Can my bad investment be saved?

As I see it, provided that I think the market will turn around, I can only hold it if I can negotiate a further IO period with the current lender at a lower interest rate.

Ofcourse and provided by "market will turn around" that it is within an acceptable timeframe. There is no use waiting 5+ years for the market to recover your 20k loss because by then you have had to deal with holding costs regardless if you go to IO and a lower rate. Not to mention inflation which would have put you probably further than 20k behind anyway.

When analysing whether your best to hold or sell then give yourself a desired return and timeframe and if you think it will achieve that then hold. For example you may say you want the property to be worth 260k by 2017.

Now maths is definitely not my specialty and their are other considerations but just for this example that would mean on the current value of 220k and your desired result of 260k then you need just over 18% capital growth.
 
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