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  • Debt & Negative Equity

    Toxic portfolios: Hang on to for grim death or bail out?

    This post was inspired by a post I saw this morning on another forum.  It was written by Paul Fieldson of Bidonmyportfolio.com :

    "The Good, bad and the Ugly! Clients with toxic property portfolios? We have a team of highly skilled property professionals dealing with trouble portfolios daily. A property portfolio may have in recent years promised so much. Capital growth and a regular income appeared to be easy to achieve. Unfortunately many landlords have found this not to be the case!" Paul suggests that one way to get rid of them is to auction them as a "job lot". I would like to explore two avenues through this thread and I hope it might turn out to be an interesting and useful discussion for the tribe. 1.  If you own a toxic portfolio, should you hang on for grim death and do everything possible within your power to keep it, or should you take what some might consider the "easy" option and get shot of it as a job lot? Please take into account the acquisition costs of acquiring property, unfavourable lending conditions etc. i.e. if you exit now, you may not be able to re-enter property investment again. 2.  If you do decide to exit, what is the best way?.  Paul offers a solution but I was also thinking that Rent to Buy is a solution.  I will ask Glenn Ackroyd to comment as I am not sure about this though. If you are in negative equity, can you negotiate with the lender to come to some kind of settlement to redeem the mortgage without paying back the full debt? I look forward to your thoughts.

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    I see Rent to Buy as a big risk unless the mortgage is a fixed rate for the term of the option.  We may get very high inflation and interest rates to match at some point, and the rent is fixed in most Rent to Buy setups.

    I also don’t like the fact that with Rent to Buy it is very hard (if not impossible) to change agents at any point.

    The issue I have with anyone selling a portfolio is:

    Given they can’t make enough money from it to be worth keeping, what problems are being hidden from the buyer.

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    Thank you Vanessa,

    We have far more solutions than auction them off - we have a specialist team in place to offer many solutions. We realised if a landlord was struggling there were very few options and apart from their accountant who do they turn to. In many cases the debts are greater than the asset - we have the contacts and experts to help these landlords. 

        

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    Can you give us further details about some of the options Paul?  It would add a great deal of value to this discussion and bring clarity to the services you offer.

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    Vanessa,

    This was a post recently submitted to social network sites. There was nothing out there to help landlords particularly if they had high gearing issues - with the vast number of calls we are receiving we must have tapped in to a vast market.   

    Are you looking to consolidate, improve, plan and position your property portfolio?

    Landlords to make their property portfolios perform better ensuring mid and long-term growth? We cater for: property funds; high net clients looking for off-market property; landlords and investors wanting business consultancy; buy to let landlords looking for a review; landlords who need to consolidate or reduce costs and landlords with high gearing issues. Call me on 0777 391 7443 or email me; paul.fieldson@theukpropertysolution.co.uk

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    Paul Fieldson said:

    Ian,

    Fully agree - rent to buy's are a big risk and unregulated - not really a proper solution for anyone.

    Ian said:

    I see Rent to Buy as a big risk unless the mortgage is a fixed rate for the term of the option.  We may get very high inflation and interest rates to match at some point, and the rent is fixed in most Rent to Buy setups.

    I also don’t like the fact that with Rent to Buy it is very hard (if not impossible) to change agents at any point.

    The issue I have with anyone selling a portfolio is:

    Given they can’t make enough money from it to be worth keeping, what problems are being hidden from the buyer.


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    Thanks for the advert Paul, but how exactly do you help? SmileI would like specifics please, not generalities or copies of adverts that don't go into detail. 

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    Vanessa,

    We have specialist professionals from Chartered Surveyors through to Barristers who are all experienced in both the property aspect but more importantly through to the financials to offer a complete service to landlords. It does not have to be outlined why so many landlords are now facing difficulties particularly as interest rates are on the rise - we asked the question were would a landlord turn when difficulties arise with a portfolio - lenders do not want to know and are all to quick to send in the LPA receivers and solicitors and accountants cannot really help. Generally the landlord accepts that selling is not always an option if there are high gearing issues or in fact the debt is greater than the assets.

