buy to let council tax warning and other warnings

DaftyDuck

It was a poor business model because it didn't allow sufficient leeway for recession/houseprice fall/economic instability. It was a poor business model because the houses you bought were attracting a poor quality of tenant that was unwilling/unable to pay the rent.

It was a poor model because the partners were chosen unwisely.

It was a poor model because you seem not to have even been clear exactly on what the loan was secured.

(The banks have been gambling with "our" money; been "greedy" - yet you haven't to either? Wow! Sounds like you've been gambling - wasting, in fact - some of the savings (albeit a minute proportion) I have stuffed safely away in the banks. Cheers! That's a portion of my interest you've just frittered away).

It was a poor business model because there was never sufficient spare capital to cope with any adverse event.

It was a poor business model..... because it failed.



You should, in my opinion, identify all properties that are or are likely to lose money through voids or lack of capital growth, and offload them a.s.a.p., at a loss if need be.

You should concentrate on far, far fewer profitable properties, and keep control of the bills/voids/security better. If you self-manage them, you need to be far, far more proactive in ensuring the quality of tenant, and their ability to pay rent on time, in full. If they are agency-managed, you need to place the same - no, even more - care on choosing the agent.

You need to ensure that, whatever model you choose (and there are several thousand useless "get rich quick" schemes like this...), you make sure that there is always sufficient safety margin in the finances to cope with difficulties.

Compared with your venture, I have built a very small property "empire" the other way round. No mortgages at all, no debts, just lots of very, very hard work and overtime in my chosen daytime profession, then endless hours of building and repair work on wrecks of houses in the evenings and weekends. I have bought cheap and (with two very notable exceptions :eek:) sold on at a healthy profit. I have scars on my fingers and damaged knees because it was blo0dy hard work. I didn't ever risk somebody else's money by borrowing on some silly ill-thought-out venture that I knew little about, always kept a very close eye on my spend (ensuring it matched the income I was getting), and always, always paid my bills. All of them.

When I managed my properties myself, I paid utmost attention to selecting tenants. As a result, in 20 years of renting a property, I have never (!), ever(!!) had a tenant not pay their full rent (albeit one or two were late, but explained circumstances to me in advance). I have never had more than two months unplanned void on any property. Oh, and believe it or not, I have never, ever, had to claim damages from a deposit. Occasional damages were either fixed by tenant, or by me, but never a difficult claim, and never from deposit! The concept of a tenant leaving a property having damaged it, or taken the heating system.... nope, not happened. Were it to happen, I'm solvent enough I could cope without an endless void.

Best of luck sorting the mess out, though. Hope it doesn't cost (us all) too much!

gallygirl

ptwparkinson wrote: »

don`t blame the banks --- who else is to blame for the meltdown --- they have been gambling with our money -- they have been greedy -- they have caused an almighty global depression

Sounds like you gambled with their money, not the other way round.

ptwparkinson wrote: »

if you are so clever let`s be hearing how you have succeeded and see if you can teach any of us anything -- what have you done with your life ?

From an initial investment of 17k around 17 years ago I'll be retiring next year (15 years early) on btl income from five properties (admittedly one inherited, but that one has the lowest rent). Rather than buying lots with high leveraging I bought one or two with less than 50% LTV, saved like crazy then bought again. Now saving like crazy again to have the money to pay off mortgages if we choose (or leave the money in the bank and use it to fund the mortgage payments). A much more cautious business model but one that has fortunately proved successful. Plus we bought properties across different areas to further reduce the risk of an area becoming 'bad'.

DaftyDuck wrote: »

It was a poor business model because it didn't allow sufficient leeway for recession/houseprice fall/economic instability. It was a poor business model because the houses you bought were attracting a poor quality of tenant that was unwilling/unable to pay the rent.

It was a poor model because the partners were chosen unwisely.

It was a poor model because you seem not to have even been clear exactly on what the loan was secured.

(The banks have been gambling with "our" money; been "greedy" - yet you haven't to either? Wow! Sounds like you've been gambling - wasting, in fact - some of the savings (albeit a minute proportion) I have stuffed safely away in the banks. Cheers! That's a portion of my interest you've just frittered away).

It was a poor business model because there was never sufficient spare capital to cope with any adverse event.

It was a poor business model..... because it failed.

Seconded.

OP, I do sympathise with you, you seem stuck between a rock and a hard place, but blaming banks for your problems is not the answer. Presumably everyone the banks lent to thought they had a good business model. Going back to my earlier point:

OP you've said you have other btl's in more prosperous areas. Rather than concentrating on these poor ones, what is your overall position of equity/debt? That may offer more solutions (albeit unpalatable ones).

- what is salvageable?

