 My personal bankruptcyI went bankrupt in November 2005 due to some bad investments in 2002 off plan followed by a few bad business decisions and a dishonest member of staff. It's no secret that in September 2002 I got a bit over excited about reserving lots of new builds and off plans all over the UK, after all I was on Tonight With Trevor and a few local news programs. This was partly due to the sudden growth in property seminars and the clever marketing of "Finders" selling property for what appeared to be no money down and instand fortunes to be made. I figured that if I did around 100 of these deals and only made a modest 10k on each one then I could be very wealthy. I could not afford to do this all by myself, and sold my existing London portfolio to fund some of it and took in some investors for the rest. 
I share my story because I am not ashamed to admit I was caught out and over ambitious - and if I can help anyone else by sharing my story, then at least my experience was not wasted. Lots of the developments didnt work to plan and I had some shocking experiences that I share with you in my dedicated off plan section. Part of the sale of Housemouse website (some of you may remember it) and development of leabeven.com was due to the bankruptcy, but also I needed a change and fresh start, and wanted a domain to cover more of what I like to do. The bankruptsy, whilst hard and somewhat embarrasing has had a positive affect on my life - and I am now very anti-credit and anti-gearing. I was discharged in May 2006 and am clear to trade again. A bit more cautiously this time. It seems to me from my own personal experience that personal bankruptcy is too easy these days. The rise in bankruptcy figures has been high since the beginning of 2005. Could this be a sign of the times? There seems to be just too much credit available, and too many people advertising credit on TV, Radio, Internet and in other media. The more we are lead to believe we can "live the dream" on other people's money - the worse it could get. I opt for pay as you go on my mastercard now - this is available to people who are bankrupt - and even tho I am clear and free now, I use it in preference to gettign into any kind of debt. So I pay �4.99 per month and top up my card either by bank transfer or at the post office (or other pay points), I can put upto £5000 on it at a time (not that I have that much spare!) Anyone can get one HERE The fact is you need to work hard or smart to make money of your own to get the things you want, and I learned this the hard way. I tried to grow too fast in both the property and web world - taking on staff, offices and commitments that I could not really fund long term but that I was hoping would just take off and make me rich overnight. Now I believe that wealth is a state of mind - and that I didn't really need lots of money to make me happy, I just needed good friends, spend time with my family and enough money to live comfortably with no debts. I could not ask for anything better than the group of friends I have now. If I could do it all again (and it feels a bit like a second chance now) then I would keep it small - I should have used the money I made in investing when I sold of my first portfolio to pay off mortgages on smaller properties, and create a passive income from rental income and websites. As far as the admin side of the bankruptcy, I found it to be very easy. You just fill out the forms and go to court pay your bankruptcy fee (around £300), and it is done. I had to make two visits to the official receivers office in Chester and take all my paperwork - and that was all. 6 months later I was discharged. It's a hard question to answer when people ask me if I agree with people going bankrupt, because I really think it depends on the circumstances. Someone that does it on purpose and rips people off I dont agree with. I did not want to go bankrupt and fought against it for a few years - pushing harder and harder to earn more money to cover the empty property and mounting bills. I only took down large lenders (who really should not have lent on the properties in such volume) and a very few investors. I did my best to negotiate and pay off as many investors as I could. I'm going to present to you a few short stories about some of the things I remember about the off plan investing I did in 2002. It took 3 years to clear up the mess and only in 2006 was I finally free of it all. I am not sharing this with you to show you how stupid one person can be (because that is obvious) - but more so that other people can learn from what may seem like obvious things, but ended up being very costly mistakes that I made. I hope that you can learn and NOT loose money in off plan and new builds like I did. I estimate that I lost over 500k by badly investing for a 3 month period and then taking 3 years to clear it all up. Before that short period of stupidity my investing was very profitable. Whilst it would be great to blame everyone else (Valuer, Finder, Seminar company, Estate Agents etc) - it has to be said - it was me (and some other *investors) that bought them! *for confidentiality I have not included other