http://www.guardian.co.uk/money/2008...tolet.property
Judith Andrew bought her buy-to-let property in summer 2006. "The broker said 'buy a flat, rent it to cover the mortgage and, after a few years, sell at a profit'. It was never a get-rich-quick scheme - I accepted I would have to wait before gaining," she says.
The broker pointed Judith towards Sheffield-based Pimlico Property Investments which sold her a flat in a Bradford mill conversion. "Pimlico told me to hurry up in case I lost it - it offered a £22,000 subsidy on its £200,000 price for a quick sale."
So she stumped up £178,000 to buy the flat, borrowing the money from GMAC, a specialist buy-to-let lender via a broker.
The two-year fixed-rate interest-only loan cost her £850 a month, and was based on a valuation from Connells, part of a major estate agency chain, which advised her the property had "a market value of £199,995" and an "expected rental income" of £860.
"The rent should have covered the interest. But all I get is £500 a month out of which I pay £120 in service charges and £50 to the estate agent, leaving just £330. I can't see where Connells found tenants paying the sort of money they said I would get."
Calls to Bradford estate agents confirm that £500 a month is a good return for the area and type of flat.
"I didn't worry about the rent levels at first, as Pimlico paid me £350 a month for 12 months as a rent subsidy. Now I am very concerned."
Estate agents in the city suggest the flat would now fetch around £135,000 - plunging Judith into negative equity by some £45,000 after selling costs. Smaller two-bed flats are on the market at £104,000. But the tumbling value is not her only problem: now the monthly cost of the mortgage is set to rise steeply. When the fixed rate runs out in September, her only option is to stick with GMAC because the flat has fallen in value. Other lenders limit loans to 85% of market value (about £120,000 for the Bradford flat) and restrict monthly payments to 80% of the rent - £400 here.
GMAC will refinance the flat but it says she must pay £1,299 a month (a rate of 8.75%), or nearly £1,000 more than her rental income after costs.
How did it all go so very wrong?
AtW, over to you and how price fixing and government regulation is the answer.
Judith Andrew bought her buy-to-let property in summer 2006. "The broker said 'buy a flat, rent it to cover the mortgage and, after a few years, sell at a profit'. It was never a get-rich-quick scheme - I accepted I would have to wait before gaining," she says.
The broker pointed Judith towards Sheffield-based Pimlico Property Investments which sold her a flat in a Bradford mill conversion. "Pimlico told me to hurry up in case I lost it - it offered a £22,000 subsidy on its £200,000 price for a quick sale."
So she stumped up £178,000 to buy the flat, borrowing the money from GMAC, a specialist buy-to-let lender via a broker.
The two-year fixed-rate interest-only loan cost her £850 a month, and was based on a valuation from Connells, part of a major estate agency chain, which advised her the property had "a market value of £199,995" and an "expected rental income" of £860.
"The rent should have covered the interest. But all I get is £500 a month out of which I pay £120 in service charges and £50 to the estate agent, leaving just £330. I can't see where Connells found tenants paying the sort of money they said I would get."
Calls to Bradford estate agents confirm that £500 a month is a good return for the area and type of flat.
"I didn't worry about the rent levels at first, as Pimlico paid me £350 a month for 12 months as a rent subsidy. Now I am very concerned."
Estate agents in the city suggest the flat would now fetch around £135,000 - plunging Judith into negative equity by some £45,000 after selling costs. Smaller two-bed flats are on the market at £104,000. But the tumbling value is not her only problem: now the monthly cost of the mortgage is set to rise steeply. When the fixed rate runs out in September, her only option is to stick with GMAC because the flat has fallen in value. Other lenders limit loans to 85% of market value (about £120,000 for the Bradford flat) and restrict monthly payments to 80% of the rent - £400 here.
GMAC will refinance the flat but it says she must pay £1,299 a month (a rate of 8.75%), or nearly £1,000 more than her rental income after costs.
How did it all go so very wrong?
AtW, over to you and how price fixing and government regulation is the answer.
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