The Wilsons - 875 buy to let property empire

Ian_Griffiths_Halifax

It's been a long day

Trollfever

PasturesNew wrote: »

As owners, it's a shame we can't just log onto a website, key in a name and up pops the addresses, loans and details

Think that I would prefer not to know about the extent of the Get Rich Quick and Mortgage Fraud that I am now paying for.

dopester

Yes; it did seem likely to me that doing your BTL-ing through a LTD company wouldn't just be a cushy process where lenders give you the same cheap deals as normal BTL mortgages, and where a landlord would then have zero worry if circumstances turned against them.

Going back in time a bit: (2001)

Buy-to-let Ltd?
This is Money
30 April 2001

The main reason for setting up a company to own your properties would normally be to mitigate tax. For example if you are now a 40% taxpayer but expect to be only a basic rate taxpayer when you retire, deferring any tax liability on any profits on your property investment portfolio may save you tax. Against that you will incur some expenses in setting up the company (or buying an “off the shelf” company) and companies have to meet certain statutory obligations on an annual basis.

Many lenders in the buy to let market will not lend to limited companies, and those that will always require a personal guarantee from at least the principle director/shareholder and possibly the others. So if you buy your properties through a limited company your choice of lenders is reduced and you may not have access to the best rates.

These are only some of the issues to consider when deciding whether or not to own properties through a limited company, although as a general rule the higher the value of your property investment portfolio the more likely it is to be worth while owning the properties through a limited company. I would very strongly recommend that you discuss the pros and cons with a qualified accountant.

What a personal guarantee involves exactly I don't know. You'd have thought it was more than someone's word of honour. Lenders can't move to collect on a personal guarantee if the borrower has spent up or hidden it away, unless perhaps it is assets in their own names.

This was a from a Woolwich BTL borrowing form for a limited company

We will require as additional security a Floating Charge (Debenture) from the SPV Limited Company together with a full Personal Guarantee from each director/shareholder/member. Please note we will require confirmation from Applicant(s)’ solicitor that they have received Independent Legal Advice (ILA) before signing the Personal Guarantee.

ad9898_3

I'm pretty certain they are highly unlikely to be able to unwind this, they will be bankrupt in less than 2 years, the average house is losing £100 pound a day at the moment, so they are losing a cool £90000 a day on their portfolio

They will never be able to sell 900 houses before all their £90 million in equity (at peak) has vanished.

They are doomed and you don't have to be a maths teacher to realise this.

dopester

From the Guardian article:

Fergus says: "Buy-to-let landlords are not bad people. We are not like sub-prime in the US. Most of the properties that will now be sold will go to first-time buyers. What the government has to do is something about the size of deposits people now need to raise."

His advice for property buyers? "Flats will not be worth buying again. There are far too many - that market is finished. What I tell youngsters is, 'rent your first flat, but buy your house'."

Used in that context, it doesn't seem like he even knows what sub-prime (lending or borrowers) even is. :rolleyes:

It is a creepy thought of Fergus Wilson telling youngsters, and possibly those young workers forced to rent his houses that were shooting up in price year after year, to "buy your house."

Does his expertise also extend to telling them, why buy today when it looks likely prices will be cheaper tomorrow, next month, next year and so on?

macaque_2

ad9898 wrote: »

I'm pretty certain they are highly unlikely to be able to unwind this, they will be bankrupt in less than 2 years, the average house is losing £100 pound a day at the moment, so they are losing a cool £90000 a day on their portfolio

They will never be able to sell 900 houses before all their £90 million in equity (at peak) has vanished.

They are doomed and you don't have to be a maths teacher to realise this.

The Wilsons claims of £90m equity just doesn't stand up. A portfolio of 875 2/3 bed houses in Ashford will be worth between £185 and £200, not £250m. Their problem is that they went on buying for far too long. 20% of their portfolio was bought in 2007 alone. They have ended up becoming victims of their own greed and hubris.

GDB2222

ad9898 wrote: »

I'm pretty certain they are highly unlikely to be able to unwind this, they will be bankrupt in less than 2 years, the average house is losing £100 pound a day at the moment, so they are losing a cool £90000 a day on their portfolio

They will never be able to sell 900 houses before all their £90 million in equity (at peak) has vanished.

They are doomed and you don't have to be a maths teacher to realise this.

