank. On that basis, you should not be getting an instalment plan. 150pm is not going to make much of a dent in the arrears. How cam your Mgt constay solvent with such a widespread debtor problem?

The tenant issue is awful-how much better would matters be if you were receiving rent?

I would agree with Brendan that you are getting good advice here. Needless to say, you won't agree with that view but if you do not value AAM as a open resource, where you will get different opinions, posting here expecting to hear only what you want to hear, is not really going to help you make an informed decision.

Alternatively there is paid for financial advice...
 
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