FlightMan

The king and queen of buy-to-let

Judith and Fergus Wilson have built an empire of 900 properties, but now they are starting to sell up and telling investors that 'the party's over'. Patrick Collinson finds out why

The Guardian,
Saturday October 4 2008


In little more than a decade, two former maths teachers at a south London comprehensive climbed the property ladder faster than anyone else in Britain. In a frantic series of deals, sometimes buying several houses a day, Judith and Fergus Wilson used cheap buy-to-let finance to snap up hundreds of homes, mostly around Ashford in Kent.

But the couple have bought their last house. The final three, acquired this year, took them past 900. Now, in the week the biggest buy-to-let lender, Bradford & Bingley, bit the dust, they have decided to begin selling.

When house prices were soaring and the economy riding a tide of cheap credit, their personal wealth was rising more than £25,000 a day. But now buy-to-let loans are becoming scarcer by the day, interest costs are soaring and tenants are struggling with the rent.

Not that the Wilsons are about to be destroyed by the credit crunch. Unlike many amateur landlords who piled into buy-to-let in 2006 and 2007, they bought most of their properties when prices were lower, and still have a comfortable cushion of equity. They focused on two and three-bed houses, not the new-build flats where prices are falling hardest. But servicing buy-to-let loans is becoming tougher, even for the Wilsons. Two-year deals fixed once at 4.5% have in the wake of the credit crunch and B&B's demise, moved towards 7% and lenders want steep deposits. Some, says Fergus, also want fees of up to 5% of the loan, which can take the annual pay rate to 9% when spread over two years.

"We are not a penny behind on our loan payments," says Fergus. "We are reasonably safe, I think. If we go under, then everyone's going under."

He's not about to dump hundreds of properties and single-handedly create a slump in the Ashford area. The plan is to sell over several years, from Christmas. Like many other buy-to-let investors, he built his portfolio for capital gain rather than rental yield, but sees little chance of such appreciation in the next few years. So rather than wait until long into his retirement, he's taken the decision to start selling.

"We are both over 60 now. My view is, 'thanks very much, it's been a nice ride but the party's over'."

Will the Wilsons walk away with millions or be left with crumbs from a collapsing market? Fergus is cautious about precise figures, but reckons his properties are worth "around £250m" and that the typical loan-to-value is around 65%. That suggests they have an equity cushion of some £90m - and a mortgage of about £160m. While some householders joke they have a mortgage the size of a small country, in the Wilsons' case it's actually true .

The risk for buy-to-let borrowers is not only rising mortgage costs, but tenants failing to pay the rent. "One or two have lost jobs, but our properties benefit from rent guarantees," says Fergus."

Figures from Nationwide this week showed house prices tumbling 12.4% annually, but Fergus says "the prices for two and three-bedders around here have not fallen much". Official data shows buy-to-let mortgages have levels of arrears and repossessions no higher than mainstream loans, and in some cases are performing better. But B&B's demise indicates the City is unconvinced and that the sector may blow up.

The Wilsons say there are two buy-to-let markets: the more professional buyers such as themselves, who invested early and specialised in houses; and the latecomers who paid fancy prices for flats. "You only have to go over to Maidstone. The ones who purchased flats there - some have never had tenants or rent to cover the bill. A lot are just handing the keys back," says Fergus. He adds many used bogus 15% "discounts" on the offer price to qualify for 85% buy-to-let loans, which were in reality 100% of the real price.

The few buy-to-let lenders left - the Mortgage Works joined Bradford & Bingley's Mortgage Express in pulling products this week - want deposits of 25%-plus, or 35% for new-build flats.

Critics of buy-to-let say they have no sympathy for the plight of investors who were interested only in using easy finance and tax breaks to make a quick killing, inflating prices and preventing first-time buyers getting on the ladder.

Fergus says: "Buy-to-let landlords are not bad people. We are not like sub-prime in the US. Most of the properties that will now be sold will go to first-time buyers. What the government has to do is something about the size of deposits people now need to raise."

His advice for property buyers? "Flats will not be worth buying again. There are far too many - that market is finished. What I tell youngsters is, 'rent your first flat, but buy your house'."

So, two maths teachers have managed to get a mortgage of £160m! Now, I don't know how much teachers get these days, but I'm guessing its not £32m ( 5x earnings )

Bankrupt in 2 years tops.

phil_wrx

iTrader: (2)

cant see them being bankrupt as they have a nice equity cushion but they are right about the flat market, the people that bought them wont be able to sell on at all

GC8

I have no sympathy for them. Ten bob millionaires such as these are one of the major reasons for low end housing being unattainable to many...

PaulC72

sounds like they did it in a resonable controlled fashion but imagine havine 900 properties and needing tenants, i couldn't sleep with one empty house lol.

SlimJ_2005

Agreed! Heard quite a bit about these guys over the past few years, I really hope they have trouble selling and lose plenty of money over the next few years.

"What the government has to do is something about the size of deposits people now need to raise."

No, they should do nothing, I think in order to get on the property ladder you should have to put down a good deposit, I think 20-25% is fair. This will quickly bring the prices to a more realistic level.

Gordo

Errr, why? Surely, like any other landlord / housing trust etc they are providing rental accommodation for people who don't have capital and want a fixed monthly outgoing. These people took the risk and good for them, but it was a risk.

The cost of housing is driven by supply & demand, not by speculators per se.

salsa-king

were did they get the deposits to buy all those properties, when some bTL companies don't allow equity release on buy to lets.

