# please help!



## pleasehelpme (13 Jul 2007)

last year i released the equity that was tied up in my home to give me money to help invest on a new development. we bought two beautiful houses off plans witch we were going to rent out. the houses are finished and were trying to rent them but the leting agent says well only get 1000 a month witch will come no where our mortage payment. were trying to sell and the idiot ea wants to sell the house for less than we paid. im thinking maybe we should sell it ourselfs to get the real value of it? is this easy?

im sick with worry and just want to get out of this and make my money back. please help me. if you want to buy the lovelyest new house in cork im selling it!


----------



## ClubMan (13 Jul 2007)

> *please help!*



Also...



Moved from Mortgages and Buying and Selling Homes since this is effectively a _Property Investment _query.

And


> if you want to buy the lovelyest new house in cork im selling it!


----------



## CCOVICH (13 Jul 2007)

The real value is only what a willing buyer will pay for the propery-no matter how beautiful they are, or what you paid for them.

Plase also note that this is not MyHome or Daft-if you want to sell your property online please do it elsewhere.


----------



## ClubMan (13 Jul 2007)

You remortgaged your _PPR _to speculatively buy two rental properties that are now not viable and *you *are calling the _EA _an idiot?


----------



## pleasehelpme (13 Jul 2007)

i jsut want some help to get me out of this situation, anything, please.


----------



## ClubMan (13 Jul 2007)

pleasehelpme said:


> i jsut want some help to get me out of this situation, anything, please.


Check what rent the market will actually pay - maybe it's more or less than what the _EA _has estimated. Consider what sort of capital appreciation you might stand to gain in fugure years (difficult to predict I would imagine). If necessary cut some or all of your losses by selling one or other of the properties. Get independent, professional advice on the tax and investment aspects of your situation. The _EA _is not the person to be asking for advice on what is the most appropriate course of action for your specific circumstances.

What was your "business plan" and motivation for getting into this venture? It sounds like you never really thought it through to assess the viability and risks.


----------



## MrKeane (13 Jul 2007)

Its called negative equity, deal with it.


----------



## z106 (13 Jul 2007)

MrKeane said:


> Its called negative equity, deal with it.


 
You'll hardly win the prize for Mr. Compassionate there !!

ANyway - to the Original poster - when you say he rent won't pay the mortgage.
Is this an interest-only mortgage you are referring to?
Or is it capital repayments as well ?

If it's capital repaymenst then you may think about going for interest only to relieve pressure for a while.


----------



## ClubMan (13 Jul 2007)

Good point.

Interest only mortgage

Are you (the original poster) aware of the tax and other issues relating to being a landlord?

Property Investment FAQ

Remember that you cannot claim owner occupier mortgage interest relief on the mortgage topup secured on your home to buy the investment properties but you can set interest on this against rental income.


----------



## pleasehelpme (13 Jul 2007)

our mortage only  had €60k left on our €800k valued house so using this to invest was a no brainer. 

the developer is selling the same houses for €345k, thats the price the price we want but the ea said to sell for €330k. we cant afford to sell for this as we have already lost €40k on the stamp duty.

we need to get out now because we cannot afford the mortage because of rising rates


----------



## ClubMan (13 Jul 2007)

pleasehelpme said:


> using this to invest was a no brainer.





> we need to get out now because we cannot afford the mortage because of rising rates


 Not a no brainer after all so? 


> the developer is selling the same houses for €345k, thats the price the price we want but the ea said to sell for €330k. we cant afford to sell for this as we have already lost €40k on the stamp duty.


 Your house will be less attractive to non _FTBs _since they can buy from the developer with no _SD _but will have to pay it in yours since it is no longer new. _FTBs _are unaffected but may be happier to buy brand new since they can then get the developer to deal with snags etc. Either way this potential reduction in the pool of demand for your property may negatively impact the potential resale value.


----------



## pleasehelpme (13 Jul 2007)

why would they pay stamp? its a new build?


----------



## z106 (13 Jul 2007)

If you have completed on teh sale it is now not new though.


----------



## ClubMan (13 Jul 2007)

Surely not since you bought from the developer already and it already "pre-owned"?

_Post crossed with qwertyuiop's._


----------



## Purple (13 Jul 2007)

While this is a difficult situation you have no one to blame but yourself. You speculated without doing your homework and used your home as collateral. That wasn’t very clever.

No one here can tell you what to do and in order to know yourself you need to be clear about the situation you are in. Talk to an accountant or even your bank but remember that you cannot control the market. If you do choose to sell then take the first reasonable offer, don't faff about looking for another 5k, it's bugger all in the scheme of things.

The whole thing will cost you about 80-100K to walk away from. That's about €500 per month on a long-term mortgage. Will the shortfall in rent be more or less? Factor in another 1% interest rate rise and do the maths again on the last question. Then factor in another 1% and repeat.