Kynthia

We are reading your posts and it's from your posts that we believe your business model was poor:
It relied on property prices increasing in the short term, which clearly shouldn't be relied upon but should be a bonus.
You bought too many properties in one area which was an area of higher risk tenants. This isn't diverse enough, even though you did buy some properties in other areas.
You didn't have a good enough yield on your properties so weren't able to cope with voids, bad tenants, rents reducing, etc. I believe you said earlier that landlord don't really make their profit from rent but property price increases, but this is wrong as professional landlords only plan for rental profits as anything else is not good business.

I don't wish you misfortune and it's not nice to hear of someone suffering, but it's infuriating that even after the event you can't see that your business plan relied on lots of debt and the good times but couldn't cope with bad times, and that much of this was avoidable with better planning.

DTDfanBoy

ptwparkinson wrote: »

You actually don`t know what my business plane was


I bought the cheaper ones only to keep for 3 years and sell on to make about £ 5,000 on each one

---

--- lives are being totally destroyed and people are not seeing the big picture and how we are all being conned and defrauded !!!!!

I bet I'm not the only one shaking my head in disbelief after reading your "business plan" :eek:


To be perfectly honest if that was your plan you were only ever destined to fail.


By all means blame the bankers, but I guarantee you that very few of them would be silly enough to have approached the property market using your formula

AdrianC

ptwparkinson wrote: »

I went in with my eyes open .
I formulated a business plan .
I knew what I was doing at the time .

So what did the business plan include for voids, losses through unpaid rent/damage etc?
How have your forecast figures compared to reality?
Why the difference?
Has this been a sudden change, or has it happened gradually?

If you really had your eyes open and knew what you were doing, you'll have the answers to those at your fingertips.

jjlandlord

One major, if not the major, flaw in the reasoning is to believe that having a "business plan" and generating marginal profits when things go reasonably well means that the plan is sound.

The number one, crucial aspect of any BTL business is the rental yield. If the properties are in less attractive areas with perhaps riskier tenants then the yield is paramount.

w00519772

I guess this is one of those things were there is high return and therefore high risk. I know someone who is a winner investing in property at the right time (before the boom) and managing the portfolio thoroughly e.g. vetting tenants thoroughly and turning people down if they do not have the right credentials - it is his responsibility and his risk to do that as a landlord. I guess not everyone can win.

Can you not hold onto your properties until prices rise in the hope that they will?

mynameisdave

ptwparkinson wrote: »

Took on two partners so that we could use our equities to borrow a hunting fund from the Yorkshire Bank -- we borrowed £ 220,000 which was on call when we needed it --- we bought from auctions or from distressed sellers ( we would just tell the distressed sellers that we had worked out what we could afford to pay based on yield percentages and that we could exchange within the week --- but if they needed a higher price than we were prepared to pay then we would wish them the best of luck and tell them if they were not absolutely desperate -- hang on longer because someone would probably come along and pay them more eventually -- but our discipline was not to pay more than we could afford --- we would see the amateurs at the auctions going well beyond what properties were worth and thinking that because they had bought at auction they had bagged a bargain -- when in fact some of them had paid the price they would have paid through an estate agent ) -- so we didn`t steal properties from anyone --- we were as fair as we could be --- anything that we bought we would refurbish and re-value and take out a mortgage so that we could pay back the bank to release us from the 8% interest charge on what we had drawn down --- the original allowance was £ 120,000 which was against our shop and my two partners homes -- when we increased it to £ 220,000 I told the bank that I personally would only be signing to accept the new amount if it was covered 33.3% by each partners property ---- it went totally skeewiff and I made a huge mistake by trusting the bank and signing and guess what --- there was obviously more equity in our shop so they gave us the money --- we actually spent £ 166,000 before they put the brakes on ---- now they will not renew the loan and they want their money back -- we are meeting a loans adviser today with our accountant but I will probably have to take out a mortgage for most of the money which puts the brakes on us selling our shop building until the properties held by the company can be sold to pay back the mortgage on mine --- the third partner is unable to raise a mortgage on his property because his wife didn`t pay off some credit card bills and it prevented him from re-mortgaging -- however my other partner and I will take out a charge on his property for the amount that we have raised which should have been his 33.3% contribution

So you only borrowed what you could afford, but when a partner could not afford to borrow more you took out a charge against his home. And then you were surprised that later down the line he screwed you over.

:rotfl:

lighting_up_the_chalice

The value of investments can go down as well as up.

I'm sure I've read that before somewhere.

ptwparkinson

mynameisdave wrote: »

So you only borrowed what you could afford, but when a partner could not afford to borrow more you took out a charge against his home. And then you were surprised that later down the line he screwed you over.

:rotfl:

All three partners were in agreement to increase the loan facility --- I didn`t take out a charge against his home --- the bank did that -- with his agreement !!! And he was in consultation with our solicitor and our accountant beforehand on my advice !!