If they had 90m equity in a 250m portfolio, they could withstand a fall in value to 160m before being in neg equity, which is a 36% fall. We could well have a fall of that size from peak to trough, quite possibly more. At the moment, though, at least on their figures, they are in positive equity. They must be praying that some fool will come and take the whole portfolio off their hands, so that they can crystallise their profit.

Of course, those are the Wilsons' figures, and they are not the most reliable people. Also, they may fall foul of their banking covenants before being in negative equity.

Alternatively, they may be able to keep the whole show on the road even if they are in neg equity, with a bit of support from their lenders. The last thing they will want is to have to take over this 'empire'.

ad9898_3

I do agree with macaque and GDB2222 here, my statement was made on their dubious figures, which are of course is open to [STRIKE]ridicule[/STRIKE], ahem... debate.

I think at best they were very stupid people who believed their own hype, I mean come on, property doubling every 7 years, what was that about ?, I wouldn't want either of them teaching my daughter mathematics, thats for sure.

It took me 12 months (July 2007-2008) to sell my 4 bed detached house, it was a beautiful home, conservatory, landscape gardens etc.., I sold it 4 times, 3 of which fell through, that was only 1 house !!!, not 900. The market was bad then, now its fallen off a cliff. They are finished, in fact I think my first estimate of 2 years to bankruptcy was too optimistic.

The reason I say this is simple, they bought for capital gain, not yield. This probably means they are highly leveraged ( forget what Fergus says, I reckon he's talking crap). They will be trying to remortgage properties on a daily basis, many of which they will fail to do so, macaque said that they bought 20% of their portfolio in 2007, they almost certainly won't be able to remortgage these properties, when their "2 year fixed rate interest only mortgage" runs out.

Put it this way, I wouldn't swap my very modest STR fund for their "paper millions", that has got to sum it up really, they will both be drinking White Lightening cider from a plastic bottle on a park bench near you soon.

dopester

Gorgeous_George wrote: »

I don't see what th problem is IF they bought properties that they could let at a profit.

You're a landlord aren't you?

Yes; we know how safe you are with your one BTL that is sounds like you've paid off in full - but unless you are being sarky, then how can you not understand some of the real reverse-leverage pressures the Wilson's will be buckling under?

Try rising unemployment, pay-cuts, and tenants missing payments or having to leave, thus more voids. Their rent guarantees seem to come at the cost of previous 4-5% of monthly rent, with the tenant having to pass the insurer's credit-checking tests, so that will have cost them even in the good times. Perhaps rent guarantees are set to increase as well.

Even forever optimistic Fergus himself thinks they are only "reasonably safe" from going under, whereas you can't see any real problem?

Despite buying from the last crash, they've continued to buy hard, even big in 2007, for a capital-growth strategy, and the house price crash is going game-on, they seem to be up against higher financing costs for their position, just like all the other OPM debt junkies.

teabelly

Sounds like they didn't build a balanced portfolio. With 900 properties they shouldn't even consider individual mortgages. What they should have done is balanced the high capital gains properties with the higher yield but low capital appreciation properties.

I wonder if they are the reason Mortgage Express/ B& B are going under? If they are the biggest number of MX mortgage holders and they are defaulting then that could explain why a) b & b suddenly went pear shaped and b) why the wilsons are saying about selling up all of a sudden.

Looking again at the figures. If they are valuing their portfolio at 250m and have 90m equity then that gives them 65% ltv. With those figures then the monthly mortgage payment @ 5.5% is £745k. To cover the mortgage to the required level they'd need £930k pcm which is roughly 1000 pcm per property. Looking at rents in Ashford I would have said the average rent is probably 800 pcm. Max rental income is there for likely to be more like 700k assuming 875 properties, not including voids. This gives them a loss of 45k per month if the mortgage figures are correct. I assume they are selling them off as they have realised as they remortgage onto higher rates the cashflow situation is going to deteriorate as they didn't have the sense to choose a long term portfolio style mortgage. Their income vs outgoings excluding equity release just doesn't work. This is the real reason they are selling as they must have realised that without capital gains there is no way in hell they can continue to meet the mortgage payments. Even at 4.5% 700k pcm isn't meeting the rental stress so they can't withdraw equity to cover the shortfall.

Anyone know what the average rent is in Ashford?