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Moneyweek: My Buy-to-let Dream Cost Me Everything

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WARNING: before you read below, please make sure your breakfast is well digested and you have a hanky ready. It is a sad and truly heart moving tale. My heart truly bleeds for these people. No, it does....really....

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http://www.thisismoney.co.uk/mortgages/buy..._id=56&ct=5

My buy-to-let dream cost me everything

Richard Dyson, Mail on Sunday

23 September 2007

Guide | Blog

Mortgage bank Abbey has been accused of fuelling the debt crisis by offering a home loan worth up to 125% of a property's sale price - and many rivals seem willing to lend whatever the risks.

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Buy to let investor Broken: Anne's foray into buytolet means she might lose her own home.

Richard Dyson reports how one buy-to-let investor has been ruined by an ill-fated property speculation - funded by some of our biggest banks.

A life of financial freedom, travel, and a luxurious holiday home in a sunny country from which to manage a property portfolio worth millions. These are the dreams conjured up by the countless property investment clubs, developers and other middlemen that have profited in recent years from the boom in buy-to-let.

But for a growing number, the dream is now a nightmare of repossession and ruin.

Anne, not her real name, has been a taxi driver for most of her life. 'Driving day after day is long, hard work,' she says. So in January 2002, in a brave attempt to escape the daily grind, she parted with £6,000 of her precious savings to attend a three-day property investment seminar in London.

It promised to change her life - and it has. Organised by one of a myriad of shady property clubs that have long since disappeared, the seminar was nothing but a hard sell.

'They said there was no cash needed,' she says. 'The warning bells should have rung then.'

But they didn't and instead Anne, 52, who lives near Glasgow, was introduced to an array of mortgage brokers, developers' agents, solicitors and property valuers. Over the next three years she was persuaded to buy four flats in three Glasgow developments. The flats were all bought before they were complete, with little or no down payments. The developers' agents, and all the other middlemen, took a commission.

Most of the individuals and companies involved in these transactions have since vanished into the murky and unregulated world of property promotion and development.

Their names, phone numbers and employees have disappeared. But the flats, and the massive mortgage debts attached to them, have not.

Tenants were hard to find. No flat ever achieved the rents promised by the valuers. And struggling to cover mortgage repayments, Anne racked up more debt on credit cards and loans. Even though the flats were new and their values questionable, she had no trouble finding mortgage lenders.

Over the years, mortgages came from numerous banks, including big names such as GMAC and Bank of Scotland. By this year, though, Anne had moved the mortgages to one lender, Mortgage Express, part of Bradford & Bingley. Earlier this year, Mortgage Express started repossession. All four flats are now in the hands of the lender, with three on the market at prices far lower than their original valuations - and lower than the mortgages secured on them.

Anne is distraught. 'I've worked so hard all my life,' she says. 'Nothing has come easily for me.

GlasgowFlats

Glasgow nightmare: One of the blocks where Anne bought a flat.

'I went on that property investment course and I came back full of promises, bowled over with what could be achieved. I was told I could make £100,000 on these properties.

'I didn't know that hundreds of people were trying to do the same thing. Maybe I was naive, but I've done nothing wrong.'

Mortgage Express told Financial Mail it had not yet launched bankruptcy proceedings to take possession of Anne's own home, but would not rule out doing so. 'We always maintain that buy-to-let is not without risk,' a spokesman said.

For Anne, the loss of her own home would be the final straw. 'I can work till I drop, but I'll never own a home,' she says.

'I'm too old to get on the property ladder again. People might look at me and say I was greedy, but I wouldn't say so. I didn't want to be really wealthy. What I most wanted was simply financial security.'

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Anne, not her real name, has been a taxi driver for most of her life. 'Driving day after day is long, hard work,' she says. So in January 2002, in a brave attempt to escape the daily grind, she parted with £6,000 of her precious savings to attend a three-day property investment seminar in London
.

Clearly Anne's real name is Mug. £6,000 to attend a sales conference OMG!

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I can't remember who here coined the phrase, but "Financial Darwinism" springs to mind.

I think that may have been mine........I'd completely forgotten about that, thanks. I shall use it more often from now on!

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You missed the best bit at the bottom of the article:

The four easy steps to financial ruin . . .

Only four years ago, Anne had a home near Glasgow, a car, and, in her words, 'not a penny of debt'. Then she made the fatal decision to go into buy-to-let.

PROPERTY ONE: A two bed new-build central Glasgow flat with a 2003 purchase value of £170,000 and a target rent of £800 a month.

In four years it was let only 70% of the time for an average £650 monthly rent. It was repossessed in June and is on the market for £128,900.

PROPERTY TWO: A one-bed new-build central Glasgow flat with a 2003 value of

£122,500 and target rental income of £650.

It has been let 80% of the time for an average £550, was repossessed in June and is on the market for £100,000.

PROPERTY THREE: A two-bed new-build flat in west Glasgow valued at £240,000 in 2004, and with a target rent of £950.

It was empty 20% of the time and never fetched more than £750 a month. It was recently repossessed and is for sale at £166,000.

PROPERTY FOUR: A two bed flat in Glasgow Harbour valued in early 2005 at £220,000, with a target rent of £950 a month.

It has been mostly empty since completion and never fetched more than £700. It was repossessed last month.

THE POSITION NOW: All four properties are in negative equity. The mortgage shortfalls, interest arrears and redemption penalties total £210,000.

Anne has also built up a £100,000 debt in the form of loans taken out to try to meet the mortgage bills.

