Good Old Fergus!

pbouk

He is selling because he knows prices will not likely rise any further once base rates rise next year, and considering that he nearly "lost the lot" when the banking crisis hit 5/6 years ago, he knows now is the right time.

Does anyone know his 7 careers he has had? I know he was a maths teacher.

Thrugelmir

princeofpounds wrote: »

I think it's a shame we never got to test his business model without extreme government and BoE support, as we will never know now if he was clever or merely lucky.

Many people followed a similar model over the same time frame. Caught the wave and surfed it. The art is knowing when the wave is about to crash onto the rocks and get off the board before.

princeofpounds

The art is knowing when the wave is about to crash onto the rocks and get off the board before.

Indeed - he didn't before; in fact there was talk of repossession if I recall correctly. He likely would have been worth nothing then (aside from whatever crumbs he stashed away out of the business).

Kind of the govt/BoE to give him a £100 million bailout really. It's this kind of hard-working family the bail-outs supported.

CLAPTON

what was his business model?


there seems nothing inherently unstable about a letting business.

N1AK

thequant wrote: »

Yet only in this country would he be called tw4t for everything he has achieved.

Even if the premise that he did some good, inadvertently, is accepted it doesn't stop him being a tw&t and he'd be called one in plenty of countries, even though that doesn't fit your endlessly repeated narratives.

leveller2911

mayonnaise wrote: »

Ever met him in person? I assume you do, having such an outspoken opinion on him?

I have met him on a number of occasions. I don't think anyone can form an opinion on a single meeting even though many of us do so I think I'm qualified to have one.

I found him to be a very ignorant man,pretty obnoxious and I think his wife must have the brains unless he covers it up well.

Its pretty much a cert that he was/is very lucky to still be trading.

ladeeda

mayonnaise wrote: »

Do you both rent from Mr. Wilson? Ever met him in person? I assume you do, having such an outspoken opinion on him?

Don't rent from him.
Have met him - thought he was a tw4t. Still do.

princeofpounds

what was his business model?

Heavily leveraged BTL basically. Buy a few houses on minimal deposits, hope that the rent roughly pays for the interest and maintenance.

Rising prices increase your equity, withdraw any excess equity via new loans to create more deposits, buy more houses, rinse and repeat.

Works rather well in an 20 year unprecedented property boom.

there seems nothing inherently unstable about a letting business.

The assets themselves are fairly stable.

Adding leverage to it makes it unstable, increasing the risk to increase the reward.

A 100k house which is bought at 90% LTV i.e. 10% equity, is 10x more sensitive to property prices than a house owned outright.

If the price goes up 10%, you sell, pay off the mortgage, and are left with 20k - you doubled your money.

Buy 2 100k houses with that money at 90% LTV. Prices go up 10%. You now have 40k in equity.

80k, 160k, 320k, 640k, etc... the equity grows exponentially.

These 10% upwards steps have happened about 11 times since 1990 (prices increased roughly 2.8x); more in the south east and if you started in the actual trough of house prices.

If you follow this 90% LTV remortgaging model at each point, then your original equity increases by 2^11 times; or 2048-fold. So with just 48,828 pounds in your bank account in 1990, you too could have been worth £100m by today.

Obviously this is a mathematical simplification and there are many other issues to the business model, but this is basically how you achieve such massive wealth.

So what's the catch? The catch is that by maintaining such a low level of equity at all points compared to your assets, you always remain exceptionally sensitive to something going wrong.

It only takes a single 10% down move to wipe out ALL your equity. This isn't necessarily a loss that gets crystallised right away, but the problem that it causes is that it makes the banks exceptionally scared to lend you more money, as they not longer have collateral worth more than the mortgage. So they might repossess, refuse further financing, jack up interest rates to compensate for the risk as they know you won't get a new loan elsewhere.

I've seen this happen to property businesses, it's ugly.

When it happens to an individual with one house, who ends up in negative equity, they can generally deal with it because they can work to build up appreciable equity with a normal salary. Doesn't work with 700 houses!

