Nathan Birch defaulting on IP mortgages...

Any investor with half a brain would ALWAYS do this prior to any and every transaction. Not just now but have done in the past and will do in the future.

Do your risk analysis, run your risk scenarios, develop your contingency plans, ...

If not, you are an amateur IMHO.

 

The LVR on the property in question seems kind of low which could simply have been what the lender was prepared to offer to mitigate risk, but it makes me wonder if this property is held in a regular company or within a SMSF structure. The latter could explain the difficulty in just making the problem go away by throwing money at it (ie when taking into account contribution caps).

 

I reckon at least 50% of Sydney 'investors' are amateurs. And yes, l meant prior not when it happens!

 

no super safety features are going to save you if you don't know how to drive defensively. sure, there are idiots on the road but much of "safety"is in your driving habits. i'm shopping for a new car today, however. those were not assumtpions...i deal with quite a number of "affluent" clients that really have nothing to show after putting assets and liabilities on a spreadsheet. but let's not discuss this aspect further, it's about NB.

 

The bigger issue here is his credit rating/credit score. With a mortgage delinquency/default , how do you think he's going to go when he next tries to borrow money at a reasonable rate ?

If he can borrow at all ( due to servicing constraints) he will be forced to pay large premiums to get money, which would destroy his razor thin cash flow model... potentially causing him to have further problems meeting his commitments... and that's just for new purchases. If he also has to try and refinance IO loans that are expiring, he could be facing some serious domino effect issues... think about this ; if any of his Westpac stuff starts coming apart at the seems this has the potential to get quite difficult. I understand almost everything he has with them is crossed.


So if for no other reason that protecting his credit score, he should have rescued this situation far earlier, at all costs... with all the supposed wealth he has accumulated he could have done a deal with the lender very easily to sell up one of his Sydney properties and clear the debt... yet he didn't. Combined with his failure to settle ( by his own admission) on some other deals in 2017, it really does make one wonder whether there are cash flow problems within the business as well... for a guy so reliant on credit availability on good IO terms, to allow THE SINGLE GREATEST ASSET he has - a good credit score - to be damaged , really defies logic.

If I was him, I'd have sold a bunch of the juicy Sydney stock for fat profits, cleared a bunch of debt and protected my "F you" position at all costs. He says he has 200+ properties worth 50 Million and has 30 million net worth, which infers he has @ $20 million of debt. Well then- smart money management 101 .. sell off the very saleable, very profitable Sydney stuff , take the millions in post CGT profit that we have all been led to believe is there, and reduce that debt down . It would have the effect of immediately improving cash flow and making servicing existing debts easier as they roll to P&I.

There's just no way this just came up yesterday, or by surprise either... he will have felt this pain or had very clear writing on the wall as far back as APRA 1, 2 to 2.5 years ago.... so really, he has plenty of time to get his ducks in a row, and the Sydney market was still very buoyant for sales during the majority of that period... It just looks like a catastrophic misread of the credit environment or just catastrophic over confidence ...

The bank will now probably push for a mortgagee sale... and a predatory investor will probably buy it below market value. #irony

Gravity applies to everyone . If you arent yielding 10-12% or carrying a very low debt to income ratio or earning a very large income where you can afford to cover your holding costs, you simply cant run a portfolio anymore without injecting some defensive cash flow into it. Be smart. Make sure you have sufficient income/cash flow within your portfolio to pay down debt while times are good ( ie low rates, and IO is available) but also sufficent to give you a defensive position /neutral position if the winds change ( ie high rates or P&I or both)

#cashcowskilldebt
#decadetodeleverage

 

To me unless he has been super dodgy he probably does have the means to finance it and this was just a simple admin or temporary issue.

I too got a little worried about io periods ending and rates going up so to be safe have started shedding up to half my portfolio

 

I've always wondered a guy like him must be doing all his credit apps via a company and not a person. As there is no way a credit file with 500 hits would look Good or possible for finance

 

For a guy with a gazillion properties and gazillion businesses and a gazillion companies I reckon 99% of us would have nfi of his true posituon

 

I'm sure a smart man like him would never buy one. Just lease it

 

I heard a rumour a few months ago that his mortgage broking business had lost its accred with a number of lenders, so maybe thats got something to do with it?

 

Not surprised...he has quite a few lenders of last resort...

Margaret Lomas makes an excellent point..a lot of people went away from her strategies...becuase it was not sexy enough.

Wonder hat the NB disciples are thinkin'....it must smell in parts of Western Sydney

 

How does a mortgage broker lose accreditation with lenders, in general?

 

I got that vibe too when I saw a property that I thought was valued for 120k being revalued by 190k with rent for 250.

The rent may have been true but definitely not the value.

I purchased a property for 90k with market value I thought being 105kish however when I refinanced it they gave me 135k.
I took the money but based on my equity calcs on my perceived market value.

 

I went away from her strategies cos they were simply WRONG

 

Her strategies in terms of locations I don't agree with...but her fundamentals are quite strong.

 

And so does Henry kae!

 

More facts...this is not fake new...these are reasonably reliable media outlets


High-profile property investor Nathan Birch is being sued for failing to make payments on a $535,000 mortgage

Should be interesting to see how some on the forum who went big in Sydney do....

People if you think you will have a CF problem...do something about it now! When the tide turns...it will get very hard.....this is why diversification is also important in additiona to CF. Have an exit plan.

 

writing dodgy loans using dodgy payslips etc etc...

 

Impossible. The banks would have written to him multiple times before it got this far. Miss a payment- admin issue, although even thats unlikely because he would have his payments automated via Direct debits , surely? Ignore the multiple reminder notices... not an admin issue. Ignore the multiple phone calls ... not an admin issue.

You just dont get to a court situation without failing to respond to multiple attempts by a bank to resolve the issue...

 

I've got a theory that a lot of wealthy people aren't as rich as their PR or estimated net worth in the AFR Rich List would have you believe. Rather it's down to notional, and possibly exaggerated, valuations of illiquid assets.

I had a discussion like this with a friend last year. He lives in Bournemouth in the UK, and one of his neighbours used to run a property development company in London, but it was wiped out by the GFC in 2008. One minute the developer had ready access to credit, the next he didn't, and that was the end of that.

So, if I could speculate, Nathan's in a similar to situation to the developer: He's got the cash flow and credit rating to support his leveraged position, and so appears rich. But if things continue to turn nasty, he'll be ruined.