Free from the chains of negative equity

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The Independent Online
John and Jacqui Wilson are typical "accidental landlords". In 1990 they paid almost pounds 250,000 for a flat on the Thames, only to see the value nosedive over the next four years. "Prices in Docklands fell further and faster than anywhere else in the country, and it felt as though our capital was being washed away on every tide," Mr Wilson recalls.

Then Mr Wilson was headhunted for a job in Glasgow. "There was no way we could sell without paying the building society to let us move out," he says. Finding a tenant was the only answer. "We went to see one of the local agents, who was able to find tenants in a couple of weeks - a German couple who expect to be in London for two years."

The monthly rent of pounds 1,200 more than covers the mortgage, service charge, insurance and management fee to the agent, who is empowered to deal with minor repairs and maintenance.

The lender's consent is essential before a tenancy can be offered, but in the Wilsons' case this was little more than a formality. "I went in with the figures, which showed that even on a worst case of interest rates and expenses the account would still be in surplus, and they were quite happy to agree," Mrs Wilson says. "Mind you, I think they were happy because they were going to charge us more - an extra 1 per cent on the rate."

The building society also suggested that the rental should be paid directly into an account there, rather than the Wilsons' bank account - a safeguard they found easy to accept. The surplus on the account goes into a higher interest account, on which they have had to draw only twice in the past 15 months: pounds 80 for the central heating maintenance, which is required by law, and pounds 100 for a new refrigerator.

"Even if the market slows down and it takes a while to find another tenant, we can cover a couple of months of mortgage payments from the surplus," Mr Wilson says.