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  • Debt & Negative Equity

    Dilemma - Stick ,Twist or Fold.

    I don`t know which course or which guru you went to. They vary in quality

    But in 10 years I personally have seen doubling of some of mine so is it the course content at fault  or  the unfortunate timing perhaps or  maybe your chosen geographical area of investment . Could be all three. Its not a precise science

    There is the mechanics of how to invest in property but also the when and the where

    I was offered new builds in Liverpool a long time ago about 10 years ago . Some  dived 50%

    I didn`t buy them I bought elsewhere and mine gained 50%

    Geography is key sometimes but as you say valuable lessons are learnt to take forward with you

    Mine in the SE may take a battering now and the NW area may shine - who knows

    So start afresh learn the lessons and you will emerge stronger and fitter

    Look forward to your mathematics conundrum

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    Jonathan Clarke. http://www.buytoletmk.com


    Consider the opportunity cost of keeping your money where it is for the next 11 years. Now this is very important - could you invest the money you gain into something else that would provide a better return be that income or capital gain. Its easy to say that property needs to be viewed on the long term but if you buy poorly, at the wrong time, in the wrong location, you may suffer from massive underperformance and experience huge opportunity cost. To get back to your original 115k, your flat needs to increase in value from 85k by around 35%. This is a fact, its what you know. You also know that you are making small negative cashflow in a perfect fully let scenario with no future increases in costs planned. As part of a portfolio you could make a case for it, but as a standalone investment, maybe you could do something better withg your money.

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    Hi

    I would also suggest looking at the stability of your current situation - particularly the mortgage. Right now you are making a decision based on some known/educated facts

    • rent - you suggest will remain fixed
    • S24 - we know the facts here and if you have done the calculations correctly and are confident that based on your wife's earning this will not affect you
    • Market value now/offer value
    • Lease/GR costs

    Like others if I felt that the market would move upwards LONG TERM  then I would have no problem in holding onto a property making a small loss (that would be my opinion - your opinion has to be your own to suit your circumstances/aims).

    However two huge factors that I don't think have been mentioned:

    • Mortgage - your costs are based on the situation right now - but what if rates change (and they will) ? If you are 1 year into a 10 year fixed then great - you know your costs for a long period. If you are in a variable or a soon to end fixed rate then your costs could increase, furthermore with negative equity remortgaging would prove difficult (read impossible) without putting in more funds.
    • Voids/Repairs - variable costs that can and will come up - if you choose not to sell is your tenant likely to move out and buy elsewhere and if so can you survive the void? If repairs are needed can you cover this (or perhaps more importantly would you be annoyed about putting more funds in)?

    Both of these play a huge factor and turn a £25 loss pm into potentially a lot more. There is no point continuing with a property if you will begrudge every time you have to put your hand in your pocket - but if you genuinely believe in the future potential and funding these issues will not cause you problems personally then this could still be a viable investment.

    So really what I am saying is pin down your costs - not just current but several years ahead, and have a think about what you a) believe and b) feel about the potential and your desire hold onto the property. Only you can decide!

    Steve



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    Thanks to all especially for detailed responses.

    Property was sold 90k for cash.

    I decided life is too short to keep worrying about mistakes. Lesson learned.


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    Coming soon Investorsk8.com

    Wisdom - an integration of knowledge, experience, and deep understanding that incorporates tolerance for the uncertainties of life as well as its ups and downs.