Friday, Sep 04, 2009
Maths couple millionaires quit buy to let market
Telegraph: Telegraph
A couple who quit teaching maths to make a fortune in the buy-to-let business have decided to cash in their 700 home property portfolio.
Posted by harry @ 12:06 PM (1323 views) Add Comment
24 Comments
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1. techieman said...
Hi Harry, we reviewed this yesterday, analysing the times article : http://www.housepricecrash.co.uk/newsblog/2009/09/blog-oh-my-fscking-god-25134.php.
This says "The time is right for us to go. It will break my heart to say goodbye to all the houses we have but you cannot take them to the grave with you."
Erm right, im welling (not in kent) up here!
2. 51ck-6-51x said...
I know it was the biggest thread yesterday, but but but... their / her website says "There is never a wrong time to buy property"!
3. Smiling said...
The time is right for us to go. It will break my heart to say goodbye to all the houses we have but you cannot take them to the grave with you."
Fair play to him, made the rich list! He's not greedy.
4. Smiling said...
"There is never a wrong time to buy property"!
There is a lot of truth in this if you could only see. Try to do the maths over the last say 200 years.
5. techieman said...
666 this one helps with my is it 900 or is it 700 question?
"Last October they started offloading their property empire, which at its peak topped 900 houses, worth roughly £250 million". i.e. Oct 2008. They had bought 200 in 2007/2008 - in that thread Paul points to a BBC article that shows they "bought their 700th house...this [2007] year. So i am assuming (since they always geared up), that they could only have sold some of those that they had made profits on (by that i mean they couldnt take a loss on the 2007/2008 purchases because they wouldnt have had the cash to fund those losses.
As i said an inverse pryamid will always get you in the end. In any case it DOESN'Tlook like timing (buying 200 in 2007/2008 and selling 200 from October of last year) looks great!!
6. techieman said...
"There is never a wrong time to buy property"! - i wonder how much per letter that phrase will end up costing them?
I am reminded of the song the gamler by Kenny Rogers!!
7. mander said...
Advice on http://www.jwipb.co.uk/how.asp :
The number one rule is:
Never use your own money.
To use people savings in the banks? Or some funds from Bank of China?
8. inbreda said...
interesting to see a big gold bar on her website.
If she'd invested in that she'd have been much better off.
Perhaps there isn't ever a bad time to buy property - maybe there are just some choice moments to sell ;-)
9. europeanbear said...
250 million, 900 properties. 277,777 per house (at leak). Even at peak it seems over inflated as they were buying mainly "two beds with a bit of grass around it". look at their web site, they had a policy of 85% gearing (LTV), and clearly must have MEWED to the hilt to obtain so many propoerties, utilising HPI to get them their. They could owe the banks as much as 85% of the 250 million, which would have left them with 38 million equity at the peak. This could have been eroded completely following the 20% decline since peak (i.e portfolio worth only 200 million now). And they will owe a whole load of capital gains taxes when they sell. See the previous thread and posts on these property entreprenuers (or rather BTL amateurs). I believe the people have major financial problems and are trying to exit now during the dead cat bounce to save their skins. When you read between the lines and do the maths this is the only conclusion you can come to......
By the way - they retired as maths teachers to become BTL entrepreneurs - what is more useful to society - good maths teachs or BTL landlords - place your vote in your replies....
10. charlie brooker said...
I would love it if those two went bankrupt - having to eat their very own smug words of advice they arrogantly shoved down our throats for years.
11. charlie brooker said...
Back in 1993 I worked for Swiss Life in Sevenoaks. At the time I was a recent graduate with bugger all money to my name and had to rent a room in a house in Wickendon Road.
The couple who owned the house remind me very much of the Wilsons and I even wonder if it is indeed them. Their look and their arrogant attitude are practically indentical. He was an absolute brute of man, a really scary intimidating bloke who ran a burger van on weekends, kept dangerous alsations and was best mates with the local plod.
So if they went bankrupt I wouldn't shed any tears.
12. Collywolly said...
As much as I dislike what I hear about them, they are probably a bit smarter and more ahead of the game than the average buy to let Landord and also in the same age range as many.
I suspect that they are being fairly smart again by being ahead of all the second property owners in the baby boomer generation who plan to sell in the next few years as well. It is when all these people sell up at once, that will cause the real property crash in my opinion, as just now the prices are still silly.
