Why Do Investors Not Sell Underwater Buy to Let Property?

Interesting Paper from Brian Lucey Karl Deeter and Marie Hunt
papers.ssrn.com/sol3/papers.cfm? … tM.twitter


The title makes me think of:

the most important line is…

I cannot afford to take the loss that selling now would realize: Affordability Neutral or disagree 44% Agree/Strongly Agree 56%

35% are in arrears and another 20% after also in trouble

Many many small time “investors”. I know a fair few in East Cavan anyway.

Some accidental landlords of course.

I don’t know much about NAMA or Institutional investors in that area. Would be interested if someone did.

That half cant even make the interest payments in this survey is bananas. Good work from Deeter, Hunt and Lucey. Credit where its due

from experience of one amateur investor I was infrequently advising them or rather planting seeds.
2007/2008: Me being risk averse. The house is worth more than they paid for it. Don’t you think you should sell it and take your profit.
Answer: No, it’s our pension.
2009: House worth a few thousand less than their mortgage . Don’t you think you should sell it and crystalize your small loss while affordable.
Answer: No. no danger here. We can afford to hold it and service mortgage with rental income and prices will bounce back hopefully. It’s our pension and tenants are mostly paying our mortgage for us.
2011: House is serious negative equity. No, we can’t afford to sell it and pay the balance.
2013: On interest only and barely able to service mortgage on interest only. Pension becomes a millstone around their necks that they’ll never own and mortgage will only ever be cleared if they come in to an inheritance.

You could supplement that report by just re-viewing ‘The Field’ I reckon.

“They can prise the keys of that scruffy fleapit out of MY COLD DEAD HANDS!”

I can’t square that with:

“the typical small investor in residential buy-to-let property also has a low loan to value (LTV) level.”

Are these portfolios worth less right now than the outstanding finance, or not? If they are not actually underwater, what does “cannot afford to take the loss” mean?

Maybe it’s my reading comprehension/attention deficit.

one investor I know purchased a S23 in 2007 ish, & has been claiming allowances since, so if it were to be sold now, as well as being in NE, will have a rebate to sort with Revenue. Didn’t get the figures off him, but there could be up to €40k or €50k in allowances used, so a forced sale by the bank will pull Revenue into the mix…

I thought you could sell including remaining allowances on S23 properties

So according to this admittedly small cohort (approx 500 people) 57% of the BTL’s introble are in the Dublin/Greater Dublin area.
And according to the central bank:
There were also 30,326 residential mortgage accounts for buy-to-let properties in arrears at the end of June.
So if the 57% was extrapolated to all the Buy-to-let arrears, that would mean 17,271 buy-to-let mortgages in trouble in Dublin.
Am I calculating wrong?
That sounds like an awful lot of fucking houses.

I mean any time I had mentioned lots of repos happening that would free up supply in Dublin, I was always assured that they were in the arse-end of Carlow somewhere.
But if this is true they are in primarily in Dublin.

Am I missing something, this is probably triple the supply currently for sale in Dublin.

The authors don’t define “Greater Dublin Area”. What’s your definition of “in Dublin”?

From Wikipedia:

“Popularly understood, the Greater Dublin Area includes the Dublin Region that is made up of the city of Dublin (that part of the capital city within the jurisdiction of Dublin City Council) plus three neighbouring counties; South Dublin, Dún Laoghaire–Rathdown and Fingal. It may also include the Mid-East Region, which abuts the Dublin Region. In this case it would include the local government areas of County Meath, County Kildare, and County Wicklow.”

Fingal includes a few large urban centres (Malahide, Portmarnock, Swords, Balbriggan and Blanchardstown) that many pinsters don’t consider to be “in Dublin” as they’re outside the M50, and these places have both flat prices and very large untapped potential for future housing (probably not unrelated).

The Examiners take on the piece

irishexaminer.com/archives/2 … 45698.html

And Charlie Westons:

Boomtime property investors a ‘bunch of amateurs’
independent.ie/irish-news/bo … 45301.html

A good friend is in a similar position. Thanks to the Pin, we sold a house in 2009, shacked up in our other abode for 2 years and bought our dream house in 2011 mortgage free while still retaining a small mortgage on the second property which we will be unable to sell but have good tenants. Most just didn’t see it coming it unfortunately.

Hmmmm… must ask him if he’s aware of that…

Sorry but this is just a survey of 7k MB clients, of whom 500 odd responded.

Interesting? Maybe. Substantial? Definitely not.

And I really don’t know why MB is associating himself with Lucey and Hunt. Combined they have less academic credibility than a drooling baboon.

Brian Lucey on Drivetime at 6.10pm

10.2 Sale of a section 23 property
To continue to be entitled to section 23 relief, a property must be retained and let under a
qualifying lease(s) for a period of 10 years from the date that the property was first let under a
qualifying lease. Section 5 contains details of qualifying leases. The relief already granted is
withdrawn if the property is sold within this 10-year period.

from revenue.ie/en/tax/it/leaflets/s23.pdf