investors or figures into the stories unless I have express permission despite most of them being joint ventures - these stories are all based on my own personal finances and experiences. The Lady Lea story - Confessions of a Property InvestorBeing a property investor since 1992 sometimes I had to pull a few strings to get a deal through. There were not really proper buy to let mortgages when I started investing, or were there buy to sell ones – only commercial mortgages which at the time were only 75% loan to value or purchase. I will say that I don’t recommend anyone actually does this style of investing, but this website is really an online book of my own experiences and how I have done things to get where I am. Although it could be seen as fraudulent investing you will find that most investors have to pull these strings when doing deals, telling a few white lies or avoiding the whole truth. Most of us are usually trying to do no money down deals or want to buy a property with a specific lender to get a certain deal (maybe one with no redemption if we are going to sell it right away) A few of the things I have done in the past to get a deal through include:
Some of the things on this website are not recommended to try or do, they are just stories of my own personal experience. I started buying property in 1992. My first property was to live in, bought jointly with my partner Adrian. When we split a few years later I had some of the equity to put as a deposit on a very small house in Wolverhampton. Things went bad for me in Wolverhampton and I had to leave, and around 1999 I rented it out and moved to London renting a flat. After being down there a year I realised I would stay so began to look for a property to live in. I found a small 1 bed ground floor flat for around 36k in Dagenham and quickly bought and moved into it. I had to have ground floor because I had a dog that used a dog flap. In my mission to find the ground floor flat I had registered with lots of agents looking for these Ex Local Authority, small, cheap flats, and not long after I moved in I started to get calls on more and more flats in the area. I thought long and hard about property as my house in Wolverhampton was doing ok and I had dreamed of expanding my property ownership. Whilst I was living in this 1 bed flat I met someone and moved in with into a brand new townhouse with a joint residential mortgage and the 5% deposit paid. Renting out my second property … things were looking good. My circumstances changed and my health deteriorated rapidly with a serious back injury I had in 1997, I was off work sick for a long time but during this time I was offered one I could not turn down, 66k for a 2 bed in Dagenham – when most of them were around the 79k mark. The lady had died and the family wanted rid quickly. My only option at that time was to apply for a residential at that time – and the only product available to me – as I was off sick and that would let me fix it up was a 130% mortgage with North Rock. So I applied and was surprised to get approved quickly. So with 30% cash back in my pocket I managed to refurbish the property and rent it out in about 6 months. I was making a small positive cash flow on this property as well as the Wolverhampton now, and my own property had gone up in value. I was very aware that I may not be able to return to work, and that building up a property portfolio would substitute my income considerably. After I had rented this one out I was offered another one, closer into London in Hackney. It was worth about 200k, but I could get it for 180k as it looked a little tatty (was only very basic cosmetics costing around £500 to put right). I snapped it up after applying for another 100% residential mortgage, and using some of the 30% cash back I had from the one before for all the valuation and solicitor fees. I rented out this one quickly and again had a small positive cash flow. It was getting addictive, buying property. I felt really good – I wasn’t even 27 years old and already had 4 properties rented out and 1 I was living in. Next one (number 5) was in Romford, a 2 bedder looking like Wayne and Waynetta slob had lived there. I snapped it up for 60k on a 100% residential with the Halifax, and they also agreed to re-value after works to it and release money for refurbishment. Within a short time it was worth 80k. During all this time I was still off work sick, mostly in bed and unable to walk unaided – but pretty determined to make sure I had an income and could get off benefits. Lucky for me I was still employed – and our financial advisor at the time knew what lenders would only ask my employer what my salary was – and not ask me to prove I was getting it. Advertising for people who needed a quick sale, I found a newish property across the road from the 1 st Dagenham flat I had bought that a couple wanted to fix the price and exchange now so that they could reserve a new house for later in the year. I snapped it up for around 170k and then rented it to a lady that started to work for me. During this last purchase we found a new 4 bed for ourselves to move into and got another deposit paid property in