13. techieman said...
Collywolly no they are not since they only know how to buy. They have mewed to participate in an inverse pryamid, continually using "equity" to ever increase exposure and gearing. Thats why they say there is never a wrong time to buy property. Yes if you like if you are going to not use it as a bargaining chip.
As for smilings comments they are just plain dumb. These people are on the precipice of an implosion. Plain and simple - as to why you only need to read this and yesterday's thread and give it some thought.
Its just a shame smilings comments arent current. Ok let me show you how dumb:
3. The time is right for us to go. It will break my heart to say goodbye to all the houses we have but you cannot take them to the grave with you."
Fair play to him, made the rich list! He's not greedy.
4. "There is never a wrong time to buy property"!
There is a lot of truth in this if you could only see. Try to do the maths over the last say 200 years."
Right ok lets see so one minute he cant take em to the grave but over 200 years he'll be ok?
Yes smiling we all know that property in the long term rises with the general wellbeing of the economy, but in the short term you can have a crash… i.e. now, which regresses them back toward the long term (now you can use your 200 year example) mean. Don’t believe me? Take a look at Case Shiller, and use that thing that resides between your ears. It’s a bubble which needs unwinding.
His comment about being attached to his properties is laughable. He is attached to the fact they (were) making him money.
What should he have done? Stopped - thats the whole point the reason why they will most likely become bankrupt (unless they find some gullible "greater fool"). If they had stopped buying at say 2004/5 then they would have been probably ok. But they didnt did they!
They wanted to be the first buy to let property billionaires (see the bbc report yesterday). So "they werent greedy" is the dumbest statement of them all!
14. letthemfall said...
And of course the fallacy that property only goes up is no different to saying shares (or investments in just about any asset) only go up. Perhaps they do - over the very long term. But there have always been many wrong times to buy, unless you're happy to lose money. Or live forever.
15. uncle tom said...
If these people had used the maths they once taught others, they would have realised that a bubble was forming, that people were following their lead and piling into BTL - dependant on capital growth as rents were no longer yielding a viable percentage of capital value. Clearly unsustainable.
They would also have made a probability calculation of the chances of an economic upset pushing up interest rates, and would also have made some calculations relating to the unsustainability of the UK economy.
If they were genuinely clever, they would have started selling to the muppets who were pouring into BTL, and would have long since sold the lot.
But no. They are now planning to sell far too late. They appear to be in a position where a 20% fall in prices could leave them bankrupt - something that could well happen before they find someone to buy their portfolio..
Making a million is hard work. Making a second million is very much easier. Wise guys then bank half their profits and put their first million into the safest investments, leaving them with the other million to play with. If they get lucky and make a third million, they divide the profits - half to safety and half to play with.
People like this hit the headlines because they continue risking everything - a million in the bank is very valauble - a second million you can very easily live without..
16. mystie010 said...
"There is never a wrong time to buy property"!
I'm sorry but try telling that to my mate who nearly went bankrupt on her buy to lose portfolio. It was only the lowering of interest rates that saved her and as soon as rates go back up she knows that she is toast! So all I can say is what a stupid thing to say.
17. Collywolly said...
Techieman, I am not saying they are smart, just smarter than the average BTL. They realise that the game is over, as opposed to those who are hanging on, expecting the whole bubble to keep inflating again.
18. techieman said...
UT - said "If they were genuinely clever, they would have started selling to the muppets who were pouring into BTL, and would have long since sold the lot.
But no. They are now planning to sell far too late. They appear to be in a position where a 20% fall in prices could leave them bankrupt - something that could well happen before they find someone to buy their portfolio."
I agree but i think the main point is not that they didnt sell, its that they geared up and kept buying exponetially. They only sold when the market started to fall. [since we know they went long of 200 between 2007 and October 208 and then they started to sell 200 from Oct 2008 until now].
My assumption is when they started they bought a few properties, then then used the equity in those as deposits for more, etc etc. So say they - simplistically bought (i'll use + for buying) [of course i dont KNOw the distribution].
