Nathan Birch defaulting on IP mortgages...

Her strategy worked, she started a business and became rich....

 

Don't know the guy. But it's obviously very thin margins. 200 properties and $500k rent. Meaning he makes $2500 per property. Sounds very high effort and maintenance business, and there's lots of debt

 

All I know is that when he set the mortgage business up he called several aggregator BDM's and they went to meet with him. I know some of them, so I know the business model he was using. It involved recruiting rookie brokers on zero retainer , to take leads from his client base and channel them to Westpac wherever possible, so that whatever "arrangement" he had with "his guy" at Westpac to do revaluations , could be utilised... Draw your own conclusions.

I haven't ever dealt with him or any of his businesses. Ive read the complaints here about his supposedly woeful property management business , but I cant speak from any personal experiences. Your post suggests his mortgage business isnt faring much better... and I suspect his core income producer- the buyers agency, is struggling because his Westpac relationship ( which I am guessing was the "secret" to much of his success) has been closed off..... and its why he is now taking 7% rates from anyone he can get them from...

My opinions of him and his model are formed on conversations with lending industry BDM's who I respect, and observations of his Youtube content- which has always screamed "numbers make no sense" to me... Ive just always had a problem with his looseness and the inconsistency of his numbers. Whether its his media articles or his own website, where he claims to earn 500K and then it goes on to claim he earns 400K on the same bio page... there are just holes in his numbers everywhere you look and listen... and if he's that consistently inconsistent and loose about the most basic figures, how can I ( or anyone else) take anything he says as gospel?

Nathan Birch - Binvested

TV appearances I have seen where he takes an investor along to provide a testimonial - its been a staff member who has appeared... the Sunrise episode comes to mind. There are others I cant quite identify right now..others may be able to help there?

And there's that epic wisdom in his Youtube video's where he gives us gems like "negative gearing sucks balls...and the reason behind that is there's nothing good about it" and then goes on to fill the best part of 6 minutes with ....fluff. It's incredibly impressive high end analysis, dont you agree?

Im not a rocket scientist but Im pretty savvy at lending and cash flow and numbers ...

I dunno...his numbers have never made sense to me...

But here's hoping this isnt the beginning of a total collapse of his model. Not so much because I dont want to see it happen to him ( I dont ) , but more so because he would have lots of clients who have followed his approach and who might find themselves in a lot of distress, and I dont want to see it happen to them... Here's hoping that his "disciples" arent all geared up to the eyeballs on IO loans that are due to roll out in the next year or two or three, and are surviving on 2-2.5K CF+ yields at the moment. They'll be decimated.

 

Whilst her strategy may not be for everyone I think her basis for property selection is spot on,20 Must ask questions etc.

Also her business is about selling education not properties..

 

I remember that one. Kochie thought they were nuts. Linda Lieu didn't know how much debt she was carrying. Didn't have a clue.

 

Didn’t NB start with a good strategy in buying in cheaper areas of Sydney and adding value by doing smart renos. But at some stage that became too hard and he started buying lots of cheaper properties which he thought were below market value because he thought he was smarter than the market.

Given his thin margins the increase in IO rates and switch to P&I would have squeezed his cashflow.

The only reason he would default is because he can’t get the cash. Selling may not free up cash if the portfolio is heavily crossed and his prime lender is looking at reducing exposure.

 

True. It worked for her

But when I was a young and inexperienced investor I took on board some of her advice, and it was either very wrong or very obvious.

Lesson learnt

 

Cross collaterisation

 

Pity,and it may well be largely that the real estate industry doesn't understand people like ###### and people's mental health and wellbeing.. i don't know how many followers on a individuals basis the companies this gentleman control's and on a individual basis would be almost impossible..But just on the scale of number's i hope he comes out the other end as the tide goes out for everyone as there is a attitude out with "Real Estate Influencers like Nathan" that there is a serious attitude out there that once you ask for money people take it the wrong way..good luck Nathan..

 

One word..... timing

 

By this I mean .... the business made the money not property.

She sold a story, people who believed in her strategy, no idea whether it is good or bad investment. I guess those that made money using her strategy will be happy, bad luck for those that missed the boat using her strategy.
The business made her rich, what she sold.

MTR

 

I think he shud have stuck to Sydney stuff that’s when he was really innovative picking up burned down houses tidying them up and renting them out which was giving him good capital growth and Sydney also boomed in that period

I really think when he went interstate that is when things started to get riskier and he also was going into an area where this high yield method with low socio economic areas was gunning on growth which did not happen like Sydney.

 

Would NB portfolio be yielding net 8pc ?
$500K profit based on a portfolio costing $30m average borrowing cost of 6p ?
Where as you probably need closer to 12pc for comfort ?

 

Quoting this for the importance

I know that many of NBs clients were heavily cross collatoralised and so it might stand to reason that he may have been too.

To sell up some stock would have caused a lot of revals of properties that might no longer live up to their desktop val equity release. A spiders web of properties would have taken a lot of unravelling that was a house of cards.

I admired NB at the beginning when he was doing the hard graft to add value to generate equity. Once he went down the "desktop reval with Mr Westpac" equity release I lost all respect as it was a house of cards waiting to crash down. If it had only done it for himself I'd leave him to it but he lured other people in with it and that smelt unethical to me.

 

Great analogy. I was always quite sceptical of him for various reasons mentioned above plus the cocky attitude.

I’m surprised he was using Latrobe finance...he must have found himself up against a wall some time ago

 

If people view Nathan Birch as a person with a house of cards - that does not look good for the property market. How many Nathan’s are there? How many people running that thin. If there is a lot, how does it impact the market as a whole? Do they hold in Sydney or in random country areas? If Sydney and they get in trouble how much bleeding is there in the local market. How much bleeds out of Sydney? If it is regional does it remain contained.

I think there is a lot of very good investors out there who have nothing to worry about.

I’m interested to see how many bad ones there are

(Interested academically- I actually hope nobodies lives get destroyed by positive geared properties turning on them)

 

On numerical terms there is really not many investors with portfolios like that.

 

You really only have to look at the many many many people who invested in one horse mining towns to see how people get lured by cash flow and don't factor in the possibility that values may fall.

Yes they are regional but the sentiment is valid for many capital cities. Perth had heaps of cash flow positive IPs 4 years ago. Then crash the construction boom finished, people migrated back to their cities and vacancy rates rose and house prices fell. Mortgage stress sky rocketed.

If you only have a few it's possible to prop up the house of cards. But when there is more or the losses are higher the harder it becomes.

 

Well said. Agree with this.

 

And this is after the first hint of prices dropping. How many will be in trouble if the market drops 10% ?