Essex, so rented out our new 3 bed townhouse (rental number 7). So this is how I started …. And by 2002 I had 7 properties in my name, and 1 more joint with my husband that we lived in (he really was not that interested in it all at that time) Then in September 2002 I made a massive mistake - investing all over the UK in lots of off plan properties. I share this story with you here, and I have given you a detailed account of what I recall (bear in mind I wrote it a few years after the event) about each development and the things that went wrong for me. Things can go wrong Now not everything has gone right for me, and in November 2005 I went bankrupt as a result of the off plan deals going wrong. Breakdown of my deals and the problems in off plan investingChester Road - ManchesterDevelopment of 3 small blocks of appartments Plots I reserved = 3 This was not off plan – it was the last three in a Bellway development on Chester Road in Manchester. One was a show home so gave me an advantage on selling (or so I thought). I bought them with a 2k finders fee on each one through Team Investments – another company run by guys that had been on the Inside Track course. Because I was buying so many properties in the same period I was not able to do a proper inspection. This was a huge mistake. In not doing inspection a lot of things came to light when I had completed:
I was lead to believe by local agents Bridgfords that the properties would fetch in excess of 120k each – and as I was paying under 110k I could make about 10k on each one – and fast. I had these properties for over a year, and they all remained empty for most of that time. I eventually had to rent them out. In the end I think I sold them at the same price I paid, but I had lost out by paying the mortgages for a year while they were empty, and of course the redemption figure on the mortgages. Total loss approx 25k over the three including the mortgages and finders fee. Tips: Don’t complete without snagging / inspecting Check policy on crack sizes (they do have them) Edwardian Row - CheadleDevelopment of 8 terrace houses and small block of flats Plots I reserved = 8 This one is a great story of how the goalposts can be moved and you can be caught completely off guard. The deal was offered to me by a smallish finder who had also been on a seminar teaching gifted deposit deals – Damian (nice chap). The development consisted of 8 townhouses and a small block of flats. I reserved the 8 houses just as they started to build them and reserved them before Christmas 2002, expecting them to be ready in April 2003. They were meant to be worth 240k (that was the supposed list price) and I was getting them for 210k. I was told by the selling agent that they thought I could achieve 280k. I spent time with the developer discussing how things would work, and we agreed that as they built them, they would push one to complete 1st, and then they would let me use it as a show home. They also said they would phase the development, which means that they would release 2 at a time to me over a few months. This would give me chance to sell them bit by bit or arrange finance if I had to complete on them. They had also agreed to do them as a gifted deposit, which meant I would get a regular buy to let mortgage on them and then the developer would pay the 15%. I monitored the build, and popped over a few times to see progress. There seemed to be a lot of delay, something to do with the ground being too soft, and them having to treat it. This actually seemed to work out better for me, as I already had enough on my plate with lots of other properties I was struggling to sell or rent out. As the delay got more, I was marketing over the summer and I used the New Homes paper that is distributed in estate agents and new developments, and I had a full page advert several times. I also built a bit of a website so people could see pictures online. Out of the blue at the end of October, I was told that they wanted me to complete on all 8 in one go at Christmas. They had not let me have a show home, and the site manager would not let potential buyers view the properties at all for safety reasons. I had not managed to sell any because lots of people really struggle to see what a property will look like when it is finished – and like to see an example. I was going to have to complete on these – or loose the contract. Then it turned out they didn’t want to do it as a gifted deposit, they wanted to do a cash back deal and suddenly it became almost impossible to find a lender. Just in the nick of time I found a buyer for plot one – more or less for the price I had paid for it and then it was clear to me that they had been overvalued by a lot. Property is only worth the price people will pay and what the mortgage valuer will put to it based on comparables in the area. I sold the one back to back. I lost the other 7 and all the money in advertising and reservations / deposits. This one was one of the smallest losses – my personal loss being around 10k, investors being much more. Tips: Get release phase and any permission for viewing / use of property in writing. Remember the price people will pay is