+ 5 1995
+ 7 1996
+ 10 1997
+15 1998
+ 20 1999
+ 25 2000
+ 50 2001
+ 75 2002
+100 2003
+100 2004
+100 2005
+150 2006
+150 2007
+100 2008 1st six months
-85 2008 since October
-115 2009 since January
So the losses on the later purchasers are NOT going to be set off by the gains on the early ones. Now of course their purchasers may be skewed one way or the other and yes selling into strength since the DCB IS a good idea. [If smiling was right it would definitely be the WRONG thing to do].
IF of course they had bought most early on and gradually bought less then ok that would have worked. But thats not how "professional" BTL works is it?
--
19. str 2007 said...
Agreed tachieman
If they were at 15% equity as they say they were, then that must have been at peak. In which case they're already underwater never mind a further 15-20% fall.
20. europeanbear said...
If they had been really smart they would have done as UT suggests at 15. They are stuffed and I think they know it. After all, if it was such a nice earner why even sell. With such a profitable 700 house portfolio surely they could just employ a management company to look after them and use the income/profits to pursue their interests in "race horses" or what ever. I am not a mathematician, but I am a professional in statistics and risk analysis and the limited data that you can glean from these reports suggests they really are stuffed. They relied on capital gains to produce working capital to expand. "Never a bad time to buy" mantra is just naive stupidity. They are probably not generating barely enough income in rents to cover payments to the banks. They have been afraid, very afraid ever since early 2008 when the marked went into free fall. There was no chance of selling sooner than now because there were no buyers prepared to pay anywhere near the "market value" (or rather the value they needed to cover the losses - before this little mini bounce you probably had to accept offers some 20% below asking to get your house shifted). Now they see a chance to get out, if they can get close to the "market value" they may, if they are lucky end up with a million or two after the banks have been paid and the capital gains tax has been paid.....but only if they are lucky, and a 1 or 2% margin of error on that luck will send them into bankrupcy...
This story will run and run so enjoy!
21. techieman said...
European bear - that IS the point. They bought their 700th place in 2007, and at the peak of their holdings they had 900 and now back to 700, since Oct 2008. Therefore they must have used sold some profitable places to reduce their holdings.
I stand by what i said. Say they stopped in 2004 with say 300 properties. The properties would be showing a positive yield, so they would probably be fine. Its because they kept buying thats the issue. If they had kept 300 they would probably be earning a very comfortable positive rent, and, if so, and they chose not to get out then good luck to them.
Assuming (which may not be right) they were decent landlords then they are actually providing a service. I personally have nothing against BTL IF the profit is reasonable and if the LL is decent. The issue here is greed pure and simple.
As im off to the Karoke later... here's my warm up:
"He said, son, Ive made a life out of readin peoples faces,
And knowin what their cards were by the way they held their eyes.
So if you dont mind my sayin, I can see youre out of aces.
For a taste of your whiskey Ill give you some advice.
So I handed him my bottle and he drank down my last swallow.
Then he bummed a cigarette and asked me for a light.
And the night got deathly quiet, and his face lost all expression.
Said, if youre gonna play the game, boy, ya gotta learn to play it right.
You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count your money when youre sittin at the table.
Therell be time enough for countin when the dealins done.
Now evry gambler knows that the secret to survivin
Is knowin what to throw away and knowing what to keep.
cause evry hands a winner and evry hands a loser,
And the best that you can hope for is to die in your sleep.
So when hed finished speakin, he turned back towards the window,
Crushed out his cigarette and faded off to sleep.
And somewhere in the darkness the gambler, he broke even.
But in his final words I found an ace that I could keep.
You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run.
You never count your money when youre sittin at the table.
Therell be time enough for countin when the dealins done."
22. techieman said...
http://www.youtube.com/watch?v=kb6TVGBB4-g
this is titled "massive crash".
Its not funny really...
23. dgj said...
If you live your fortune by houses then your going to crash your fortune with houses! or in this case BTLs
24. honest valuer said...
They are real amatuers because I know from a reliable source that they are even highly geared on their own residence in Maidstone - they will truly end up with nothing when this unwinds.
To add something on portfolio sales/purchases - I have been professionally involved in these during the boom and even during periods of rising house prices most professional investors, property companies etc. require a discount of 15-25% from open market values - or else why do it. The Wilsons have no chance of off loading this lot - I know of investors who would be interested but are probably waiting for a receivorship sale.