Bulgaria Extreme Exit Strategy

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lyonsie99

Guest
I am sure everyone is aware of the head aches associated with purchase of a Bulgarian property especially on the black sea coast. My situation is probably worse than most, therefore no need for "I told you so"s. Currently I am renting my apt in St Vlas and think I will end up making 2000 euros for the season (before tax). This might cover the management fees for the year and maybe a month or two of rent. My mortgage re-payments are about 560 pm and I have another loan (to make up the other 30% after mortgage) which is costing 500.
As the re-sale market appears sluggish at best my options are few. Even if I achieved a re-sale I am not convinced that it would cover the outstanding mortgage. Basically I am looking for an exit strategy??? What would be implications if I defaulted on the mortgage? It is with a Greek bank, with a branch in the UK! Would this effect my credit history here? Any advise would be appreciated!!!
 
What are the headaches, other than the rent won't cover the mortgage? Is it frontline on the beach, or is it in a beach town, or is it inland a little ways? Have you tried renting it out long term, as opposed to short term lets to vacationers? Have you tried another rental agent?

How much are you asking? How much do you owe? How much are similiar properties going for? How much did you pay?

Please e-mail me privately. Thanks.
 
He's shelling out 12,720 euros per year on loan repayments, plus council tax, plus utilities, plus service charges and getting virtually nothing back in rental on a property that certainly won't be appreciating in value, more likely decreasing and you ask, "What are the headaches ?." !!!!!!!
 
Sounds like you have got yourself into a fine mess!

The way i see it you have two options. Sell it at a loss, ie. advertise as a distressed seller needing to get out asap that might attract a buyer or two

but that would really come down to the value of the property. If then there is only a 5K balance on the mortgage to pay off after it then renegotiate the repayments over time so its not hurting you so much and your credit rating will be fine for the future. That might not work so well if your balance is 30K or 50K, as that might be too much to pay off to protect a credit rating.

Ask yourself how important your credit rating is to you for the future? that will help you decide if you want to take the option 2 that you already mentioned.
I would hazard a guess you wont be making too many ventures into overseas real estate again if you missed the mark by so much this time....especially if you have a nagging wife!:D
 
this is what happens when people are attrackted to 'nice' places for nothing, it is fine to buy property in parts like Bulgaria IF you have very reliable company to cover your ass.And if you want to live there yourself.
But if you want to invest! And keep paying nothing in taxes pay nothing in bills etc.and get only rent coming in to get that extra finances you need. Check for the right country with experienced proffesional ho will be looking after your property while youre away and only thing you will need to do is make one or two calls to get info if your apartment is not blowed up and how are the things with rent.

I would suggest countrys such as Poland , Latvia , Lithuania.
Property is cheap and rent is almost as high as in Ireland. Only problem there are too many rogue compansy same as in Spain or Bulgary. Very few will do what you want,not what they want.



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Try to contact your agency to rent your property on long terms , agency will take something like 10-15% but your property should get back to you in 5-7 years if its in nice place which attrackts tourists.
Or try to sell it just to cover your expences and invest in proper country.
 
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If you defaulted on the mortgage the bank would repossess the property and try to sell it quickly (probably at an auction). If the sales price does not cover the mortgage the bank is likely to try to recover the difference from you through the courts. However, I am not sure how easy this would be because there are a number of jurisdictions involved.
 
I would have hoped that as soon as they would repossess, then any obligations
to the Greek bank would be gone. I am not sure that going through lengthy process would be the exit I am looking for here. The original purchase price was €100,000 with the mortgage being €70,000. After speaking with a number of people, selling in the area, I am more confident of making at least the €70,000 sale. For a front line beach property in this area, even in the current market, it would still represent good value. At this point of sale I would still be looking at a €30,000 loss!!!
 
lyonsie99 said:
I would have hoped that as soon as they would repossess, then any obligations to the Greek bank would be gone.
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No, if the sale price is less than the outstanding amount owed on the mortgage, they can chase you for the remainder.

lyonsie99 said:
The original purchase price was €100,000 with the mortgage being €70,000. After speaking with a number of people, selling in the area, I am more confident of making at least the €70,000 sale.
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So if you sell it for €70,000, you clear the mortgage. So the bank will be happy.

lyonsie99 said:
At this point of sale I would still be looking at a €30,000 loss!!!
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You say
I have another loan (to make up the other 30% after mortgage) which is costing 500.
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Is that loan with the same bank?

