For legal reasons I cannot give personal investment advice but on a wider issue though, consider the following:
1. Interest rates will go up in the future. Clearly they cannot go down in the future as they are already on the floor. This means you are on a one way bet. Unless BTL investors have a fixed ten-year mortgage they are massively exposed to the increase when it hits. How would this affect you if you are on, or move to a variable mortgage? I worry massively for those readers who are sitting on variable mortgages and are only surviving because interest rates are low. I know it costs money to move to an fixed rate mortgage but if that stops you falling off the log it is money well spent. If you are in this position this is your wake-up call: work out what effect a half percent and one per cent increase in the base rate will do to your cash flow. Now act!
2. I never sit on a bad investment and wait for it to improve if that investment is so big it could take me under. Look at your exposure over the next five years. Look at the potential upside and the potential downside and then look at your options. It is OK to lose money on a bad deal that you got into at the wrong time. We all make mistakes so be honest with yourself. What is not OK is to hang on to that investment if it could kill you in the future. If it is just one of many you could sit it out but if it is your only one you need to get pro-active. The days when you could buy any property and just float with the market have gone away, at least in the short-term. One things for sure – you cannot afford to sit on the sofa and simply hope things will get better.
3. Clearly you are reliant on your rental income in the future. That is the business you are in. You must recognise that fact. Start talking to rental agencies, massively increase your due diligence and become an expert in your chosen investment field. I cannot stress this enough – you must become an expert in the area you have put your money into otherwise you are simply rolling the dice. Can you increase rental income by approaching local companies directly instead of using an agent? Would lick of paint and some new furniture reduce voids and increase your rental charges? Can you extend or develop the property to move yourself out of negative equity? Do you have so-called savings that are earning virtually no interest (and taxed) whilst you are paying to borrow money for the mortgage? How about using that cash to pay down some of the loan? Don’t say its not enough to make a difference – all pay-down counts!
4. There are some real property bargains out there so if you have bought a “lemon”, get rid and buy something that will perform over the next five years. Property will always have a place in your portfolio – but it has to be good investment property. At least 80% of UK property is not a good investment.
5. Don’t confuse capital gain and rental income. If you have taken a capital loss but the rental opportunities are good then maybe it is not such a lemon after all. But if it looks like you will lose on the capital gain AND the rental over the next five years maybe it is time you were honest with yourself. Stay in denial and you will have a long slow death.