Property crash, just maybe it really is different this time (Part 3)

[With a crooked smile]

On 27/03/2024 at 16:38, sancho panza said:

they spent £1.7mn refurbing it in 2017 according to the blurb,not sure what they spent.they've got to be in the hole for £3 mn or so.

to my untrained eye,it looks like a beautiful hosue but probably not viable as a B&B due to costs and its run by relative amateurs in the trade but WACS best to assess that.they say no kids on the site.I wouldnt stay at a place like that out of principle.

I wouldnt mind buying an ex B&B

I'm not sure why you wouldn't stay there? I would.

Re spend etc. Its a hotel, never believe the books. They are probably one of the best tax avoidance vehicles out there!

That said a lot of the value may be in the property rather than the business. Can it be repurposed locally as a luxury house or nursing homes etc.

That said for that money I'd buy something less attractive and more commercial. This is about to change hands to an Irish Group locally. https://www.rightmove.co.uk/properties/132341441

I currently get to use the leisure facilities for free. Be interesting to see if I can still get away with that under new owners. The pools fine but the gyms rubbish so I dont use that. New owner plans to use conference rooms for additional bedrooms so will be spending a lot post purchase. 

Manager is son of owners, assistant manager his partner is Polish. Early 50s they are retiring and buying a very expensive place locally. Good luck to them.

Edited April 1 by With a crooked smile

[sleepwello'nights]

13 hours ago, Frank Hovis said:

 

If however they are built in Devon and Cornwall then the timbers will begin to rot very quickly as the climate is damp and it never gets that hot.

 

Oh dear. Still the open panel timber house we bought should outlast me. 

https://www.framehomes.co.uk/

Edited April 1 by sleepwello'nights

[Frank Hovis]

17 minutes ago, sleepwello'nights said:

Oh dear. Still the open panel timber house we bought should outlast me. 

https://www.framehomes.co.uk/

 

You missed my earlier post, there are of course nuances:

Obviously it's not all timber frames, those cruck built medieval houses with huge timbers sitting on padstones will go on for ever, but the softwood chuck 'em up quick and clad it in brick that went up from the early 80s will have big structural problems in damp parts of the country.

[spygirl]

On 28/03/2024 at 20:01, spygirl said:

'I took out a mortgage 17 years ago and owe £15,000 more than I borrowed'

Amanda Wilson is one of around 200,000 'mortgage prisoners' stuck on sky-high rates through no fault of her own.

https://uk.news.yahoo.com/mortgage-prisoners-debt-amanda-wilson-145751795.html

A mother-of-three who took out a £335,000 mortgage in 2007 says she currently owes nearly £15,000 more than she borrowed, despite keeping up with her payments.

Amanda Wilson, 59, is one of around 200,000 so-called "mortgage prisoners", who were prevented from switching providers or applying for more favourable rates due to the fallout of the 2007 financial crisis.

When she bought her home with the now-collapsed Northern Rock in May 2007, she followed her brokers' advice and put down a 15% deposit for the home in Redhill, Surrey, valued at £395,000 at the time, leaving her with a mortgage of £335,750.

...

It was an interest-only mortgage, at a rate of 5.2%, but Amanda says the general consensus at the time was that rates were going to come down.

Sure enough, they did, with the Bank of England base rate falling to 3% in November 2008, and 0.5% in 2017. However, as a mortgage prisoner, Amanda had no way to take advantage of this and now finds herself in more even more debt.

...

It was an interest-only mortgage, at a rate of 5.2%, but Amanda says the general consensus at the time was that rates were going to come down.

Sure enough, they did, with the Bank of England base rate falling to 3% in November 2008, and 0.5% in 2017. However, as a mortgage prisoner, Amanda had no way to take advantage of this and now finds herself in more even more debt.

..

At a time when the base rate was reaching historic lows, the lowest Wilson's rate ever went was 4.04%, and she says she's had 14 rate rises, the last of which, in August 2023, took her up to 9.29%.

Amanda's payments went up from £1,200 per month to £2,700 per month in just over a year and a half. "The mortgage has just gone up and up and up," she said. "It was incredibly hard keeping up with the increases. I just don’t have the ability to pay extra."