current market value. Confirm how the developer is helping you to complete (gifted deposit etc). Be prepared for early or late completion. Get the notice period of completion written into exchange of contracts. Avoid Christmas completions for back to backs – there are no buyers around Hawthorn House - LiverpoolDevelopment of lots of 3 bedroom luxury appartments Plots I reserved = 4 The worst nightmare out of them all – this development by Miller homes has the most unbelievable story. Miller Homes have got to be the worst developer I have ever dealt with as an investor, causing me the largest losses and most drama and headache. Offered to me in the September 2002 I was expecting to complete in the November. I took the deal on understanding that I could market them back to back and sell them on before completion. So I proceeded to market them before completion, only to be told as soon as I reserved /exchanged them that I could not do this – it was in the contract – that I could not put sale boards up etc until they had sold the rest of the development themselves. Anyway, I went to view the flats in November and they were not ready... but you could see that they were well on their way – and looked fantastic. Middle of December I was told I had to complete on them all before Christmas, or I would loose my deposits. So I pushed my solicitor and financial packager to complete, but did not have time to go up and do a pre- completion inspection or proper handover. So Christmas came and went, and in January when all the selling agents were back in work I spoke to mine and asked him to collect the keys and market them properly. So he went and got the keys and I didn’t hear anything for a while. Come Febuary I had not heard much from the Agent, so I gave him a ring to find out the latest on viewings. He said that he had been up a few times but could not get access. It turns out that the area with my flats in was fenced off and there was no access without a security guard – who was not around except in site working hours. I had been paying a mortgage for two months on a property that had no access. I then made a visit myself and discovered that along with the fencing locking me out, the driveway to the property was not complete, nor the car park and street lighting. When I did get access I found the lifts were not switched on in the block, and none of the walls / woodwork had been painted in the communal area. On top of this the dishwashers were missing in all the plots and there were quite a few snagging points that needed sorting. Lots of light bulbs were missing in the properties too. By June, still most of the issues were not sorted. It took 6 months to get the lifts on, and about 8 or 9 months to sort the dishwashers. In the mean time I managed to rent one out to a guy that paid 6 months cash upfront. My tenant stayed for over a year, and after the first six months I never saw another penny. I had to use landlord action to evict them. They were a fantastic help. In the mean time I did some filming there with Trevor McDonalds team talking about the disaster in that block, and while we were filming, the tenant was moving out. So for over a year (near two years for some) I paid the mortgages, of around £850 each, trying desperately to sell or rent them out. I had nothing but trouble because people viewing the property could see the hallways were not complete – and it looked very unsightly. Just as I was about to give in and give the keys back to the lender I sold one. This was a blessing. However it came with a problem that was still going on in 2006. The solicitor I used for the purchase of the property had not registered any properly with land registry. Nor had they completed lots of other parts of the initial purchase – including sorting out the proper plot / apartment numbers. The plot I sold went to a cash buyer, and when I asked my new solicitor to get the redemption figure from the mortgage company – the mortgage company came back saying that they had no interest in the property and no charge on it. Eventually after a couple of months of trying to sort it all out, we came to the conclusion that the 1st solicitor had actually paid cash for the property using money that they had of mine in suspense accounts etc – it seemed to be the only explanation. I had done a huge amount of deals with them, and some money had disappeared but I never got to the bottom of it. So finally we completed on the sale and I ended up with over 200k in my hands. I had quite a lot of debts by this time so negotiated with investors and credit cards to reduce the debt so that I could pay as many people as possible. I kept a small amount to take on a team for 3 months to work for me, to build up the web side of my business. May 2006 I got some court papers through the door from a person living in a house I had moved from. The new owner of the plot I had sold was having problems with my lender who had said they had no interest in the property and was trying to take the property off him. I really had done everything I could to sort this, and so had my solicitor. We can only put it down to very bad initial purchase work, and that things were