    Each individual case has to be assessed as it may simply involve removing a bad part of the portfolio to ensure the survival of the good part. We have the expertise and contacts to negotiate a short sale with the lender,if required or it may involve re financing the debt of the portfolio which is probably difficult or impossible if high gearing issues are present, or offering some independent consultancy to review the portfolio and restructure particularly by reducing costs. So many people bought properties thinking it was a great idea for the future but without having any knowledge of the industry.

    We most certainly are not trying to reinvent the wheel with our approach to assist, but offering a service which appears to be currently missing from the industry - we offer a free consultation to any landlord who feels they need help and then try to offer a bespoke solution to their issues. 

    The aim is to try and make a landlords portfolio perform better or by offering a landlord a way of removing the burden of their toxic portfolio. With the shear amount of landlords now contacting us particularly now interest rates are on the up is an indication of the problems which assist - many landlords are undoubtedly in denial whilst others realise time is up.

       

    Are you looking to consolidate, improve, plan and position your property portfolio?

    Landlords to make their property portfolios perform better ensuring mid and long-term growth? We cater for: property funds; high net clients looking for off-market property; landlords and investors wanting business consultancy; buy to let landlords looking for a review; landlords who need to consolidate or reduce costs and landlords with high gearing issues. Call me on 0777 391 7443 or email me; paul.fieldson@theukpropertysolution.co.uk

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    Thank you for that detailed information Paul.  I appreciate your input.

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    Surely any issue with a toxic portfolio just go bankrupt.

    Properties stay with OR for 4 years.

    If no value to repay property loan, properties are handed back to LL

    LL is in the clear.

    No loan debt as far as I can recollect, or it maybe that you can just carry on servicing the loan debt.

    Can't remember everything they said, but the option is there.

    That is what National Debtline advise.Paul Fieldson said:

    Vanessa,

    We have specialist professionals from Chartered Surveyors through to Barristers who are all experienced in both the property aspect but more importantly through to the financials to offer a complete service to landlords. It does not have to be outlined why so many landlords are now facing difficulties particularly as interest rates are on the rise - we asked the question were would a landlord turn when difficulties arise with a portfolio - lenders do not want to know and are all to quick to send in the LPA receivers and solicitors and accountants cannot really help. Generally the landlord accepts that selling is not always an option if there are high gearing issues or in fact the debt is greater than the assets.

    Each individual case has to be assessed as it may simply involve removing a bad part of the portfolio to ensure the survival of the good part. We have the expertise and contacts to negotiate a short sale with the lender,if required or it may involve re financing the debt of the portfolio which is probably difficult or impossible if high gearing issues are present, or offering some independent consultancy to review the portfolio and restructure particularly by reducing costs. So many people bought properties thinking it was a great idea for the future but without having any knowledge of the industry.

    We most certainly are not trying to reinvent the wheel with our approach to assist, but offering a service which appears to be currently missing from the industry - we offer a free consultation to any landlord who feels they need help and then try to offer a bespoke solution to their issues. 

    The aim is to try and make a landlords portfolio perform better or by offering a landlord a way of removing the burden of their toxic portfolio. With the shear amount of landlords now contacting us particularly now interest rates are on the up is an indication of the problems which assist - many landlords are undoubtedly in denial whilst others realise time is up.

       

    Are you looking to consolidate, improve, plan and position your property portfolio?

    Landlords to make their property portfolios perform better ensuring mid and long-term growth? We cater for: property funds; high net clients looking for off-market property; landlords and investors wanting business consultancy; buy to let landlords looking for a review; landlords who need to consolidate or reduce costs and landlords with high gearing issues. Call me on 0777 391 7443 begin_of_the_skype_highlighting            0777 391 7443      end_of_the_skype_highlighting or email me; paul.fieldson@theukpropertysolution.co.uk



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    In reply to Paul Barretts post;

    We have never advised or never made a landlord go bankrupt. Why go bankrupt if a landlord has no equity or assets - the lenders realise bankruptcy serves no purpose apart from making the administrator money.

    Paul.

       

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