 

The self-employed beauty therapist also took a six-month payment holiday when she was left unable to work due to the COVID-19 pandemic, and over the Christmas period between 2010 and 2011, which was the last chance she had to have a holiday with her family.

"It's been 17 years – all I've really done is work to pay the mortgage," she added.

bearhug just pinged this.

One thing I did not pick up was -

It was an interest-only mortgage, at a rate of 5.2%, but Amanda says the general consensus at the time was that rates were going to come down.

IR were 5.5+ in 2007.

Im not saying she was wrong cos I knew someone who took at a stupid mortgage in 2006/2007ish. We were chatting about it, and he was going - 'I dont want an IO mortgage ... I dont want it hanging around for ever.

Now the fact this person, whos was forever between jobs, got a mortgage of ~150k was nuts.

When I went thru what he was paying it came to an IO only at less than the base rate.

I went - Youre not paying off money on this.

He goes - Oh the advisors said they give you a discounted few years, IO only, to let your career progress so you can afford the repayments in 2y time.

This bloke was well in his 40s then.

He went bust in 2009.

 

 

[sleepwello'nights]

55 minutes ago, Frank Hovis said:

 

You missed my earlier post, there are of course nuances:

Obviously it's not all timber frames, those cruck built medieval houses with huge timbers sitting on padstones will go on for ever, but the softwood chuck 'em up quick and clad it in brick that went up from the early 80s will have big structural problems in damp parts of the country.

I was being self deprecating and blaming myself for buying a modern  timber framed house in a part of the coubtry with lots of rain. In addition the developer was a farmer who relied on subbies who may or may not have been supervised well enough to ensure the house was built to a good standard. Some of the workmanship we've noticed doesn't bode well for the quality of some of the work. Plus a couple of other houses have more serious issues still to be attended to. We used to joke that all of the houses had indoor swimming pools during construction!

On the plus side its an attractive looking house not on a high density estate, we have a large drive and breathtaking views. 

[spygirl]

Camp chief economist on the radio.

Its not going well.

He wasnt so effervescent.

 

 

 

[belfastchild]

On 31/03/2024 at 18:20, Frank Hovis said:

If however they are built in Devon and Cornwall then the timbers will begin to rot very quickly as the climate is damp and it never gets that hot.

I live in an 80s timber framed house.

Its so wet here I consider using the boat to get to the shops the odd time.

As long as they are maintained (roof/damp etc) they are fine.

[Frank Hovis]

1 minute ago, belfastchild said:

As long as they are maintained (roof/damp etc) they are fine

 

Tbh you can say that about anything including a car which is prone to rusting.

That isn't an argument for its being a good method of construction.

[spygirl]

1 hour ago, spygirl said:

Camp chief economist on the radio.

Its not going well.

He wasnt so effervescent.

 

 

 

 

Nationwide: House price growth remains subdued in March

https://www.bbc.co.uk/news/business-68711502

Robert Gardner, the building society's chief economist, said told the BBC's Today programme that affordability pressures on buyers was "weighing down" on activity in the housing market and price growth.

For someone on an average wage of about £35,000 per year buying a typical home, mortgage payments currently take up nearly 40% of their take home pay.

"That's well above the 30% which is the long-run average," Mr Gardner said.

[Axeman123]

On 01/04/2024 at 07:34, With a crooked smile said:

That said for that money I'd buy something less attractive and more commercial. This is about to change hands to an Irish Group locally. https://www.rightmove.co.uk/properties/132341441

What kind of yield could that actually produce, in your opinion?

[With a crooked smile]

28 minutes ago, Axeman123 said:

What kind of yield could that actually produce, in your opinion?

Put it this way, the owners son and partner drive a drive a top spec Range Rover that I know was bought not leased. They also have a Tesla but I dont know if that was bought or leased or how much it would cost. The woman always strikes me as quite frugal so i think you only see a fraction of their wealth.

And one thing that people never seem to get on here. Theres a big difference between accounts submitted to HMRC that are tax efficient as possible and management accounts

Edited April 2 by With a crooked smile

[Axeman123]

2 minutes ago, With a crooked smile said:

Put it this way, the owners son and partner drive a drive a top spec Range Rover that I know was bought not leased. They also have a Tesla but I dont know if that was bought or leased or how much it would cost. The woman always strikes me as quite frugal so i think you only see a fraction of their wealth.