Her total debts exceed £300,000. She has already lost her car and faces the loss of her home in which there is £30,000 equity - her only asset.

The buy-to-let lender, Mortgage Express, will not escape unscathed either. Even if it bankrupts Anne, it is set to lose more than £200,000 through its loans to her.

I mean who in their right mind would pay £240,000 for a 2 bed flat in Glasgow. Is there any way she could possibly have got £950 a month rent for another 2 bed flat?

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As I was reading that my face twinged, I felt pain in my heart and did actually shed a tear...... Wind sometimes does that to me.

You sir are a cruel and heartless man....but your observation does have a, shall we say, RING of a PIECE of truth to it.

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that last line made me realise the difference between recent btlers and old-fashioned landlords - the old-fashioned landlords had financial freedom already, they could buy without btl mortgages - that woman just wanted financial freedom, but at the expense of others - let's hope there are plenty more of these stories to come

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'I didn't know that hundreds of people were trying to do the same thing. Maybe I was naive, but I've done nothing wrong.'

Amazing. This seems to be the way people think about everything these days. I presume she thinks it is someone elses fault.

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She never stood a chance against these people and all the property porn in every paper and on every channel.

Don't forget that even a couple of weeks ago the press were trumpeting that houses would be ten times salary by 2010 after reproducing some VI survey how can ordinary people see the real truth

This is not a free market never has been.

She has to take some responsibility but so does the f*****s who should have been making sure people like this were not misled.

The state has failed on a massive scale.

Wait till she sees what her pension manager has been buying with her money seems like he went to the same seminars

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i like her, bitch slaping the mortgage lenders with 300k of debt that will no doubt have to be written off against profits that those banks make

she is a living weapon that will finally take this best down, although her stupid actions did help feed hpi in the early steps.

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I can't remember who here coined the phrase, but "Financial Darwinism" springs to mind.

'Financial Darwinism' I like it!

Anne is just another victim of the 'living the dream' concept where in twenty years time no one would need a job because we would all have 7 BTL properties to support our luxury lifestles. In that sense her £6000 investment in the sales pitch was worth every penny :lol:

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one of my first posts on hpc was one of breaking the banks, just like anne did

i proposed getting some 100BTL properties all with 125% mortgages, if they where 200k a pop. that gives you some £5mil (from the 25% equity) which you use to subsidise the rents, and live the good life for a few years.

then when remortgage time comes, if prices increased you would remortgage 125% again of the new price, if they stagnated or droped hand in the keys.

the banks take ALL of the risk, no matter what the markets do you win. can end up costing the banks 5 mil or more!

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I wonder if these are the same Glasgow flats that we were talking about about 2 years ago where people who had put down desposits were being sued by the builders when they tried to withdraw due to a lack of people wanting to rent them?

These postage stamp size flats have sprung up all across the UK. Swansea is full of them priced at 200K PLUS and all the ones I have seen are not as big as my ground floor. (I actually saw a 2 bedroom one this week for rent where the second bedroom was so tiny they had stood the bed up on its end. I asked the EA to fit the bed into the room properly but she could not as the bed was longer than the room!)

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that last line made me realise the difference between recent btlers and old-fashioned landlords - the old-fashioned landlords had financial freedom already, they could buy without btl mortgages - that woman just wanted financial freedom, but at the expense of others - let's hope there are plenty more of these stories to come

Exactly. NuLandlordism is largely a product of banking deregulation and post-911 crazy credit. There was no real shortgage of rental properties as the limited demand was met by people who sank real capital into projects.

All NuLanlordism has done is made FTBs' 'property pounds' worth about 20p compared to the late ninties and created a load of forced renters.

It's also buggered up the quality of the housing stock as housings were 'renovated' with paper-mache B&Q kitchens and tubs of pollyfilla and routine maintenance not done. Once decent terraced streets of working class family homes have become tatty rental and HMO zones.

Every NuLandlord that faces financial ruin is a cause for celebration. I hope millions are wiped out.

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The buy-to-let lender, Mortgage Express, will not escape unscathed either. Even if it bankrupts Anne, it is set to lose more than £200,000 through its loans to her.

Only if it has failed to resell the debt!

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She should thank her lucky stars she isn't better paid. She could have spent the next five years subsidising this piss-poor "portfolio" before ending up at the same juncture.

Edited by Sledgehead

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No mention in the article of the tenants that will be forced to move with all the hassles that involves.

Doesnt sound like she often had any.

The scandal here is that someone on a taxi drivers salary in Glasgow can take on half a million in debt and the people who arrange it for them make a packet. There will always be gullible people, that doesnt mean there shouldnt be legislation to protect them.

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She bought them during the span of 2-3 years at ever increasing values. I don't believe the situation dramatically changed but she must have thought each next purchase will be a success to bail out existing ones.

I have a feeling that BTL is addictive - akin to gambling and drug-taking.

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The scandal here is that someone on a taxi drivers salary in Glasgow can take on half a million in debt and the people who arrange it for them make a packet. There will always be gullible people, that doesnt mean there shouldnt be legislation to protect them.

I believe people will always be stupid or tempted but the legislation should prevent them from hurting themselves.

That's why good taxi cabs have automatic door locks.

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Guest The_Oldie
She bought them during the span of 2-3 years at ever increasing values. I don't believe the situation dramatically changed but she must have thought each next purchase will be a success to bail out existing ones.

I have a feeling that BTL is addictive - akin to gambling and drug-taking.

That would explain a lot. Do we have a psychologist in the house?

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