Case study Investment Property - Voluntary Surrender

Someone suggested we can take cleaning jobs...not going that root.
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If you are €455k in negative equity and going to the UK for a year lets you walk away from that, surely that is the same as earning €455k in one year and paying off the debt.
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A good way to look at it. And that would be a very well paid cleaning job!
 
Maybe Brendan can advise me where i have misread OP's problem.
And I do apologise if I've misunderstood or misintepreted anything ?

OP borrowed money to buy a property1 from which OP gets 10k rent, but only gives the lender 6k of that amount .

-on property2 OP only pays interest of 5k a year but gets 11k rent p.a.

Is that right ? €21.000 gross rent -pays lenders €11.000.

Was that the case from the very start ? that is, was OP only paying half of gross rental income from the properties to the people who gave Op to buy the properties ?

There are, of course, costs in letting properties -but ten grand a year ?

OP states lender on property1 now gets nothing because OP was " getting nowhere with lender regarding reduced payments". But wasn't OP only giving lender reduced payments (€500)for some years ? -despite receiving a few hundred euros more in rent each month ? I'm assuming OP is still getting 800 a month on this proeprty.

So confusing for me. Please tell me where I've misunderstood things.
 
oldnick

You are confusing me now.

I think you should address your question to the OP, and not to me. She will have to explain why she has become a "won't pay" on one of her properties.

Brendan
 
I was asking you Brendan because I 'm not sure I understood OP's position - or,rather, how OP got to it.

I asked OP a couple of questions yesterday but got no answers.

On the face of it -and without details I may be wrong - it looks like OP took the money to buy property, let the properties but did not use all of the rent to repay even the interest on those loans which made the rent possible in the first place.

But,as I say, I may have misunderstood the figures.
 
My feeling too. OP didn't even pay the full interest, even though the rents were greater than the interest on the loan. OP is still getting the full rent but now doesn't even pay a penny interest, never mind the capital sum.

And there are people like Mr Thatcher and New Beginnings so happy to help.

No wonder borrowing from banks is so difficult nowadays.
 
I thought this site was for people with genuine problems. If I wanted to have my cake and eat it...I would have done that couple years ago.

Anyway...the background is ...for investment property we were paying capital + interest...rentamount ddropped..we moved to interest only. Then the property was left vacant with few issues from tenants ...husband lost work the same year ...we used savings to continue making payments. All this time we were making capital + interest to our residential home too....but we couldn't sustain these payments with only one income. Requested residential to go on Interest only..took tenant on a lower rent and started making reduced payments for investment property. All this time requested banks for a .meeting to put a reduced payment plan in place.

They were not interested. With another baby our childcare cost took over with income from my husband's job ....so just to get attention from the bank stopped making payment in June...only 2 months. Now they have met us and discussed my proposal of voluntary surrender. We have agreed that I will make a gesture payment of 150euros this month and that we will put property on sale.

This brings me back to my original question what will happen when we won't be able to service approx 200k negative equity. The bank said they will take judgement against us in that scenario and we should seek legal advice. I don't have funds to get legal advice.


I have put aside 500euros for last 2 months and will try put away for next couple of months as that money will be used to either pay for legal fees if we proceed with the sale or to pay arrears if we get some reduced payment plan agreed with the bank
I want to pay...but I don't have anything substantial to pay. If bank accepts very small payments of 50 or 100 euros after I sell the property... I am willing to do that
 
The full payment are approx 1900...I can't remember what the figure for interest only was..
But definitely few hundred more than the rent.

I
 

That's an interesting point of view. Do you not see that you are far worse off than a cleaner with no debts. You are actually in effect a slave. To the banks. And they are going to keep you that way.

Obviously I didn't mean that you take a cleaning job, I'm just saying that in life one does what one can, degree or no degree, to get to somewhere better. I've waited tables and been a chambermaid and worked in a pub and if I had to do so again then I would. In your particular circumstances this is what I could do. You asked for solutions, just because the solutions involve us asking you awkward questions, and appearing not sympathetic, and you not liking our solutions doesn't mean we are not helping you. I'm not going to mess around with people and tell them everything is going to be ok. It won't be ok until people deal with their own messes. Because nobody else is going to sort it for you, only you.

In relation to your lifestyle, is it actually worth it, I note you didn't answer my points on how you are living now, about groceries and about what happens if a big bill comes in. Do you not worry every moment of the day about the debt?

The bank has suggested you get legal advice, you cannot afford it and in any case it won't help you. The bank has agreed that you sell the property and then you will owe the negative equity, it's not going to write off the debt, what they mean by judgment against you is a threat that they will put a judgment mortgage on your home. In your case this is pointless as you are in negative equity, but say you pay off the house mortgage in say 10 years, then if you think you own the house you don't because of the judgment mortgage. The amount owing going up meanwhile.

If they don't go for a judgement mortgage, then they will more likely go for an instalment order. You're offering them 50 to 150 Euro a month (Why would a bank agree to this, why would you? You'd never pay it off) In court a judge will look at all your income and expenditure and the bank will ask that you be left with the same amount to live on as is the dole currently (they've discussed this with government, leaving people on a dole amount and every cent above that to go towards paying debt). What kind of lifestyle will that be do you think?

