This post is a continuation from How to Fail Spectacularly and Still Retire Early…..
As a couple, by most people’s standards, we were well off. One and a half professional salaries produced a lot of disposable income. And though I funnelled much of my part time salary into our savings accounts, there was still some to spare.
The “must have” investment among my husband’s colleagues was property overseas. Our financial advisor directed us towards a company selling apartments in Cyprus.
I would like to lay the whole blame for what we did at my husband’s feet but the fact is, I was there too. With almost no research and a blind faith in following the herd, we signed our lives away to the tune of two off-plan apartments in a country we had never even visited.
When I write that now, I shudder with disbelief at the combined stupidity of two supposed professionals. All I can say in my defence is that this was back in a time when the internet was barely a thing and so research was not at our fingertips the way it is now. Safety in numbers, we did it because our peers were investing there and our financial advisor himself was supposedly buying there. (Suffice to say I don’t use him any more).
The intention was for long term capital gain, renting the apartments to tourists to cover the costs and also to use the larger two bedroom place as our own holiday home. (Just one of many mistakes made – a property that suits your family as a holiday home won’t necessarily make a good rental).
There was no AirBnb back then, so building up the rentals was a hard slog. I treated it like a job and doggedly put in the hours and it paid off because both apartments achieved good occupancy.
Research might have forewarned us that 2 bedroom apartments in Cyprus are not highly in demand. Being further than the usual hop to mainland Europe, flights were that much more expensive and so we found lots more couples booking rather than families. I had to charge the same rental as for equivalent 1 bedroom places in the area, but I reasoned that some rental income was better than none.
The whole story is long and littered with things that went wrong – pretty much everything that could go wrong did go wrong.
We knew nothing about the local property laws and even now, some 15+ years later, the deeds for those properties have not been issued, rendering them unsellable.
The builder declared bankruptcy soon after completion, leaving a host of problems unresolved like subsidence, unfinished resort roads and promised amenities never built. He was back in business with a new company almost immediately but that was no help to us.
The years passed and the value of the pound plummeted against the euro, meaning mortgage repayments and all the costs associated with rentals rocketed. But at the same time, AirBnb was born and frankly, it was a life saver, opening up the rental market to the whole world rather than just UK tourists.
We weren’t breaking even – far from it – but it helped minimise the expense.
Money-Pits and Millstones
After our divorce we had to keep joint ownership of the apartments, since they were basically unsellable money-pits and neither of us would release the other from the responsibility.
I can’t tell you how much I worried about this situation for my future. The mortgages were interest only so the clock was ticking to the day we would have a massive capital amount to repay. And every year the payment of leasehold community fees running into the thousands was a stress factor.
I considered rolling the debt into my home mortgage but my ex would not do the same for his half, preferring to bury his head in the sand and it seemed as if the nightmare would never end. I thought this was to be a millstone around my neck for life – one that would mean I could never retire and never rest easy.
Finally however, there was light at the end of the tunnel. Thanks to the tireless work of the resort management committee we discovered two things.
Firstly that the Cypriot lawyer appointed to us by the purchasing agent had acted for all parties – both buyers, builder and bank through which mortgages were arranged – and so there had been no independent legal party representing our best interests in the purchase.
And secondly, that the bank had acted arguably illegally – giving us mortgages for properties built on land that was already mortgaged by the builder (with the same bank).
With the help of a UK solicitor based in Cyprus, a few years ago the bank released us from the mortgages in return for the keys and we walked away.
I have never added up the total costs of all those years – I don’t want to know – there’s nothing I can do about it now. Walking away seemed like the only option and I don’t regret it. The alternative would be a legal fight against a bank through the Cypriot courts, with no guarantee of the outcome being in our favour and certain financial ruin if we lost.
At least this way I can sleep easy.
Moving On
I am embarrassed to tell this story. I am ashamed of how naïve we were. But on the positive side, I will never make mistakes like that again and neither will my boys. And when I think back over it all, I feel just relief that it’s all over and overwhelming gratitude that there was a way out.
I am sure that anyone reading this blog would not be as blindly stupid as we were. But if you take anything from this horror story, let it be this….
Those were dark dark days and sometimes I thought there was no way out and that I would lose everything. But here I am now, some years later, financially independent and early retired.
We all make mistakes and going over and over them does no good. Minimise the losses as best you can, pick yourself up and move on.
I didn’t let this experience put me off investing. I’ve bought three rental properties since then. They are in my home country with a market I am familiar with and laws I understand and they are providing the cashflow for my early retirement.
All’s well that ends well.
FIREthe9to5 