----------



## ClubMan (13 Jul 2007)

pleasehelpme said:


> our mortage only  had €60k left on our €800k valued house so using this to invest was a no brainer.


How much did you home originally cost and what was the mortgage on it?


----------



## robd (13 Jul 2007)

pleasehelpme said:


> last year i released the equity that was tied up in my home to give me money to help invest on a new development. we bought two beautiful houses off plans witch we were going to rent out. the houses are finished and were trying to rent them but the leting agent says well only get 1000 a month witch will come no where our mortage payment. were trying to sell and the idiot ea wants to sell the house for less than we paid. im thinking maybe we should sell it ourselfs to get the real value of it? is this easy?
> 
> im sick with worry and just want to get out of this and make my money back. please help me. if you want to buy the lovelyest new house in cork im selling it!



Basically you made a bad investment decision.

The EA is not an idiot.  So many posters say this when the EA doesn't agree with them or can't find a buyer at what they think there place is worth.  He has given you what he believes to be the open market price that your house will get.  It's unfortunate that this is below what you paid but that's the way it is.  Investments carry a risk.  He/She is better placed to know what price the house will get than you.

Going by what you said in a later post, if you sell both houses at a loss then you will have a mortgage of about (60k + 40k + (15k X 2)) €130k.  This is a pretty small mortgage which you should be able to cover so it's not the end of the world.

Investments mistakes cost money.  I don't see how you can make your money back in the short term.  I also don't see why you should make your money back.  Unfortunately, you have to pay for this mistake yourself.

New developments attact a developers premium so they can generally attact more than a second hand house.  As house prices have stagnated over the last year what you have lost is that premium.  Also as already mentioned there's the stamp duty consideration for a non FTB.

Your choice is rent the places and cover the difference between the rent and the mortgages or sell the places and pay the extra mortgage to cover your capital losses.  You have to run the figures (with an independent financial advisor) and work out which works best for you.  By the sounds of the situation you got yourself into you really really should get independent financial advice.


----------



## lorna (13 Jul 2007)

unfortunately, you will have lots of other investors joining you in the same situation in ireland.
obviously you did no homework at all before you bought these properties but again you wont be on your own.
maybe sell your home place and move into one of the investment properties and take whatever rent you can get for the other one.


----------



## steelblue (13 Jul 2007)

Hi

From the details i have assumed that you have debts of 790k (345 x2 + 40 stamp + 60 original mortage)

Interest only on 790k is 3.5K per month.
Rental income is 2k per month (assuming the 1000 is per house)
Short fall 1.5k (Not taking into account the operational cost of letting 2 houses)

Can you manage this . A loss is only a loss when you dispose of the asset. If you dispose of the assets now you will lose at least 70k. 

If i was in your position i would try to hold out for a year or two.


----------



## money man (13 Jul 2007)

Very little you can do now to help the situation...as they say no point in shutting the gate when the horse has bolted. But if i was in your situation i would sell one (whichever you can get more for for) then rent the other to as good a tenant as possible(this is where you need to be very careful and do some legwork unlike day one when you bought!) Hold onto the second property for 10-15 years and manage it as closely as possible. This way goes some way to solving the short term cashflow issues and still allows you a chance to make your money back.....dont worry it seems  the only safe place for your money in ireland is a high interest deposit account at the moment after i lost a chunk of an investment today ..apparently due to the rain!!! im sure you can guess what share it was!!...But if you are in for the long haul you will be ok....Inflation is running at almost 5% so even suggesting to people to put money in the bank seems crazy these days!!!! looks like were in for that bumpy ride they are all talking about...


----------



## Superman (13 Jul 2007)

money man said:


> Inflation is running at almost 5% ...


But only about 2.8% when mortgage interest payments are removed from the inflation calculation.


----------



## pleasehelpme (13 Jul 2007)

i know we made a very silly mistake but at the time everyone wanted to buy. neither my husband or me have a pension and we taught we could invest in property to safe gaurd or families future.

so please,i know we screwed up, i dont need to hear that anymore.

i will definately look at going interest only to help with the repayments. we have another ea who has just given us a valuation close to what we bought for. so were putting it on the market. weve lost our 40k on the stamp so hopefully thats all we lose


----------



## ClubMan (13 Jul 2007)

The _EA _valuations are largely irrelevant and there is no point calling an _EA_ who gives a valuation below what you hope to sell it for an "idiot". The second _EA _could just be over optimistic and want to please you with his/her valuation. Who knows? Time will tell. What matters is what a buyer is prepared to pay for it. As I pointed out earlier the fact that these properties are now effectively pre-owned may negatively impact the value which a buyer will put on them (e.g. a non _FTB_ because they will have to pay _SD _and a _FTB _or investor because they might prefer to buy brand spanking new directly from the developer). You seem to have decided to try to sell one one (or both?) of the properties so I take it that there's not much else that anybody here can offer by way of advice? All I would say is that you should learn something from this episode and make sure to make much better informed investment decisions in the future - with the help of professional assistance if necessary (and I reckon it is!).