In relation to the investment properties, I'm curious about one thing, did they ever pay their way? When you took out the mortgages did the rent pay for everything?
 
Figures

500 + 420 + 1000 + 500 +50 +700 + 500 + 400 +200 +200 + 100 + 100 +180 + 1000 = 5850

Income 800 + 950 + Salary 1? + Salary 2?

2 Salaries would need to be generating 4100 and that's with reduced mortgage payments, not paying mortgage on one property and without the figures associated with managing rental property (NPPR, tax, accountant, repairs etc)

Grocery bill looks very low to me. What about childcare costs.

Would also like to see how each rental property on their own are working. Income and expenditure. It's really hard to be a landlord currently, anyone who bought at the height of the boom cannot make money in my opinion. Oldnick, very experienced, will attest to that. I myself won't invest because despite the 'lure' of the zero capital gains tax, all I see is more tax and hassle. Household charge is only going one way, ditto NPPR. 75% interest relief might be reduced.

Emma you mentioned the property market changing as a solution, meaning going back to boom prices? We're not allowed to discuss property prices on AAM, but just look around you.
 
Figures
Investment Property
Monthly Rent 950.

Interest only payment 520
Nppr/household charge 30 approx
Home Maintenance 100 approx ( Although last year had to spent nearly 4000 to get the place repaired as tenants deliberately broke furniture & fittings as they had a fight in the house!!!... another story... left without paying any rent for the last month!!)
Revenue + Accountant 80 approx
Prtb 10. ...approx
Home contents + landlord insurance 100 ( I know very high...but our house is apparently flood risk so it was hard to get insurance )
Life Insurance 60
Letting Agent Fees 60 approx h

So in total income = 950
Expense = 950 +!!!!

Second Investment Property
Rental Income. 800 per month

Expenses
Until June bank payments 500 ( now keeping that money aside....not spending on myself!!)
150 prop management fees ( 4500 in arrears )
Nppr/household charge 30
Prtb 10approx
Revenue + accountant 50
Life + sickness cover 60
Letting Agent 50
Home maintenance 80
Income 800
Expense
900 approx
 
First property paying for itself...almost apart from the disaster that happened with previous tenants. Still paying family member separately for that loan

Second Property paying as much as possible after other expenses. The problem with this is the high interest rate...4.5... I think. Have request ed bank to lower the interest and then we could possibly pay interest only for the remaining term....of course the bank doesnt agree tothis.
 

Hi Emma,

Can you redo this showing either annual or monthly costs. For example your NPPR and household is incorrect. Total is 300 a year. Not 360.

Also put in mortgage amount, term, interest rate, arrears.

Why do you have a letting agent?

It seems strange if you had a tenant turnover and major expense that there is something owing to revenue.
 

The following may seem like highly personalised comments, given we don't even know each other, so apologies in advance because I know I am about to offend you. But you are clearly in complete and absolute denial about your situation. You are utterly insolvent, and you have no hope of keeping all these balls in the air.

Listen to what the other posters are saying. Don't block them out because it is not what you want to hear. You've asked for advice, and they are giving you reasonable advice. You are hopelessly insolvent, so face up to that and enter some form of insolvency procedure, either in Ireland when the law changes next year (better for you, as you could keep your jobs and life here) or in the UK (where it would be quicker and cleaner financially, but not from a family viewpoint with your kids etc).

Why do you want to keep hold of one of the "investments"? It's ruining your life. I can see why you don't want to give up your job here and move your family to the UK. It might not be the best option. But you have to go bankrupt somewhere, for the sake of your kids' future. Why bring them up for the next 18 years under this ridiculous burden?

Swallow your pride, accept that you are deeply deeply insolvent, and start looking for a way out. Bankruptcy looks the only viable option. What you are proposing is not realistic.
 
Looking2011.. its not a matter of "getting offended" .. I dont understand why everyone thinks moving to UK should be my 1st option? We cannot just leave everything and uproot ourselves. I have parents who need looking after. My kids have friends and there is a thing called "life" that we have here.

I am not insisting on keeping any properties. To be honest. If given the choice .. I would sell the 3 properties... and rent somewhere.

I am sorry but I keep going back to my original post.

I can afford Interest Only on my residential mortgage. The bank is quite happy with this arrangement.
I can afford the payment for my Investment Property (They both are with the same bank!)

The only issue is the HIGH INTEREST RATE with the 3rd property with a different bank. If it was on a tracker rate or low variable rate, I could just about make atleast Interest Only payments with the Rental Income. I spoke to the Auctioneers today and he has said that I will not get more than 100K for this property, that is, if it actually sells!
So, I will be in 200k debt with this property. If the bank insists on me selling the 2nd Investment Property, I will do that if it "makes them happy" but it will help no one as that too is in Negative Equity!

So, my original proposal of making .. say 100Euros payments for the rest of my life seemed like a fair option... ofcourse if things change in few years...as in either myself or my husband get an increase in pay etc...we would make extra payments. We are nearly 40 so add another 40years (we are quite healthy otherwise!!.. stressed but healthy!) so the bank will get nearly 50K out of us even with such a small payment. ofcourse this will only happen if they don't charge us even more interest on the 200K loan.