Thanks for that.

If you don't mind putting it a different way, would someone really just be buying 1 or 2 ~£100k salary full time jobs for themsleves at best for their £3.75M?

[With a crooked smile]

Just now, Axeman123 said:

Thanks for that.

If you don't mind putting it a different way, would someone really just be buying 1 or 2 ~£100k salary full time jobs for themsleves at best for their £3.75M?

Nonthet would employ someone else to do the work.

The owners employ their son and his partner for the day to day. They are never there that I'm aware of.

[onlyme]

On 30/03/2024 at 10:38, Frank Hovis said:

 

I do hope so.

I noticed a big rise in the sort of nice place I would like to have through lockdown, I thought it only a matter of time before that reversed because these places are bought upon emotional attachment rather than value so there is often zero demand propping these up and they can tumble when sentiment turns.

I have a type of house I keep an eye on - with either accessible water frontage or land and a lake - and they jumped from about £1.5m in 2019 to £2.5m - £3m now.

Not that I'm imminently buying one for several reasons but if the opportunity ever arises then I will know if it is a "good" price.

Markets get in trouble when there is a significant pull forward of demand. Wasn't just the working from home that allowed more money to leak out of the London bubble  / high wage environment a lot will have, many will have brough their retirement forward with teh move out from their work area, both factors leaving a significant vacuum  in demand afterwards.  If you look at the figures you can see the biggest / earliest significant falls were on SW coastal areas where this effect was the most. Might be quite a few years until demand normalises again so no surprise if prices continue to slide.

[With a crooked smile]

And you'll get 75% LTV now potentially 80%.

[belfastchild]

8 minutes ago, With a crooked smile said:

They also have a Tesla but I dont know if that was bought or leased or how much it would cost.

100% write off in the first year. Wouldnt give a shit about depreciation then. The bigger the depreciation the better.

I know where Id put my money.

When someone on here talks about being shit hot at business yet 'has' a Tesla on finance it doesnt compute.

[Axeman123]

@With a crooked smile so 17% yield, presuably after paying the son and his partner a generous wage etc. Thats much better than I would have expected.

Thanks for taking the time.

[Frank Hovis]

2 hours ago, onlyme said:

Markets get in trouble when there is a significant pull forward of demand. Wasn't just the working from home that allowed more money to leak out of the London bubble  / high wage environment a lot will have, many will have brough their retirement forward with teh move out from their work area, both factors leaving a significant vacuum  in demand afterwards.  If you look at the figures you can see the biggest / earliest significant falls were on SW coastal areas where this effect was the most. Might be quite a few years until demand normalises again so no surprise if prices continue to slide.

 

Good news for me if that slide happens, certainly I'm seeing houses staying on the market unsold and a friend who is selling and has been speaking to EAs said the expensive houses, anything much above £1m, aren't selling. His is below this.

 

Edit: Appropriate Telegraph story today:

‘We’re struggling to sell anything over £500k’: how Cornwall’s Covid property bubble burst

With properties going to best bids within 24 hours, selling for 15pc over the asking price and “lockout” clauses to keep off gazumping cash buyers, Cornwall’s pandemic property market was frenzied. 

The average property price in Cornwall has increased 35pc since 2019 to £313,420, according to Hamptons. But last year it came back to earth with a bump. The market cooled rapidly: prices fell by 1.3pc in December, more than the average for the South West’s dip of 0.5pc. In 2023, the average Cornish property took 77 days to sell, the longest in any year since 2015, according to Hamptons. 

It is now a buyer’s market for the first time since the pandemic, according to PropCast, which analyses the proportion of properties for sale that are under offer. Currently, 31pc of such properties are under offer – down from 39pc during the same month last year.

Properties are lingering for longer on the market and are more subject to price cuts. In the four weeks to March 17, 3.2pc of for sale listings in Cornwall had undergone an asking price reduction of 5pc or more, less than in the same period of 2023, according to Zoopla.  

House hunters have caught on: the number of sales agreed in the first eight weeks of the year show is 23pc above the same period last year, according to Savills using TwentyCi data. 