----------



## Madeline (13 Jul 2007)

Intrest only will drastically reduce your repayment.  300k mortgage would be about 500 less a month. Also reduces your tax liability.
Bear in mind too that if you rent the properties yourself without an agent you will be saving that fee too every month.
All might not be lost.


----------



## robd (13 Jul 2007)

Madeline said:


> Intrest only will drastically reduce your repayment.  300k mortgage would be about 500 less a month. Also reduces your tax liability.
> Bear in mind too that if you rent the properties yourself without an agent you will be saving that fee too every month.
> All might not be lost.



And drastically increase the risk of her losing even more if the price of these properties drops in value.

It doesn't reduce her tax liability at all.  She borrowed 100% to buy these places, based on releasing equity from her residence and getting mortages for the rest on the 2 places.  The interest component of her mortgatges is circa €1670 (at 5.2%) per month (based on borrowings of €365k + €20k stamp per property).  She'd only be getting €1000 per month rent which is no where near the cost of interest.  On a repayment mortgage it would be years before this situation changes.

The constant advice from a few posters on AAM that interest only will fix everything is really really bad to the extreme.  Interest only is only suitable for professional investors and only when Loan to Value ratios are suitably low to mitigate the risk.  It can get people out of a hole for a small period of time such as if they are trying to sell or tempoarily out of work.

All is lost I'm afraid.  What the OP needs is reality in the replies that will encourage her to seek professional financial advice and try to resolve the  bad financial position she has got hereself into as quick and efficiently as possible.


----------



## Howitzer (13 Jul 2007)

Madeline said:


> Intrest only will drastically reduce your repayment. 300k mortgage would be about 500 less a month. Also reduces your tax liability.
> Bear in mind too that if you rent the properties yourself without an agent you will be saving that fee too every month.
> All might not be lost.


 
You need to crank up the oul calculator there Madeline. 5% of 300K is 15K. You must have made your calculations in November 2005, assumed the OP was getting the ECB rate of 2%, and then rounded down to the nearest 500.


----------



## Hedger (13 Jul 2007)

Howitzer said:


> You need to crank up the oul calculator there Madeline. 5% of 300K is 15K. You must have made your calculations in November 2005, and then rounded down to the nearest 500.


 

500 "less" a month. Not 500 a month.


----------



## ClubMan (13 Jul 2007)

robd said:


> The constant advice from a few posters on AAM that interest only will fix everything is really really bad to the extreme.


This is totally unfair and not true as far as I can see. I don't think that anybody here or habitually elsewhere claims that this is a panacea as you suggest. It was mentioned earlier as *one thing *to check out. And references to it elsewhere are usually general and qualified with the usual caveats about getting professional advice etc.


----------



## ClubMan (13 Jul 2007)

Hedger said:


> 500 "less" a month. Not 500 a month.


Second time today that _Howitzer _in this thread has had a go at somebody without actually reading in detail what they *actually *posted. Only this time he didn't get back in quick enough to delete his misplaced comments as he did when he mistakenly criticised something that he thought that I had posted because he didn't read my post properly.


----------



## Howitzer (13 Jul 2007)

Aye, I'm not on the ball atall today. Apologies all round.


----------



## dontaskme (14 Jul 2007)

pleasehelpme said:


> the houses are finished and were trying to rent them but the leting agent says well only get 1000 a month witch will come no where our mortage payment.


 
1000 a month seems a bit low - your bogstandard 3 bedroom out in the sticks is 1000+ a month and if you are near Cork city you should be getting more.


----------



## Kendr (14 Jul 2007)

You're obviously new to this and a bit of panic has clearly set in. Ok, first relax a little. There are positives to think of:

1. Estate agent believes houses can be rented out. At €1k a month each? Doesn't fully cover mortgage, but better than paying entire mortgage yourself.

2. Despite critics, interest only is a perfect solution to short term cash flow problems. But get to work on it now, banks can be very slow changing loans.

3. Don't get emotional about investments or think you've made a mistake. You haven't. You have invested in two houses. This is a business - think of it as trading your way through a difficult period. The investment may not be performing now, but it may in the future.

4. You can get out and take a loss. They may sell for less but at least they will sell.

5. Hold your nerve, address the amount you personally pay each month. Forget about the value of this and that and the amount of rent you desire.  Instead ask, how much will it personally cost you each month and how can this be reduced? That's real money - everything else is just notional.

