Should I sell at a loss?

Discussion in 'General Property Investment Discussion' started by Malgovert, Mar 4, 2019.

  1. Malgovert

    Malgovert New Member

    Morning

    I bought a property 3 years ago in Canary Wharf at £450k. I am losing around £12k a year on it, and paying very little capital off as I took out a long mortgage with fixed 5 year term. Nevertheless the rent does cover all the interest paid. I have 6 other properties and have been struggling a bit lately to keep up payments - but it is difficult to determine whether selling would actually improve things all that much. I have an offer but it is £100k less than I paid. Plus the early redemption will cost me around £15k penalty. With Crossrail and Brexit on the horizon, I cannot decide whether to cut my losses and sell or struggle through for another 2 years so the fixed term will have expired and the market may have changed - but whether for better or worse seems impossible to determine. Welcome and appreciate any comments you may have. Thanks very very much.
     
  2. diyhelp

    diyhelp Active Member

    It may be time to look at reducing your number of properties and consolidating your equity. The danger is that if you start to miss payments this could bring your whole portfolio down.
     
  3. Karen R

    Karen R New Member

    Would you not consider contacting a finance broker and asking them to review your entire portfolio? If you provided a reputable broker with a full asset and liability statement and a property schedule detailing every property you own, its current value, outstanding mortgage, monthly repayment and rental income they would be able to establish your options for you. Trying to do this alone and looking at each property situation independently (especially when it is your property so it is impossible to be neutral) is very difficult. A broker knows the market and can review your whole situation including your own residence value/liability and your employed income situation and tally this off against your rental properties and establish various options which may include, refinance, restructuring, downsizing and various other options you may not have even considered where your own property may actually be able to generate more income if you make some small changes. Many brokers will evaluate things with no charge or fee up front so it would cost you northing to establish your options. Making a hasty decision based on a small amount of information may actually leave you in a worse situation hence why someone with expertise in such scenarios would only help.
     
  4. Malgovert

    Malgovert New Member

    All sounds like good advice, thanks very much. I may end up combining the two, finding a broker and consolidating the equity. In any event having re-evaluated the situation and taken a fresh look at the numbers, I decided not to proceed with the sale at such a huge loss - I think I can muddle through at least until the early repayment date has passed and I can then even look at changing the terms of the mortgage. Too much uncertainty around to sell at such a loss unless I absolutely have to. Thanks again!
     
  5. Longterminvestor

    Longterminvestor Administrator

    That is one of the major problems of investing alone - a different pair of eyes can make so much difference. There may well be an obvious answer to your current issue - my advice would be to take advice. You dont want one bad investment to bring your whole portfolio crashing down.
     
  6. Dan Veo

    Dan Veo New Member

    If you have Better investment opportunities then you can do it.

    It's hard to let a bad investment go and lose money in the process. But if you take the proceeds from the sale of that investment and apply them to a better opportunity, you might end up not just compensating, but coming out ahead, fairly quickly.

    Imagine you bought a $10,000 bond at face value, only the issuer has since stopped making interest payments and the value of that investment has dropped to $7,000. Since you're not getting anything out of that bond, it pays to unload it if things are unlikely to improve any time soon. And while you will take a $3,000 loss by selling it off, you'll also free up $7,000 to invest elsewhere. Now, imagine you take that $7,000 and buy yourself shares of a company whose stock price doubles over the next year. Suddenly, you'll be sitting on a net gain over the course of both transactions.
     
  7. lookinginvest

    lookinginvest Member

    I totally agree @Dan Veo

    Many people find it harder to take a loss than they do a profit - maybe it is an ego thing but it has cost many investors a fortune. if in doubt ask yourself a simple question:-

    Would you buy the property today?

    However, you have to be honest with yourself :)
     
  8. If the properties are covering their own mortgage payments via rental income then I would not be overly concerned about the short term fluctuations in value. Maybe you have over extended your finances with the number of properties you hold/manage?
     
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