The Wilsons - 875 buy to let property empire

pickledpink

dopester wrote: »

I rarely read it, but found this to be such a great post about the Wilsons over from GPHC.. and hopefully the poster won't mind me reproducing their insight here.

One other thing... this bit:

That indicates to me he either thinks they are too big and important to go unsupported by their lenders - or, even worse a trait - that he would prefer to see everyone brought down and get hurt and go to ruin if he falls.

Oh!....................that's not nice.

He sounds a bit psychotic if he said that.

mewbie_2

Pobby wrote: »

Sure it`s bad news re the stock market but you are not committed to any form of debt repayment on a falling market. Maybe, oh OK yes I am trying to make myself feel better, but so far in history the market has recovered. Hope it`s in a 5 year time span as I would like to take my pension then.

At least you don't have to visit your shares and perform various menial tasks for the tenants, while they say fake comforting things like "you must have lost a packet on this property", "I wouldn't like to be in your shoes", "did you think you were going to get rich doing this" or maybe offering you a fiver on the way out.

Generali

mewbie wrote: »

At least you don't have to visit your shares and perform various menial tasks for the tenants, while they say fake comforting things like "you must have lost a packet on this property", "I wouldn't like to be in your shoes", "did you think you were going to get rich doing this" or maybe offering you a fiver on the way out.

That's the great thing about shares as an investment - they don't ring you on Christmas day to say the boiler's broken down and you don't have to put coffee in the oven or have that American woman round to tart the place up if you want to sell them, you just call or log on to your broker.

My landlord is a crack businessman and newsagent. His mortgage costs are approximately £1200pm now more than the rent when this place is occupied and my notice is in as I'm off to Aus.

When I used to pop in to his shop on a Saturday to buy an FT he used to bang on about what a great investment property is and all that guff. He's stopped doing that now. I've no idea why.

JayScottGreenspan

The facts:
1) 910 properties (http://www.thisismoney.co.uk/mortgages/buy-to-let/article.html?in_article_id=455442&in_page_id=56&ito=1565)
2) £162.5m of debt (http://www.guardian.co.uk/money/2008/oct/04/buyingtolet.property- portfolio valued by them at ~£250m at 65% LTV; they're probably optimistic about the value, but should have a good grasp of the debt)
3) They aim to own house in the ratio of 16 two-bed-terraces to 8 three-bed-terraces, to 4 three-bed-semis to 1 three-bed-detached(http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/2791508/Property-investment-Dont-choose-flats-go-for-houses.html)

Rightmove (Ashford):
two-bed-terraces: £600 pcm rent, £130k buy
three-bed-terraces: £700 pcm rent, £150k buy
three-bed-semis: £750 pcm rent, £170k buy
three-bed-detached: £800 pcm rent, £190k

What does this mean (speculative)?
Assets: £130m (assuming 910 properties in Kent as above)
Liabilities: £162.5m

Rent: £7.2m per year
Interest (@4.5%): £7.3m per year

When they have to renegotiate their financing at higher rates, they will get a bit of a shock. I imagine this has already happened, hence their decision to try to sell. I expect they've got some property outside Kent that helps to balance the above calculation, but it would have to be a pretty big chunk to save them.

Moral vitriol
It shouldn't be the Wilson's 'success' that should irk, it should be the impact they've had on thousands of people's lives in the area. If they'd built houses they'd have been providing a valuable service; instead they've simply outbid young families. To borrow an analogy, what they've done is akin to putting a blockade up outside Tesco and charging people a 50% mark-up for the privilege to use the store - not exactly providing a service!

So their bankruptcy (their ltd vehicle's loans are almosty certainly guaranteed by them) is bad news for them, but in the long run should be good news for thousands of young families. So let's not berate anyone who rejoices in that. I just hope their tenants are treated fairly in the inevitably painful period in which this mess gets unwound.

ad9898_3

Good post Greenspan.... unless of course you are the real Greenspan, then you need a good kicking ...:D

JayScottGreenspan

ad9898 wrote: »

Good post Greenspan.... unless of course you are the real Greenspan, then you need a good kicking ...:D

Ta. The great man on the housing bubble: "I really didn't get it until very late in 2005 and 2006"
What a class act. Wouldn't want him running a chip shop, let alone the Fed!:mad:

Sir_Humphrey

Generali wrote: »

My landlord is a crack businessman

You mean he is a drug dealer?!? :eek::p

ad44downey

JayScottGreenspan wrote: »

It shouldn't be the Wilson's 'success' that should irk, .