6. If there are tenants out there willing to pay €1k or more - get them in a soon as possible. Then take it from there. And yes, do it yourself, forget about agents.


----------



## pleasehelpme (14 Jul 2007)

thank you kendr, thats very well taught out advice.

interest only looks like its the best option to help me reduce payments, we called the bank and they have agreed in principle we can go interest only for 5 years. if we can get 1100 a month rent then we can just about break even and hold out for when the market improves.

we talked to a friend and she says this long term option would be the best way to go and we would be foolish to bail out on our investment so soon.


----------



## SidTheDweeb (14 Jul 2007)

pleasehelpme said:


> we talked to a friend and she says this long term option would be the best way to go and we would be foolish to bail out on our investment so soon.



Ah right, she's a psychic.
Use your own head, do some research, and make an informed decision yourself. Many property discussions on 
[broken link removed]
[broken link removed]
and of course daft.ie have discussion forums too...


----------



## Maine (17 Jul 2007)

pleasehelpme said:


> thank you kendr, thats very well taught out advice.
> 
> interest only looks like its the best option to help me reduce payments, we called the bank and they have agreed in principle we can go interest only for 5 years. if we can get 1100 a month rent then we can just about break even and hold out for when the market improves.
> 
> we talked to a friend and she says this long term option would be the best way to go and we would be foolish to bail out on our investment so soon.


 
Would sell one property and keep the other. This removes almost all of the risk.......that is you could carry one house through void periods etc.

Carrying both is rolling the dice........ Another way of putting this is that right now a bank may have difficulty in giving you a further loan of say €20k. 

It is amazing that a bank would give you 800k of loans to play the property market when clearly it was inappropriate yet I guess if you had asked them for 50k for a new business venture they would still be looking at it. 

They should have stress tested you etc. ......I am not familar if they have liability here. Certainly a judge would be looking at them sceptically when they tried to explain why they gave you 800k to gamble. 

One other solution would be to sell your own home...€800k means it has a implied cost at 4.5% of €35k a year. You could then move into one of the houses - implied cost 400k at 4.5% = 18k - this is a saving of €17k


----------



## Purple (17 Jul 2007)

pleasehelpme said:


> interest only looks like its the best option to help me reduce payments, we called the bank and they have agreed in principle we can go interest only for 5 years. if we can get 1100 a month rent then we can just about break even and hold out for when the market improves.


 The market may not improve for 10 years. Can you afford to take that risk?
I think Maine’s advice is good advice and you should sell one to reduce your risk. Don’t bury your head in the sand and hope things work themselves out. You cannot afford to be passive here, not when you have no pension. 
Five years at interest only is a long time, ask yourself if you will be better off after paying interest for five years without any capital appreciation and no increase in rents. I’m not saying that will happen but it’s as likely as any other scenario.
You should also take into account that you will have periods when your properties are not rented (work on the basis of ten months rent a years) and that in five years you will have to refurbish both properties (you should paint every two years, at least). Assume that this will cost €5’000 per property. Take all this into account and see if the rent pays the mortgage, and all other costs, at interest only. For the purposes of your calculations do not assume any capital appreciation for at least 5 years.
When you have all that done ask your financial advisor to work out what a pension will be worth if you put the same resources into it up to retirement age.




pleasehelpme said:


> we talked to a friend and she says this long term option would be the best way to go and we would be foolish to bail out on our investment so soon.


 The exit costs are high but don’t take any friends advice. Go and see an independent professional advisor. Only with all your private financial details can a proper assessment be made.


----------



## smarthinking (17 Jul 2007)

*Toughest thing is to learn your lesson ...*

After winning some and losing (a lot) I realize that you have to have the nerve to make a tough call.  If it were me, I would definitely sell one house, and rent out the other.  Holding on to both indicates that you cannot make the decision to take a finantial hit.  Don't let your ego get in the way.  Take a hit, sell one, live easier.


----------



## Steve D (18 Jul 2007)

You have to bear in mind that it is a tough world out there and sometimes you have take tough decisions. There are no definate one-way bet investments, if there were we would all be millionairres!

Everything that you invest in carries a certain degree of risk and if you feel that the investment is no longer viable you have to be prepared to cut your losses and walk away from it. Professional investors in stock markets are always prepared to sell and cut their losses if they realise that they have made a mistake.

Anyone who thought that remortgaging their PPR to invest (instead of "invest" read "gamble") €750,000 in the property market (or any other market!) was a "no brainer" certainly needs their head examined! To me it sounds like that you have bought into the investment property market at the wrong time (the top of the cycle) and that you have paid too much for them. 

If the property prices continue to fall you could end up loosing a lot more than you already have done. It is entirely your decision. I think you need some professional financial help and I suggest that you see an independent financial advisor or an accountant.


----------

