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Found 5 results

  1. It's no secret that leveraged property investment has been very lucrative in recent decades, but people have been made bankrupt as well, especially in 2008. I'm trying to get to grips with how people with larger portfolios sleep at night with lots of mortgage debt to their name. Let's say I have one Buy-To-Let worth £200k with £150k debt against it and it's held in an SPV with a 20% personal guarantee (PG). The most I can lose personally is 20% of debt, so £30k. This isn't too scary, unless I've spent all my money it probably won't bankrupt me and it's not an insurmountable amount of money to rebuild. Anyone hoping to grow big though is going to one day end up with much more debt than this, perhaps they will end up with 20 of the same property, worth a total of £4M with £3M debt and the same 20% PG. Now they are personally liable for up to £600k! That's a much scarier amount. I can think of a few ways investors might justify these risks and I'd be interested to get your thoughts. A) prices will never fall more than 25% and so negative equity will never occur, and if the property needs remortaging at this price (which won't be possible without putting new money in because of the new value) then it can be easily sold to cover the debt. B ) before prices get anywhere near dropping by 25%, the government will step in to support the housing market C) The investor has sufficient other assets to cover any insolvency in their property portfolio I get the impression that a lot of people are either not thinking about this risk or thinking of A and B. In my eyes at the moment, only C is really that safe. If the properties are held personally or with a larger PG, then much more is at risk. As an investor grows their portfolio, they might be under the impression that they are unstoppable, but if they keep up a mortgage LTV of 75% across their portfolio, they are no more safe against bankruptcy than someone with a single property, and in fact have more to lose. Please let me know what you think, do you have a way to mitigate against these risks? Am I missing something? Thanks
  2. While it seems common place to refinance properties owned in an SPV and use the proceeds to fund the deposit on further properties, what options are there to access that equity if one doesn't want to grow there property portfolio any further..? Since equity released by refinancing is not a profit, I imagine it is therefore impossible to extract the equity through dividends - one would instead have to sell a property and record a profit?? This seems like a significant drawback to me compared to owning property in my own name, considering that I don't intend to just forever buy more and more property... (but might want to buy enough to otherwise make an SPV worthwhile..) Looking forward to hearing what people have to say on this. Thanks in advance!
  3. I have an interesting situation. I had a tenant who wanted to be released from their tenancy early, which I agreed to. I put the house on the market with the tenant’s consent and obtained an offer back in March 2018. When it came to exchange, the tenant refused to move out. I issued a S21 on my agent’s advice, but had to re-issue as I learned that the two months notice period must expire an a date after the end of the fixed term tenancy. This delay resulted in the loss of the sale. Due to Brexit and market pressure, it has fallen in value and I can no longer sell. Eventually the S21 notice expired in July. At that point, the tenant stopped paying rent, and asked to be paid the deposit early, so that they could move out. i took them to court, obtained a possession order in August, and a CCJ for a portion of the costs. They still didn’t move out, so I had to get bailiffs (another 8 weeks delay and more costs). The tenant left in November on the day that the bailiffs showed up (tenant wasn’t there), but didn’t return the keys. At this point they owed £4K rent, plus costs for property damage, locks, legal, bailiffs, etc. Bear in mind that this was a tenant who passed reference checks, had a full time job when starting the tenancy, and was being managed by a reputable letting agent. In January I managed to get the ex-tenant’s new address, in emergency accommodation (provided rent free) provided by the council. I tried to agree a repayment plan and whilst they said that they could pay £100 a month, they never made any payments, so I started a small claims court claim. They disputed all costs other than the rent arrears, and to make it easier and to expedite payment, I agreed to their response, thereby halving the debt. They still didn’t make any offer of repayment when they responded to the court papers, so I have made a request to the court that they pay £200 per month. Now they says they have no money to pay anything (despite having no rent to pay to anyone). Their council tax is up to date, as are their other bills (they had to provide financial details to the court), yet they say that they are going deeper into debt each month and have no savings. They have now told me that they’re planning to have the debt written off, using a debt relief order. They were supposed to return to work full time in July, but has no incentive to do so as it will only serve to increase their earnings, making them more able to repay the debt. So as far as I can tell, there is no point in chasing for what they owe, as even if I get an Attachment of Earnings Order or a bailiff, this is overturned by a DRO. I am wondering if anyone has any experience of Debt Relief Orders? It seems like they allow people to write off £20000 of debt owed within a year, not paying their creditors a penny, and the only impact on credit history is the equivalent of a CCJ which they already have. If this is truly the case, I wonder how anyone is able to get a person in arrears to repay a debt. Thanks for your advice.