So what has changed? Buyers (and sellers) are getting used to the “new normal” of interest rates around 5pc and some are tired of sitting on their hands, says Robin Thomas of Recoco Property Search. He has just taken on his first two clients in Cornwall in three months – both cash buyers looking to spend over £1.5m. 

‘We’re struggling to sell anything over £500k’: how Cornwall’s Covid property bubble burst (msn.com)

Edited April 2 by Frank Hovis

[Axeman123]

12 minutes ago, With a crooked smile said:

And you'll get 75% LTV now potentially 80%.

For a hotel business? Is that with or without a personal guarantee? Any idea on interest rates or IO/repayment?

750k down, 650k pre-tax profit...maybe 3 years payback for the deposit after interest and tax?

I have just realised how "financialised" my own mind has become, I honestly never expected the sums on a physical business to make sense.

[Boon]

650k 'adjusted' pre-tax profit, I think that adjusts out the Best Western fees which aren't avoidable if you choose to continue with them, but also if you don't must drive a lot of business. 
I do suspect if the net profit figure was good then why not quote that, or even the 2023 figures if they were better. 

This must have been on sale for ages, notice that the first turnover = Actual + Forecast = £1.934m, but the actual turnover is £1.482m, I wonder whether those forecasts were made based on the 2021 summer, where people couldn't travel abroad/were scared to/other countries had vax requirements, and the disappointed since.

The hotel wouldn't seem out of place in Alan Partridge, a very 90s feel overall, so capex required for the new owner at some point.

[spunko]

19 minutes ago, Boon said:

650k 'adjusted' pre-tax profit, I think that adjusts out the Best Western fees which aren't avoidable if you choose to continue with them, but also if you don't must drive a lot of business. 
I do suspect if the net profit figure was good then why not quote that, or even the 2023 figures if they were better. 

This must have been on sale for ages, notice that the first turnover = Actual + Forecast = £1.934m, but the actual turnover is £1.482m, I wonder whether those forecasts were made based on the 2021 summer, where people couldn't travel abroad/were scared to/other countries had vax requirements, and the disappointed since.

The hotel wouldn't seem out of place in Alan Partridge, a very 90s feel overall, so capex required for the new owner at some point.

Looks like they've renovated some of the rooms but not all, which I would think suggests cashflow issues, unless there is a contingent of the population who choose to stay in 90s chintz hell:
 

[With a crooked smile]

1 hour ago, Boon said:

650k 'adjusted' pre-tax profit,

Normally they have added directors wages back in to give the adjusted figure 

[spygirl]

1 hour ago, Boon said:

650k 'adjusted' pre-tax profit, I think that adjusts out the Best Western fees which aren't avoidable if you choose to continue with them, but also if you don't must drive a lot of business. 
I do suspect if the net profit figure was good then why not quote that, or even the 2023 figures if they were better. 

This must have been on sale for ages, notice that the first turnover = Actual + Forecast = £1.934m, but the actual turnover is £1.482m, I wonder whether those forecasts were made based on the 2021 summer, where people couldn't travel abroad/were scared to/other countries had vax requirements, and the disappointed since.

The hotel wouldn't seem out of place in Alan Partridge, a very 90s feel overall, so capex required for the new owner at some point.

Dunno.

I dont like hotels.

https://find-and-update.company-information.service.gov.uk/company/03193781/filing-history

https://suite.endole.co.uk/insight/company/03193781-ivy-house-cumbria-limited

They list 37 employees, so that turnover is going to disappear in wages.

Hotels offer people with the right mindset and manageable leverage a decent business/lifestyle - though you will be run ragged 247.

The cashout is selling up, which can takes years if not decades.

Most pple running hotels of whatever sizes tend to have had enough by 60.

Great if that coincides with banks expanding commercial loans and people looking to take on lifestyle business - 2005 would have been a great time to exit.

Pretty grim if banks are contracting credit and people are pulling horns in.

I dont know if LD attracts more pros than dreamers.

 

 

 

 

Edited April 2 by spygirl

[HousePriceMania]

[With a crooked smile]

21 minutes ago, HousePriceMania said:

asking prices and reductions in asking price are completely irrelevant. What did other houses historically sell for in the road. you need proper context