This almost happened to Fergus in the 08 crisis (according to some newspaper reports - I don't know the truth of this). One of his banks was getting nervous. This whole 'I'm going to sell up to retire' story was being put out at the time in fact.

http://www.thisismoney.co.uk/money/mortgageshome/article-1689285/Buy-to-let-gurus-see-empire-crumble.html

At that point, he was probably worth nothing, technically a bankrupt if the bank had chosen to force the issue. He owned a lot of assets, but his liabilities were almost as large.

But the old Donald Trump adage that 'if a bank gives you a small loan, it's your problem, if they give you a large loan, it's their problem' (I paraphrase) holds true.

He somehow won some time, possibly through a restructuring process (i.e. negotiating a softer deal to stop it turning messy). possibly because he wasn't really quite on the edge yet.

And in that time, interest rates were slashed, banks were recapitalised and forced to lend on mortgages, and he got his equity back.

CLAPTON

princeofpounds wrote: »

Heavily leveraged BTL basically. Buy a few houses on minimal deposits, hope that the rent roughly pays for the interest and maintenance.

Rising prices increase your equity, withdraw any excess equity via new loans to create more deposits, buy more houses, rinse and repeat.

Works rather well in an 20 year unprecedented property boom.



The assets themselves are fairly stable.

Adding leverage to it makes it unstable, increasing the risk to increase the reward.

A 100k house which is bought at 90% LTV i.e. 10% equity, is 10x more sensitive to property prices than a house owned outright.

If the price goes up 10%, you sell, pay off the mortgage, and are left with 20k - you doubled your money.

Buy 2 100k houses with that money at 90% LTV. Prices go up 10%. You now have 40k in equity.

80k, 160k, 320k, 640k, etc... the equity grows exponentially.

These 10% upwards steps have happened about 11 times since 1990 (prices increased roughly 2.8x); more in the south east and if you started in the actual trough of house prices.

If you follow this 90% LTV remortgaging model at each point, then your original equity increases by 2^11 times; or 2048-fold. So with just 48,828 pounds in your bank account in 1990, you too could have been worth £100m by today.

Obviously this is a mathematical simplification and there are many other issues to the business model, but this is basically how you achieve such massive wealth.

So what's the catch? The catch is that by maintaining such a low level of equity at all points compared to your assets, you always remain exceptionally sensitive to something going wrong.

It only takes a single 10% down move to wipe out ALL your equity. This isn't necessarily a loss that gets crystallised right away, but the problem that it causes is that it makes the banks exceptionally scared to lend you more money, as they not longer have collateral worth more than the mortgage. So they might repossess, refuse further financing, jack up interest rates to compensate for the risk as they know you won't get a new loan elsewhere.

I've seen this happen to property businesses, it's ugly.

When it happens to an individual with one house, who ends up in negative equity, they can generally deal with it because they can work to build up appreciable equity with a normal salary. Doesn't work with 700 houses!

This almost happened to Fergus in the 08 crisis (according to some newspaper reports - I don't know the truth of this). One of his banks was getting nervous. This whole 'I'm going to sell up to retire' story was being put out at the time in fact.

http://www.thisismoney.co.uk/money/mortgageshome/article-1689285/Buy-to-let-gurus-see-empire-crumble.html

At that point, he was probably worth nothing, technically a bankrupt if the bank had chosen to force the issue. He owned a lot of assets, but his liabilities were almost as large.

But the old Donald Trump adage that 'if a bank gives you a small loan, it's your problem, if they give you a large loan, it's their problem' (I paraphrase) holds true.

He somehow won some time, possibly through a restructuring process (i.e. negotiating a softer deal to stop it turning messy). possibly because he wasn't really quite on the edge yet.

And in that time, interest rates were slashed, banks were recapitalised and forced to lend on mortgages, and he got his equity back.

that's a good explanation


so the lesson to learn is a little less leverage, unless you can guarantee a collapse in interest rates to 0.5%

Running_Horse

The Wilson soap opera continues.

http://www.kentonline.co.uk/maidstone/news/property-tycoon-fergus-wilson-tv-21213/

This time he wants his own property TV show.