It seems the best option for me is to let the bank bring me to the court and let the court decide. I am not refusing to make payments - if I had the means to make those payments. If the judge feels selling 3 properties is the best outcome... so be it.

Thanks for all your replies.

I actually checked my life policies yesterday and if either one of us (myself or my spouse!) were to "go" we wouldnt have anything to worry about... the other half will be left to enjoy their life with the kids!!
 
emma09 said:
The problem with this is the high interest rate...4.5... I think. Have request ed bank to lower the interest and then we could possibly pay interest only for the remaining term...
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Even if you pay the interest only ‘for the remaining term’ – what happens at the end of the term? You could very well still be in negative equity on all your properties so what happens then? You’ll be at/close to retirement with large net outstanding loans even after you sell all the properties leaving yourselves in debt and without a home for retirement. Also, 4.5% is not a terribly high interest rate - it's a fairly standard variable rate at the moment - any less and the bank will be losing money on you every month on top of the risk they are already facing of making a large capital loss on the loan.

emma09 said:
So, my original proposal of making .. say 100Euros payments for the rest of my life seemed like a fair option...
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It might seems fair to you but paying 100 per month for 40-50 years is only paying back about 20K-25K at 4.5% interest so it’s not really surprising the bank doesn’t want to engage with you at that level when you would potentially owe them over 100K.


The reason people are suggesting UK (or Irish) bankruptcy is because you came on here looking for solutions and the bankruptcy route is really the only way for you to be proactive about solving your problems (and as pointed out above you really do have big problems – hopelessly insolvent with 900K+ of debts on 65K income). If YOU want a solution, bankruptcy is the only one you can force. The alternative is years of stress as the loans topple one after the other as unpayable, the banks get judgements against you which stay forever and you find yourself facing retirement with large debts, little income (I’m presuming you won’t be able to save adequately for retirement while sorting out your cashflow problems) and no home. It is very unlikely that any of your lenders will give you a nice closure to your problems – they have to pursue their debts to the end and better to hang on with a judgement that might eventually get them something when inflation/salary increases slowly make the situation better (for them, not you) than to cut you a ‘nurse Laura’ type deal which crystallises their losses immediately.

Bankruptcy is a horrible option but it’s one that will give you a chance at a normal life in a few years time. Formulating ‘fair options’ in your mind that a bank will never accept is just going to delay the day of reckoning – better to face it at 40 than 65.
 
emma09 said:
I dont understand why everyone thinks moving to UK should be my 1st option? We cannot just leave everything and uproot ourselves. I have parents who need looking after. My kids have friends and there is a thing called "life" that we have here.
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All those are just excuses Emma for avoiding making the hard choices. You are not the first to have to uproot. And nobody is saying it's easy. It is not, it's very difficult.

I'd be very interested in what wonderful 'life' you have now because based on the figures you've posted it's hopeless and only getting worse. You are in denial about this.

Have you talked to Mabs? Or someone who's good with figures?
 
Bronte the "wonderful life" that I am living does involve a lot of sacrifices. Yes its true. I am not in denial about anything. I am trying to pro-actively arrive at some solutions.

We have had to deny ourselves little luxuries. For example, I do not buy "new" clothes, I do not get my hair done. My husband and I do not go out. We do not exchange gifts for ourselves at christmas/birthdays. We don't drink. At the end of the month we are just about managing to pay for our own residential home plus have enough left over to pay for kids daily expenses. We still treat them to an odd McDonalds or the like. We still take them out for an odd movie (Usually kids club in the mornings.. they dont know the difference!)

I would still rather live like that.. ie pay off my debts for the rest of my life rather than end in UK bankrupt.. look for handout from welfare and live in a council house with no jobs or work as a cleaner! I would rather be slave to the banks than lose my dignity!

I have spoken to MABS and they have advised me to not to pay anything to Investment Property if you cannot afford it and concentrate on your residential mortgage and your household bills ie Gas and Electricity... the rest of the bills are up to date. We have enough food on our table. The mortgage is on reduced payment which we can afford.

At the retirement age we still will be making payments. But like I said I would rather that.. then the other life you all are suggesting.
 
Please enlighten me with your opinions. Tell me what did I say wrong?

You would rather that I go across the pond and leave all my debts to clear to be paid back eventually by tax payers making life more hard for people who are left behind.

I think its your own attitude is what is wrong with Ireland today.

Atleast I am trying to accept the responsibility. All I am asking is help not for a free hand out.

A family friend who was earning similar income to mine gave up his job and is now living in a 5bedroom house on Social Welfare rent allowance. He has 4 kids and does not have to worry about paying Household Charge, Childcare, GP Visits and other medical treatment. He gets help with Back to School Allowance and many other such benefits. He has no intention of taking up work and every now and then goes on a Free Training course just to show he is upgrading his skills to get employed. Its a joke!

Its people like that need to get out of here so that our taxes are paid towards helping people in genuine difficulties or towards people who are trying their best to pay off their debts as much as possible and NOT running away from their responsibilities.
 
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