Negative equity insurance?

Question

Is there such a product that I can take out if house prices fall below the amount for which i bought it for insurance would protect me? im looking at buying property for investement.

Answer 1

Sounds a bit specialist - you need a specialist broker who walks the floor at Lloyds.

But do you still expect the same returns a property speculator would get if you're passing off all the speculation risk onto someone else?

Expect the premiums to be heavy unless you can very thoroughly box off the risk that your insurer is taking on. You're looking for good returns here; you should accept some risk and only insure against disasters.

Note, there may be a rule here that foxes you. Negative equity isn't a cash loss unless you sell up during the down market. Who decides you're going to sell? You? Your insurer? The timing of a sale during a down could hurt one party very badly. Expect them to want control over that, because if they don't control it then you could "game" them by overbuying then selling cheap. If you did it with an accomplice it would be a licence to rob your insurer. They won't do a deal where that risk is (theoretically) present.

You might actually be looking for a cap/collar arrangement or similar hedge on an agreed house price index - in other words, buy a financial instrument (quasi-insurance policy) on market movements, quite separately from the purchase of the property. Again, very specialist. Certainly do-able if you're turning over millions, but for just one pad you'd be very lucky to find a good deal of this nature.

Answer 2

To the best of my knowledge, no there is no such insurance. Getting on to real estate investing is just like making an investment in the stock market, when it's up you make money and when it's down you lose money or break even. It's a risk that you take. Depending on the area of the country that you live in, right now may not be the best time for this type of investment if you are only planning on having a property for a short time. If you are planning on holding on to it for more than two years, it may be worth it.

Be of luck to you!