never done properly for both the lender and myself. I hope to update you when this is finally over. Fortunately for me I had already gone bankrupt and been cleared when this came about ….. so it is now nothing to do with me, but I hope I can help the new owner sort the rest of it out, and that he can keep the property. I do feel for him. Tips: Check resale rules on the development NEVER complete without an inspection Check with land registry that you have been registered if you are wanting to resale fast to avoid delays. Don’t trust 6 months up front tenants (this is the 2 nd one I had problems with) Newhall Hill - BirminghamDevelopment of many luxury appartments Plots I reserved = 1 This development was offered to me by Urban Exposure, a supply company run by a couple of guys that had been on the Inside Track course (a course that teaches lots of people how to do the same style of investing). They had very limited experience in property investing at the time – and basically saw their way of making money in property to be the “supplier” or “finder”. I reserved plot 46 in this block and as far as I can remember it was one I wanted to sell back to back. The discounted price was 150k with a reservation of £500 and an exchange deposit of 7.5k and there was a finder’s fee of 1.5k upfront (then the same amount again to be paid on sale of the property) I was sold the property understanding that there was a discount on the real value of 15% - and that normally property in that area could fetch 180k. I did research by calling agents who confirmed this. The property was on the market for resale with a couple of different agents and put it on the market for about 180k (approx figures). We had very few viewings and the property price appeared to be too high, however one day I received an offer and a purchase started to go through. During the purchase I was informed that the buyer had to move out of his existing property, and was going to be homeless, so I agreed that he could move into the property before the completion and rent it off me. This was on the basis that he would pay £250 per week rent until completion. When the property was about to complete it came to my attention that there was a shortfall – and the price we had been offered did not cover the mortgage repayment. This was a terrible mistake and possibly came about because there were a lot of properties on the market at the time, and I was so desperate to sell that I never checked properly. Also a redemption fee was added and I had forgotten in my rush to sell to add on the solicitors costs. My other mistake with this property – as it was so near to completion when he moved in was that I did not draw up a tenancy agreement. My mortgage was £70 a month, and the buyer paid me one payment of £250 and then never paid again. This was in August 2003 – and still in March 2004 – he was still there and I had not been able to get him out. He didn’t respond to anything, and his solicitors stopped answering questions – I was in a total mess. In the end I got possession of the property, did some filming there with the BBC, then gave the keys back to the lender. It never was worth what I had paid, I had been mislead by local agents in my research that I believe had befriended the finders – and this one lost me around about 30k including all the mortgage paid. Tips: Don’t rent to a purchaser without a tenancy agreement Don’t believe selling agents when a property finder has a lot of properties with them. Ignore the words 15% discount – it is made up. Check the redemption BEFORE exchange of contracts. St Vincents - ManchesterDevelopment of several low rise blocks of appartments Plots I reserved = 9 This deal was offered to me around the same time as Chester Road, by Team investments again – and to be fair to them I think that I only paid half the finders fees because they let me off the other half when I told them all the problems I was having. These 6 properties were almost ready when I reserved them, again discounted at 15% (the magic number). The list prices were around the 140k mark, and I was paying around 120k. I’m sure the developer was Bellway again, but don’t quote me. The plan was to sell them back to back. A lot of these properties had gone to investors. At the time I thought that might be a good thing (duh), it meant that they were a good investment if other people were buying them – what I didn’t think about was the flooding of a market, and that as soon as I completed on my 6 properties, I would be competing against all the other investors to sell or rent. In my research, well before purchase, I faxed the local agent’s plots and square footage and requested resale values. I was given some promising figures at the time. I told the agents I wanted to flip the properties and get them away back to back – and they assured me it was possible. This was wishful thinking! What had not occurred to me was that I may have to complete on all 6 properties, and that not only was there a mortgage to pay – but each plot was around £100 a month service charge! Don't forget anyone can get a mastercard that you can top up.
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