"Buying and renting property seemed so easy and I fancied a bit of glamour. So I bought two apartments in Leeds: one for myself and one to let. The rent didn't cover the mortgage and since the value had gone down I couldn't borrow any more.
Looking back, I should have checked out market rents or prices with local agents. I keep asking myself how could I have been such a moron?"
Janie Dix is a 32 year old marketing consultant from Manchester. Three years ago, she bought two flats costing £300,000 with a 95 percent LTV mortgage. At the time, she thought that by 2008, her property portfolio would be worth £450,000. She has just sold both flats for £250,000 in an auction.
Poor Janie is a little off the mark here. Rather than checking out the rental market, she should have thought a little more about her expected rate of return. She put down £15,000, borrowed £285,000, and expected a capital gain of £150,000 in just three years. This poor deluded woman expected a 900 percent return on her investment in just 36 months. She expected to make a capital gain of about £4,200 a month simply because she went into an estate agent and a bank and sign a few documents.
Sadly, it just didn't happen for Janie. Instead of a huge return with negligble effort, she took on a mountain of trouble. However, I wouldn't be surprised if Janie couldn't put a number on her losses. She knows she lost her deposit and owes a further £35,000 in unpaid mortgage principle. However, she was almost certainly losing cash every month as her rental income didn't cover the mortgage and other costs.
Presumably, Janie is now bankrupt. With no prospect of clearing her debt, her speculative adventure has now become a banking problem. The bank lent out £285,000, and minus auction fees and other repossession costs, I reckon they got back perhaps £230,000. So, the bank made at least a 19-20 percent loss due to Janie's fancy for a "bit of glamour."
This kind of financial stupidity has consequences. Janie, to her credit, now recognises that. The UK banking sector, on the other hand, are only just beginning to understand how dangerous women like Janie could be.