And I maintain my comments! I will bet this product Is withdrawn within 6 months due to a lack of uptake. MBS are a niche lender and like to experiment.

Lisa

(18-08-2012 11:50 PM)Mark Alexander Wrote:  I predicted about a year ago that a product like this would come out and I was told by quite a few on PT (including Lisa Orme which surprised me) they thought it would never happen and that if it did it would never sell.

I think Manchester BS will be inundated with apps for this product, it will be interesting to see what happens next.

I'm not sure whether MBS will do much business, not because of the product more more generally their criteria. They seem to exclude the market that really want this product based on my thoughts on this thread >>> http://www.property118.com/index.php/25-...age/31162/

However, if Paragon or TMW were to launch a similar product I suspect they would be buried in applications with a week!

(23-08-2012 11:24 PM)Lisa Orme Wrote:  And I maintain my comments! I will bet this product Is withdrawn within 6 months due to a lack of uptake. MBS are a niche lender and like to experiment.

Lisa

(18-08-2012 11:50 PM)Mark Alexander Wrote:  I predicted about a year ago that a product like this would come out and I was told by quite a few on PT (including Lisa Orme which surprised me) they thought it would never happen and that if it did it would never sell.

I think Manchester BS will be inundated with apps for this product, it will be interesting to see what happens next.

[quote='Mark Alexander' pid='79394' dateline='1345764903']
I'm not sure whether MBS will do much business, not because of the product more more generally their criteria. They seem to exclude the market that really want this product based on my thoughts on this thread >>> http://www.property118.com/index.php/25-...age/31162/

However, if Paragon or TMW were to launch a similar product I suspect they would be buried in applications with a week!


Mark

I read your thoughts on 118 and agree and replied like this.....

I agree a track record and experience makes you and me a much safer bet. But. My belief it is because of their - bigger they come the harder they fall attitude - towards you that makes them think the way they do .- It is also common with other lenders to limit those with the larger portfolios. They must have their reasons however bizarre and illogical it is to the likes of those with good sized portfolios.

They think they are acting like a parent and I think their fatherly chat to you would go something like this........................

`` Look I know your talented son and i want you to succeed but you are scaring me sometimes with the pace of your expansion. You can see where you are going and thats great but i simply dont have that forward thinking and absolute confidence in my own ability as i think you have. I admire you but I cant run with you on this one.
If I were like you do you think I would be sitting behind a desk all day working for the next 25 years making decisions as to whether I can lend to you or not. No - do what you do and good luck but I cant risk my job lending to you. I`m scared of my CEO sacking me. I dont have your vision I`m afraid Also I`ve seen some of those big guys crash and burn and they make the headlines and thats preyed on my mind. I know that maybe just the odd one or two and I hold a distorted picture but I`m sorry but i just feel more comfortable lending to the ones who just want to paddle in the shallow end. I`m comfortable at that level. Deep sea diving is just not for me. Sorry son``

(24-08-2012 08:00 AM)Jonathan Clarke Wrote:  [quote='Mark Alexander' pid='79394' dateline='1345764903']
I'm not sure whether MBS will do much business, not because of the product more more generally their criteria. They seem to exclude the market that really want this product based on my thoughts on this thread >>> http://www.property118.com/index.php/25-...age/31162/

However, if Paragon or TMW were to launch a similar product I suspect they would be buried in applications with a week!


Mark

I read your thoughts on 118 and agree and replied like this.....

I agree a track record and experience makes you and me a much safer bet. But. My belief it is because of their - bigger they come the harder they fall attitude - towards you that makes them think the way they do .- It is also common with other lenders to limit those with the larger portfolios. They must have their reasons however bizarre and illogical it is to the likes of those with good sized portfolios.

They think they are acting like a parent and I think their fatherly chat to you would go something like this........................

`` Look I know your talented son and i want you to succeed but you are scaring me sometimes with the pace of your expansion. You can see where you are going and thats great but i simply dont have that forward thinking and absolute confidence in my own ability as i think you have. I admire you but I cant run with you on this one.
If I were like you do you think I would be sitting behind a desk all day working for the next 25 years making decisions as to whether I can lend to you or not. No - do what you do and good luck but I cant risk my job lending to you. I`m scared of my CEO sacking me. I dont have your vision I`m afraid Also I`ve seen some of those big guys crash and burn and they make the headlines and thats preyed on my mind. I know that maybe just the odd one or two and I hold a distorted picture but I`m sorry but i just feel more comfortable lending to the ones who just want to paddle in the shallow end. I`m comfortable at that level. Deep sea diving is just not for me. Sorry son``

You got it Johnathan, the Jaques Cousteau type of LL which you are is not wanted by the paddling pool lenders!!!!

