My Property Loss

Property lossThere are worse things in life than losing money, but when you’re on the receiving end of a property loss it’s not a great feeling. Want some schadenfreude from my latest property deal, and latest property loss? Then read on.


It’s starts at the beginning

A fairly standard 2 bed terrace property in an area I know fairly well and already own 5 properties in the surrounding streets. All of the properties were (and still are) let for around 8-10% gross yield. I found this property in early 2014 and while it needed some cosmetic updating, it didn’t seem too bad so went for it on the basis of a simple addition to the rental portfolio. Not too much work needed, but buy it cash, tart it up and then refinance it after 6 months.

Seemed to go to plan initially. I got it for a reasonable price, £44,500 and put some money into it. Unfortunately the ‘tart up’ ended up turning expensive and non-value adding. I had to replace a pane of glass in one of the double glazing units, but as this was going to be a long term renter, I replaced all of the windows for new double glazing.

The flat roof to the rear had a small leak near the juncture with the house, so instead of a patch repair I re-roofed the rear extension.

Full redecoration and wood flooring throughout, plus some small works to the bathroom.

All in, I spent just over £7,000. Got the remortgage at £55,000 so not great, but I pulled the cash I had used to purchase it out and moved onto the next project.

The property was advertised for rent at £450pcm during the works, and there was some interest but not loads. Once works had completed I swapped agents and they found a tenant over a weekend. Happy days. The property was empty for around 5 weeks longer than I would have expected though. Sad times.

The Tenancy

The property wasn’t amazing, but it was to a reasonable standard. The tenants did have a couple of issues during their stay though. Minor works needed to the cooker and a replacement extractor fan in the bathroom. I left that to the management company to oversee and left them to it.

The tenants paid on time and had a moan about some damp issues, but on investigation it was due to condensation and their lifestyle. Not sure that made them feel any better, but installing the new extractor fan hopefully helped them with the issue.

The Start of Problems

The tenants served notice at the earliest possible point and left exactly 6 months after they signed up. Bit concerning as most of my tenants in the area have been there for years and I expect an average tenancy to be 4 years in that area.

There was a dispute over the tenancy deposit. The doors had been damaged and the garden at the front had been left to grow full of weeds.

The front garden area was paved, so fairly low maintenance anyway, but it just needed some weeds pulling out.

I didn’t think it was unfair to retain £75 for a replacement door and some touching up of paint and tidying up the garden. The tenants obviously did.

It was now that I found out the management company hadn’t bothered doing a check-in inventory, so couldn’t provide me with the state the property was in when they first moved in. They also didn’t bother doing a check-out inventory either.

It turns out one of the staff in the company is a close friend of the tenants…

So, no deposit could be retained (or it wasn’t worth the effort to argue over it anyway).

Given my experience with the management company, I asked for a Let-Only service as they were good at finding a tenant, but questionable over managing the property. They refused to work on this basis, so we parted company.

Two months later, 3 agents later, and with only 2 viewings, I made the call to just sell the place.

The Sale

Crappy property in a dodgy area that only investors want? Obviously it was an auction property! With a property next door but one currently on the market at £60k I felt justified in setting a guide price of £40k – £50k.

Long story short, it sold for £48k and is due to complete before the end of the year.

The Result – My Property Loss

So the final figures;

Purchase Price £44,500
Mortgage £38,500
Works costs £7,000
Other costs £3,000
Total Cash Tied up £16,000
Sold Price £48,000
Loss £6,500


Fortunately I did make some profit during the rental period, around £2,000. And around £2,000 of the “Other costs” are made up from early redemption charges on the mortgage I picked – which I can avoid if I port the mortgage to another property. So optimistically I could reduce that loss down to £2,500! Yay!

The Lessons Learnt

Every day is a school day, and I never claimed to be perfect at this stuff. We all make mistakes, what matters is whether we make the mistake twice or not. So what can be taken from this ordeal?

  1. Don’t assume

I thought I knew the area well enough to buy without carrying out enough due diligence on the immediate vicinity. The houses on either side were run down and not well maintained. The majority of the street has a For Sale or To Let board outside it, so the demand for that particular street is lower than the others surrounding it.

  1. Don’t commit too soon

This is a possible lesson… I overspent on fundamental improvements to the property that made no or little impact on the value of the property. My justification was it was for the long term benefit of the building, and would need to be done anyway, so just do it all now while it’s empty.

While sensible if you do plan to keep it long term, it wasn’t required to achieve the same numbers.

Would I have been better off carrying out these works over the next few years so as to limit my initial spend? Probably. Will I make this “mistake” again? Probably. I am committed to my properties being in as good a state as possible, so it’s not in my nature to leave single glazed or poor windows in place just because I can get away with it.

  1. Don’t tie yourself in

I locked myself into a 5 year capital repayment mortgage, which in retrospect is now causing me issues with early redemption charges. I took the view that I wasn’t expecting huge capital growth from the area, so I could make a profit from the rent (12%+ ROI) while on a capital repayment basis, thereby making my “appreciation profit” by getting the tenants to reduce my mortgage.

  1. Don’t trust other people with your assets

Nobody cares as much about you making money than you do. So using a managing agent who is earning £40 per month, you can’t be expected them to put the same time and effort in as yourself. That’s not to say they aren’t worthwhile, but they do need much more management than I dedicated in this instance.

  1. Life doesn’t exist in spreadsheets

Anyone that knows me knows I love a good spreadsheet. It’s one of my favourite things to do. Unfortunately sometimes life doesn’t conform to the workings of a spreadsheet. This property was fantastic on paper, but in reality it was a bit of a dog.

I could have stress tested some of the numbers more and instead of using my average void periods, looked at finer research in the area to establish a more specific likely void for this property. It would have been a guess still, but a more educated guess than I did use.


That’s probably a good enough bunch of lessons to be learnt. Nothing ground breaking, but a timely reminder to not get complacent and assume it will all work out because “property always works out in the end”.

When life gives you lemons, sell the lemons and buy some apples instead.



Most people in property are very reluctant to talk about their losses. And when they do, they make it into a tongue in cheek version where they “missed out on even more profit” rather than actually made a loss.

Maybe every single person in the property industry is making a profit 100% of the time they do a deal… or maybe they just aren’t honest about it?

Human nature means we don’t like to admit we are wrong. Perhaps that’s why everyone wants to get into property and thinks they can be a huge success at it. Not many people will admit to giving it a go and making a loss. Whereas most are more than happy to tell you how they made £100k by doing up a house.

For every time you hear a story of someone making money in property, there are at least the same number again (if not substantially more) who haven’t made anything or who have lost money. They are just much less keen to advertise that fact!

Personally I learn more from mistakes than I do from success. It’s easy to attribute success to just being an all-round great person, but a mistake makes you question everything and dig into what went wrong and why. This was a tough blog to write, but it’s somewhat cathartic as well.

Coming out of the other side of a mistake is what helps us grow and become the best version of who we can be.

So until next time, keep learning!

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