The Wilsons are total Gamblers IMHO. You'd find more astute investors in your local bookmakers.

JayScottGreenspan

ad44downey wrote: »

The Wilsons are total Gamblers IMHO. You'd find more astute investors in your local bookmakers.

Agreed. They're also a great example of how unsustainable booms encourage misallocation of investment and arbitrarily redistribute wealth, ultimately to the detriment of society.

Imagine if the economy had been prudently managed and the banks had been properly regulated. All the money that poured into property would have been allocated to doing something useful and permanently improving our quality of life. Nevermind...

teabelly

JayScottGreenspan wrote: »

The facts:
1) 910 properties (http://www.thisismoney.co.uk/mortgages/buy-to-let/article.html?in_article_id=455442&in_page_id=56&ito=1565)
2) £162.5m of debt (http://www.guardian.co.uk/money/2008/oct/04/buyingtolet.property- portfolio valued by them at ~£250m at 65% LTV; they're probably optimistic about the value, but should have a good grasp of the debt)
3) They aim to own house in the ratio of 16 two-bed-terraces to 8 three-bed-terraces, to 4 three-bed-semis to 1 three-bed-detached(http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/2791508/Property-investment-Dont-choose-flats-go-for-houses.html)

Rightmove (Ashford):
two-bed-terraces: £600 pcm rent, £130k buy
three-bed-terraces: £700 pcm rent, £150k buy
three-bed-semis: £750 pcm rent, £170k buy
three-bed-detached: £800 pcm rent, £190k

What does this mean (speculative)?
Assets: £130m (assuming 910 properties in Kent as above)
Liabilities: £162.5m

Rent: £7.2m per year
Interest (@4.5%): £7.3m per year

When they have to renegotiate their financing at higher rates, they will get a bit of a shock. I imagine this has already happened, hence their decision to try to sell. I expect they've got some property outside Kent that helps to balance the above calculation, but it would have to be a pretty big chunk to save them.

:rotfl:It's what I suspected, they are going bankrupt. For maths teachers (those who can't, teach) they really are poor at adding up!

Their demise probably won't help 900 families in Kent as it is likely the portfolio will just be passed onto experienced landlords as has been happening already with a few more modest sized portfolios. No idea if an experienced landlord would even take it on as it is clearly making a serious loss. Who in their right mind thinks 100k negative income per year excluding voids, maintenance, management fees, tax etc is good??? Tarbey brained half wits the pair of them. I suspect it will be split up into a fewer positive income portfolios and the worst renting places will be put into the open market.

Imagine having to owe 30m in secured loans after you've sold everything? They'll be living in cardboard boxes and their kids will get nothing (if they have any) as they will have bankrupted themselves totally. And after all that they'll have to pay a massive CGT bill out of nothing or indeed first. Unless they have a personal private residence worth more than 30m and not already mortgaged to the hilt then they are going to owe lots of money.

Personally if I had interest payments of 7 million I'd want a least 2 million a year surplus to even consider it a worthwhile enterprise. -100k pa is laughable :rotfl:

It is not a warning against booms, it is a warning against cretins being allowed to invest in things they do not understand. 900 properties should probably only be kept at max of 40% ltv to allow for a snowball effect if property prices stagnate locally to them or mortgage rates go up. It is one thing being a bit stretched with half a dozen places but something else entirely if you're overstretched with 900! They should have calculated to more modest HPI and invested less of the equity in more property without thinking about how much cash flow it added. If it took it away then they shouldn't have bought it. In this game you have to buy as though the price would never rise so any price inflation is a bonus rather than a necessity.