I assume that's an unsecured loan. So it doesn't really matter if the house is sold, repossessed or whatever. You'll still owe that €30,000 and the bank is entitled to chase it, and most likely will. If it's an EU bank, then it shouldn't be too hard to chase it across jurisdictions
 
lyonsie99 said:
What would be implications if I defaulted on the mortgage? It is with a Greek bank, with a branch in the UK! Would this effect my credit history here? Any advise would be appreciated!!!
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So to return to your original question. I'm assuming the mortgage is not interest only, so you've paid back some capital. Let's assume the balance due is now €68,000. You also have a €30,000 (personal?) loan out with some (other?) bank. Let's just call this bank CU, and assume again the balance now due is €28,000

So you default on the mortgage. The Greek bank reposseses the apartment. This takes time for legal reasons, and the interest on the mortgage is clocking up all the time. So lets say this adds €2,000 to the mortgage (bringing you back to €70,000). The Greek bank then sells the apartment. It's a distressed sale, so only makes €60,000. The Greek bank issues you a bill for the outstanding €10,000 plus a sale administration fee of, say, €5,000 to cover their legal costs. So you now owe the Greek bank €15,000. Seeing as they've an office in the UK, I'm sure they could find some debt collection agency in Ireland to sell this on to (assuming you don't pay it immediatly). The Irish debt collection agency could presumably register judgement against you and it would affect your credit rating here.

So from this perspective, you'd probably be better trying to sell yourself and ensuring that you at least get €70,000 to remove that headache.

So the outstanding issue is the remaining €30,000 loan with the other bank, the CU. I assume this is unsecured, so you simply owe this money no matter what happens the apartment. Again I'd imagine they could sell this debt to an Irish debt collection agency if you were to default on this loan as well.
 
lyonsie99 said:
I would have hoped that as soon as they would repossess, then any obligations
to the Greek bank would be gone. I am not sure that going through lengthy process would be the exit I am looking for here. The original purchase price was €100,000 with the mortgage being €70,000. After speaking with a number of people, selling in the area, I am more confident of making at least the €70,000 sale. For a front line beach property in this area, even in the current market, it would still represent good value. At this point of sale I would still be looking at a €30,000 loss!!!
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I find it hard to understand how you seemed to believe that you could borrow money from a bank to invest in property in the hope of making a profit and then expect to get away Scott free with the bank taking the loss when that investment has gone tits up! I am not sure what planet you are on.

You have to remember that investments can go down as well as up and that borrowing to invest can be very risky.
 
Steve D said:
I find it hard to understand how you seemed to believe that you could borrow money from a bank to invest in property in the hope of making a profit and then expect to get away Scott free with the bank taking the loss when that investment has gone tits up!.
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Limited companies do it every day. The only difference is that O/P is not a limited company. Mind you, to protect their own interest, the bank would have looked at the loan much harder if it was to a limited company, and may have demanded that O/P act as guarantor for the loan. Belt and braces approach.


Murt
 
Would the risk of the loan, not have been reflected on the Loan to Value that I would have been offered (max 70%). The bank was obviously not that confident of the valuations first day. Also the interest I am paying on the mortgage 7.5% over 20 years, is quiet high, which would have produced a handsome profit over the term. Its a high risk/high return venture for them also with the associated upsides(high profit) and downsides(mortgage difficulties and defaults). Don't see how its terribly different.
 
lyonsie99 said:
Would the risk of the loan, not have been reflected on the Loan to Value that I would have been offered (max 70%). The bank was obviously not that confident of the valuations first day. Also the interest I am paying on the mortgage 7.5% over 20 years, is quiet high, which would have produced a handsome profit over the term. Its a high risk/high return venture for them also with the associated upsides(high profit) and downsides(mortgage difficulties and defaults). Don't see how its terribly different.
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7.5% would not be seen as a high return investment in my book. Pension funds tend to forecast retirement values based on 6% growth per year before inflation over the life of the pension. I'm pretty sure that they would not use that figure if it was considered an above average return.
The 70% LTV indicates that left a buffer to account for negative appreciation on their security (A wise move, it appears).

Forgive me if I inferred incorrectly but, the bank has not acted as greedy money grabbing cowboys in this instance.
 
dear lyonsie,
I'm a journalist trying to write a piece about overseas property headaches currently being experienced by irish investors. Would you have any interest in talking to me about your case? If so, please post a reply and I will pass on my details, thanks, C Murphy.
 
crunch time

cibank have informed capital financial partners (CFP) that, unless the loan plus interest and charges are paid within 7 days they will begin legal action.
I have tried to negotiate directly with them- offered them the bansko property etc but they're not interested.

CFP say the bank will inform credit ref agencies in the uk, appoint bailiffs to pursue me here.

I'm in a mountain of debt with mortgages, loans etc here. I am keeping afloat but am well overdrawn, as is my wife.

Any suggestions or help please?
 
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