Nate

iTrader: (2)

Some of the comments are typically British, 'Don't like anyone getting on in life, and prefer losers', it does annoy me when people think like this.

As also said above, they are helping with the rental side of the market, which is an important part.

I say good on them, and especially over 10 years

stilover

Totally agree with that statement.

I remember seeing these 2 on Watchdog a few years ago. Very poor landlords. Very aggressive with Tennant's when anything went wrong. They refused to pay for maintenance to their homes. Billed Tennant's once they'd left for maintenance work that they'd refused to repair in the first place.

stilover

If these 2 were aggressively buying houses as they came onto the market, there were less home for people to buy. So prices rose.

First time buyers now can't afford to buy a house, so have no alternative but to rent.

If house prices hadn't rose so stupidly fast, the property market would still be healthy. Without first time buyers, chains stop.

I bought my apartment as a first time buyer. To sell now, I'd need a first time buyer to buy it, but they can't due to the price and that mortgages are getting increasing hard to get/afford. This all means that I can't upgrade to a house.

NotoriousREV

Yes, and these people took 900 properties out of the supply in that area thus driving up prices. And now they're dumping 900 houses back into the supply and a time of low demand depressing prices. I know they'll say they're going to do it slowly, but even at 100 houses a year it's going to take them 9 years to dispose of them and there's every chance that as interest rates rise, rental yields drop and BTL mortgages reduce massively they'll be in a financial mess long before they get to this point forcing them to dispose of their stock much more quickly.

It's pretty clear that they had no viable exit strategy and it was very short-sighted of them to buy the vast majority of their properties in 1 area.

GC8

Spot on. All I can add to that without repetition is that unchecked immigration was also a factor. Unlike this though, immigration isnt particularly the fault of the immigrants who are taking available housing, fault lies with the government.

GC8

Revelling in their title the King & Queen of But to Let, no doubt. The parasites.

Deep Singh

Oh come on! Parasites? Why do they deserve such a title? They have done nothing wrong! Who has decided that its immoral to own 1, 2, 5 or 900 houses? Its a free country and a free market. Free market says they can buy or sell whatever they like and the prices will follow.

They may come out of this rich in which case good luck to them. It might come down around their ears in which case tough luck. Either way they have tried to make their fortune without breaking the law, they do not therefore deserve to be vilified

EddScott

If they have a "cushion" of 90m then whats stopping them just handing the keys to the bank and walking away from the properties?

FlightMan

Sorry, they may or may not have done anything wrong, but the fact they have a mortgage of £160,000,000, on 2x teachers salary, would seem to me to be indicative of a tieeny weeny problem.

If, and it's a big if, banks and building societies had stuck to 3 or 4 times salary for a mortgage, this whole damn mess wouldn't have happened. Now, whether that's the banks fault, or Govt ( who got relected on unsustainable increases in house values that made Joe Shmo feel like rich ) is another question.

austinwrx

now nicholas van hoogstrateen

now he really was the private renters dream landlord

he'd evict you with a hand grenade.

people forget the broad rule of thumb with property- it roughly doubles in value ever 8-10 years.

you've got to be in it for the long run.

ps I don't think you'll find immigration has much impact on the housing market in terms of them wanting to be 1st time buyers. usually immigrants tend to be forced onto sink council estates where the white community has done nothing but smash the living daylights out of it for years.

logiclee

It was 3 times when I took out my mortgage in 1991.

And yes I totally agree.

Cheers
Lee

GC8

There is no suggestion that immigrants are first time buyers.

Immigration reduces the number of available houses: it doesnt matter from which sector. Fewer houses equals greater demand.

al4x1

The income you're working on is their salary, however the banks will include their rental income as they would if they were running any property business, on paper there doesn't seem to be any liquidity problem or lack of equity so to me they have done very nicely thanks and it'll be because they got off their ***** and took a risk and once it started to pay off they managed it well and expanded. Ltes face it if they aren't going bust during this crisis then they have certainly done ok

davegtt

Think how cheap houses were in 1998 compared to todays market. A few houses could have been bought and paid for relatively quickly compared to todays market. The income would have gone towards the rising mortgage etc...

Theyve obviously done well for themselves and fair play to them, those dissing them are just jealous. Wish I knew how well the market would have risen in 1998 to todays prices, Id be laughing now.

GC8

Rubbish. They were greedy, they werent very good at it and now theyre failing.

If all of the bandwagon jumping profiteers hadnt tried to do the same then the house market wouldnt be in the mess it is now.

davegtt

How are they failing? they have at todays market 30% equity on top of their mortgage, going to take some massive drop over the next year to put them out of pocket. No doubt theyve been making money on the rent too which is paying its way

FlightMan

Sorry, but I don't see this "they've done good" thing.

They "own" 900 assets, the value of which is falling, rapidly, and no-one knows where the bottom is.
If they'd been real businessmen they'd have sold them at the peak.

Gordo

think of all those 'poor' first time buyer who haven't lost capital as they couldn't buy a house in recent years. what a load of trot is being spouted above - how many of the same muppets posting on here were chuffed their propety had gone up in value when in reality it was fool's gold locked in an illiquid asset.

not everyone should own their own property - noone I know in Italy owns, they all rent and are just as happy without a stupidly fluctuating property market.

good on this couple for being opportunistic and doing well - ignore the random socialists posting on here - these two can drive a managed exit and still walk away with 10s of millions. beats teaching!

Gordo

GC8

Im far from a socialist. Im a libertarian conservative realist.

GC8

Scratch that: Im a realistic libertarian liberal-conservative with a social conscience.