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  • Debt & Negative Equity

    Is there a solution to this particular BTL?

    Hi all,

    I"ve been introduced to a Vendor and I'm a bit stumped on whether there's a deal to be made.

    -A 2-bed terrace, very run-down, worth about £20k

    - Needs about £40k spent on it to do up. Would be then worth about £70k

    - The Vendor owes £45k on the mortgage, plus he's in arrears with council tax to the tune of £15k.

    - He's an elderly chap in his 70s.  Still has his marbles, just wants rid, doesn't mind going bankrupt he said!

    Can anyone think of a way forward for a deal or is this impossible??

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    The bank will not let you take it like that and will have to let it go through the auction rute, however the lender will not kick out an elderly gentleman due to bad publicity. 

    So unless the elderly gentleman move to a council property and the place becomes unoccupied nothing will happen.

    But how will he be able to get a council flat when he owns a house.

    To be honest it sounds like he is stuck until he dies or move in with someone??

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    On a different note. £40k worth of work and only an £10k uplift in value doesn’t seems like a good deal

    the risk - reward seems poor.

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    I should have clarified. The vendor doesn't live there, it's his BTL. The property is in the NW and he lives down south.


    (As a sidenote, the deal is good for my portfolio goals)

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    Hi Nick,

    The numbers simply do not stack up here to assist the gentleman.  Taking into account the purchase, arrears and the refurb, you are -£50K.

    There are surely other properties similar to this that do not have a distressed vendor involved with such significant debts?

    Perhaps just set up a portal alert to be notified if this property comes on to the market after being repossessed?

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    Thanks Vanessa.  I guess I just wanted to check whether I wouldn't be saddled with the debt, but rather it get written off under the Vendor's name.  It really does sound like the Repossession route is the only route! Thanks again.

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    It depends on the nature of your commercial relationship with the vendor.  If you simply bought the property for £20K, then the shortfall would become unsecured debt with his lender and they would likely pursue him for it.

    However, if you went into some kind of JV arrangement with him then you could be impacted negatively by his debt and the association to him.

    You could be kind and introduce this gentleman to Landlord Debt Advisory, as they may be able to assist with a debt write down or payment plan.

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    Thanks Vanessa.  I've not heard of the LDA and I doubt he has either.  I will certainly advise him to contact them!

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