  4. Hi, I am currently stuck in a consent to let nightmare and I was hoping I could get some help or advice. Any help would be greatly appreciated. The issues I have span a long list, but I have summarized most of the issues. In 2007 I bought a 1 bedroom apartment (new build/off plan) in Sheffield City Center for £106k (100% mortgage), myself and my wife lived there until 2010. In 2010 we bought a 3 bedroom house together. Because I was in a fixed mortgage for the apartment, I couldn't move to a different lender. So after failed attempts to sell the apartment, I decided to rent out the apartment. But because my mortgage lender (Norwich and Peterborough) changed their products, there was not an option for a buy to let mortgage with them so it had to be a consent to let. The mortgage for the apartment was roughly £600 per month (residential mortgage and also when it moved to a CTL). So the apartment was rented out under a CTL. The general rental income in for the apartment was £500 - £550 per month. So there was a short fall of £100 - £50 per month. I also had to pay ground rent and service charges (£100 per month), along with landlords insurance and cover any damages (£50 per month). So a worst case scenario was £500 rent + £100 short fall + £100 service charge + £50 insurance. £750 outgoings per month, with £500 rent, leaves a short fall/lose per month of £250 (which was not ideal). When the fixed rate mortgage expired I attempted to move to a buy to let with a new lender. The Zoopla valuations and near by valuations (from estate agents) put the property at £100k+ (Zoopla showed £120k+). My mortgage at this time was at £95k so I did have 75% LTV. So I paid for a broker and a required valuation on the property, which came back as £85k, which was way lower than everyone's estimates. So I could not move lenders and had to pay the broker fees. I continued to rent out the apartment, and continued to make the monthly loses. In 2017 I decided to try and sell the apartment again. In June/July 2017 I got a buyer, for £95k (the apartment was on the market for £95k - £100k, £95k which was the lowest I could go). This was great, but 3 days before the apartment was handed over the buyers solicitor discovered that the building didn't have a completion certificate. This totally took me by surprise and was my understanding that this should have been sorted when the building was completed back in 2007. There were 5 issues that caused the completion certificate not to be issues, 2 involved fire safety. From this point (July 2017) on wards has been a battle to try and get these issues sorted by the builders the land owners and Sheffield's building control. I have spoken to (many) solicitors about this, but to take either my original solicitor or the builders to court would cost thousands. So I am currently waiting (on a waiting list) for the legal/financial Ombudsmen to look at this as my original solicitor from 2007 when I bought the apartment should have noted this and not gone ahead with the mortgage. When I found out about these issues, the apartment didn't have any tenants (in a void period). I finally managed to get the builders to look at these issues. During this whole time myself and my wife had to pay for some private health care, which ramped up to £20k. The original plan was to take out equity on our residential mortgage (we had £45k equity) to pay off this health care bill. We approached our bank/lender and I was told that releasing equity wasn't possible. The option available would be to buy a new property, and use any money made to pay off the health care debt (which was a bank loan). Then get a new mortgage for the newly purchased residential. We found a new residential property and had a mortgage in principle completed (with the plan to pay £20K off the loan). We went to the bank 3 months after the mortgage in principle was done. So we could check everything (before we sold our current residential). The mortgage on the new residential was declined. The basic outgoings (affordability check) caused an issue. Our residential mortgage was £370 per month, the loan was £260 per month, but because the apartment which was being rented out was classed as a consent to let, the rental income could not be considered. So that added an additional £600 to the outgoings. In total (as a base number) is £1230 per month. Our other option was to stay in our current residential house, and just attempt to take out £20k from the equity, which would then be added to the apartment/consent to let mortgage which would take the LTV down, so I could move it over to a new lender on an interest only mortgage. A new buy to let mortgage would mean that I could pay the apartment's mortgage and also the loan payments (the rental income from the apartment would cover our outgoings i.e. the loan and buy to let monthly payments). But this was declined. So the current situation I'm in is that I'm waiting for Sheffield Council building control to fix/check the issues regarding the completion certificate (the completion certificate still needs to be issued as 4 of the 5 issues have been done, the fire safety issues were the first to be rectified). I am stuck with my consent to let mortgage for my apartment because I cannot release any equity from my residential mortgage as the outgoings are too high (rent isn't taken into consideration with a consent to let) and I cannot sell the property because the completion certificate isn't in place. I have spoken to many estate agents in the area and 1 apartment in the same building apparently sold a while ago. The buyer bought that apartment with cash. But If I were to sell (once the certificate is issued), the value of the apartments have dropped below market value (around £85k) which is too low for me to cover as my mortgage is £88k. So if you have manged to read through all of this (which has been edited/cut down quite a lot), you can see it is a living nightmare. If there is any help of advice anyone can give, I would really appreciate it. Thanks.
  5. Hi everyone!! I have recently started working at a property/investment/finance company and am eager to share my knowledge on the these topics, join conversations and learn some new stuff from other members!! Hope to contribute a bit more across the forum in the future :-)
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