Back to the future for landlords

I remember vividly the autumn of 1989. The start of the football season, the nip of autumnal air, the seasonal calm before the winter storm.

It was also the time that I took the first steps onto the property ladder.

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Buoyed with youthful enthusiasm and a determination to make my own home the start of a property empire that would provide the basis for a financial freedom far into the future. I bought a 3 bedroomed terrace located in an 'up and coming' part of town sold the idea by the acres of newsprint at the time devoted to the next property "Hot spot".

The property boom of the late 80's was finally running out of steam after the earlier removal of joint MIRAS by the Chancellor at the time Nigel Lawson. The Prime Minister Margaret Thatcher was unpopular and was soon to be ousted by her party. The country was about to be plunged in a deep depression after a decade long explosion in credit. Sound familiar?!


How did I survive?
For me as a first time property owner and landlord, I had to face the realities of the property bust after a decade long property boom. Luckily for me I had always intended to buy my property partly for investment purposes with the intention that I was to let out at least one of the bedrooms.

This meant that despite capital values falling, I was always able to pay the mortgage, out of what I later was to learn was strong cashflow. If there is one thing that a landlord should focus on it has to be cashflow.

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Keep the cash coming in to service your debt and your buy-to-let lender will be happy and you as the landlord will get a good nights sleep.

The next 12 years I remained in negative equity with that particular property which I had originally bought for £36,500 but then loaded it with £4,000 worth of endowment payments. I thought about and tried on several occasions to sell, but each time the thought of making a large capital loss put me off. So I kept letting the 3 bed terrace out and most of the time the rent from the property covered my costs of servicing the debt.

Then one day and it was literally one day I was suddenly aware that prices in the area were on the rise. £40,000...50,000...60,000 within a year they had gone from £40 to £80,000. It was almost embarrassing. After a lifetime of appearing not being able to give away my investment property, somebody was going to give me £40,000 of net cash for it?! I sold, fearing the market had gone mad. Unfortunately, for me the market continued to rise but not at the brake neck rate it had.

What this hopefully, illustrates to landlords who are fretting over what to do about falling prices and negative equity is that landlords have faced this situation before. Therefore, don't panic, be patient and eventually this approach will in the future be generously rewarded.