The Dream Factory

More and more these days I seem to be hearing of large property landlords who have been made bankrupt. Some of these people I personally know well. A good friend of mine termed them ‘ celebrity landlords’. They were the ones who marketed themselves via large property networking events. They sold courses, and books about how to get rich quick using the various strategies available at the time.

The reason that so many of these landlords are biting the dust is because they used one strategy over and over again. And,  it’s a high risk one at that. ( I have always been an advocate of diversifying your portfolio so that you have options when times change.)

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That strategy was “no money down” – otherwise known as the ‘bridge and remortgage’ method. If you don’t know- this is where a property value was negotiated down to just under what the available mortgage LTV’s were ( back then 85%), then the mortgage deposit was financed via bridging loan, and the property remortgaged in the same day to remove that bridging loan. Effectively this means no actual money was put into the deal by the investor and hence, there was no risk factor for them, and no responsibility either.

Now, I know LOTS of new landlords were taught this strategy (and ways to carry on doing it even when it was stopped by the FSA) as a way in to property, with no thought for the effect long term, either on their personal tax returns or on if the market stopped rising one day, or even if the market fell.

This method effectively took all the equity out of a property, which in turn means you have no way of raising finance on the properties if the market goes against you, or repairs are needed. Even a landlord with 20 properties can find themselves in hot water if they have no money for essential repairs, voids or even for the cost of an eviction case.

The Dream Factory

No matter how I view personally some of those sharks….er…landlords…..gloating about them being made bankrupt on a public forum is distasteful. This kind of salacious gossip really sickens me to be honest. Some of the old celebrity landlords still market the latest ‘dream’ in networking events.

The most recent dreams to hit the ‘over hype market’ are these: Lease options, making money from the internet,selling social media courses, and the latest of all- land grabbing. Will this merry go round never end?

In all the financial fallout mess from the last couple of years, has nothing been learned about the dream factory marketeers? I find it incredible that folks still fall for the get rich quick schemes and pay to listen those that continually re-invent themselves by selling the latest scam to their huge marketing lists.

For the record, there is no such thing as get rich quick. Acquiring wealth involves skill, tanacity and knowledge ( unless you win the lottery!) Is anyone to blame for this celebrity culture, or are people just purely victims of their own stupidity and greed?

And finally, I wonder, do any of those celebrity landlords make money from property anymore?  when interest rates rise we will likely see many more landlords being repossessed and hitting the bankruptcy courts. Wonder what will happen to all those tenants?

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