Jonathan,

I think we now have common ground.

The tax deductions you and I are talking about come from spending income to reduce the profits of the business or investment. If the money is spent on interest or other deductible business expenses, it does not matter to HMRC. Expenses paid for out of income is money spent so we pay a Pound so we are 'getting some back' in terms of what we could have paid in taxes.

Leverage increases the impact of movement. If we think of a loan on a property, leverage magnifies the impact of a change in value. If the price rises, we have a higher return. If the value falls we have a magnified loss. If someone had a 90% LTV loan and the asset value fell by 10% they would have lost 100% of their equity.

If we broaden the focus, marketing has great leverage. You spend £1,000 on direct marketing. You can then deduct £1,000 from your income so you have the same tax benefit as paying interest on a loan. If each £1,000 in marketing produces 1 deal where you make £10,000 you have a 10 to 1 return. Your £1,000 turns into £10,000 so better leverage than most BTL loans.

An interesting tax opportunity is to spend money on marketing late in a tax year. The money goes out in the current tax year. The income from the successful transactions comes in during the following tax year. You have shifted your tax liability by 1 tax year and it can be repeated.

(24-08-2012 11:59 AM)john_corey Wrote:  Jonathan,

I think we now have common ground.

The tax deductions you and I are talking about come from spending income to reduce the profits of the business or investment. If the money is spent on interest or other deductible business expenses, it does not matter to HMRC. Expenses paid for out of income is money spent so we pay a Pound so we are 'getting some back' in terms of what we could have paid in taxes.

Leverage increases the impact of movement. If we think of a loan on a property, leverage magnifies the impact of a change in value. If the price rises, we have a higher return. If the value falls we have a magnified loss. If someone had a 90% LTV loan and the asset value fell by 10% they would have lost 100% of their equity.

If we broaden the focus, marketing has great leverage. You spend £1,000 on direct marketing. You can then deduct £1,000 from your income so you have the same tax benefit as paying interest on a loan. If each £1,000 in marketing produces 1 deal where you make £10,000 you have a 10 to 1 return. Your £1,000 turns into £10,000 so better leverage than most BTL loans.

An interesting tax opportunity is to spend money on marketing late in a tax year. The money goes out in the current tax year. The income from the successful transactions comes in during the following tax year. You have shifted your tax liability by 1 tax year and it can be repeated.

Excellent post John if I may say so, both from a property perspective and also a marketing one.

(24-08-2012 11:59 AM)john_corey Wrote:  Jonathan,


If we broaden the focus, marketing has great leverage. You spend £1,000 on direct marketing. You can then deduct £1,000 from your income so you have the same tax benefit as paying interest on a loan. If each £1,000 in marketing produces 1 deal where you make £10,000 you have a 10 to 1 return. Your £1,000 turns into £10,000 so better leverage than most BTL loans.

John
900% is indeed an impressive return. Is that £10,000 you make a one off finite return?
Is it in the form of a one off fee? I would be interested in the mechanics of your £10,000 deal ( only if you want to share of course)

Would not however leveraging a BTL loan to provide the potential for income and capital growth be probably yes less than 900% at the outset but have the potential to grow to that 900% point and beyond over a lifetime and indeed longer if proper succession planning was in place.

Some BTL loans cleverly used to invest in property can be used to produce an infinity % return when for instance refurbing, refinancing and leaving no money in but still producing a rental income for ever more . I find the concept of infinity returns on a BTL very exciting

As to the 25 year repayment loan and how they are intentionally excluding professional investors who have a portfolio.

The lender is taking a view that the concentration of risk with large portfolio lenders is not to their liking. While the portfolio lender might be more experienced, the added experience might also encourage the portfolio landlord to ramp up the risk. They know the tricks and how to push the edges.

Stated differently: A large loan book with many, many borrowers who represent individually a tiny fraction of the loan book could be a lower risk than the same sized loan book with a small set of large borrowers. Single point of failure & concentration of risk.

Under normal banking rules and practice, a lender is not allowed to loan out more than X% of the lender's capital to any one borrower. The general principal applies to all forms of lending. MBS and portfolio borrowers are just a small example.

I have just seen in their T&C:

Maximum capital raising amount of £30,000 is permitted for this mortgage product. Additional Home Improvement funds are only allowed for property to be mortgaged. Please note - Debt consolidation is not permitted.

I was thinking of taking this out on my former home, and using the capital raised to pay off some of our current domestic mortgage and invest in 1 or 2 more BTL. Shame this condition stops me doing this….

But if I had taken more risks in the past and already had a larger mortgage on my former home, they would lend me more!