Lee Rotbart

Archive for the ‘Getting the mortgage’ Category

Back, and in at the deep end

In Getting the mortgage on October 20, 2010 at 11:51 am

You’d think that no time had passed at all. Back from a fabulous holiday I was secretly hoping that all would be sorted, that I would sashay gently into an exchange and move. Ignorance really is bliss.

Don’t get me wrong, things have moved on a little bit and we are now the other side of a successful survey and valuation; yet it still feels like there’s a long way to go and the bank still need this, that, and the other before making the official offer. The key problem at the moment being that they’ve suddenly decided they would like evidence from my current company that I will be continuing to freelance for them once I move to Cornwall. Hmmmm… difficult. Considering that I haven’t actually handed my notice in yet, I’m not quite sure how that conversation would go…

“Excuse me boss, just wondered if I could run something by you. I’m planning on leaving at the end of February but don’t want to hand in my notice now just in case it all goes tits up and I end up not wanting to leave after all. However, if I DO leave (and I fully intend to) I would like to continue to work for you so if you could just write a letter saying if I leave you are happy to let me do freelance work that would be ace, because that would help me get the mortgage and help me leave. Obviously, this is on the understanding that if it all falls through you should just forget all of this ‘handing my notice in’ rubbish, and I will continue to stay on at the company. Thanks so much.”

It’s a bit of a Catch 22 don’t you think?

Am hoping that the bank will just take my word for it, and this will not be a deal breaker.

Meanwhile I have since decided that I have far more to worry about, and last night ‘The Fears’, or as my Mum would say ‘The Willies’, hit me like a ten ton truck. In no particular order:

  • Fear that this will fail
  • Fear that my marketing skills are all well and good when they’re for someone else, but putting my own business on the line is a different story
  • Fear that no one will want to stay
  • Fear that we will go broke in the first year
  • Fear that I am leaving behind all my friends and family and won’t have a support network
  • Fear of going it alone
  • Fear that we have massively underestimated the cost of all this and we won’t be able to afford to do what we need to do

Being quite risk averse as a person I am appalled to find myself in a highly risky situation. Luckily Danny, who is possibly the most optimistic person I have ever met, doesn’t actually believe that this could fail; suggesting that this entire scheme is a ‘no-brainer’ and through the powers of persuasion and a winning smile managed to convince me that my fears were all unfounded.

I suspect it was reading all the mortgage jargon that sent me into a tailspin; triggering the realisation that we are ploughing EVERYTHING we own into this venture. We are selling our flats in London, we are leaving our jobs, we are basing our whole future on the fact that we think we might be able to market and run a guest house, and we think we will be able to do this without killing each other. (Don’t tell the banks this, according to our business plan we are highly confident, skilled individuals that will be running the most successful guest house in the world within 3 years).

Tonight we are writing a pre-opening budget and once it’s all in black and white I know I’ll feel better, I just need to keep the final goal in mind, not forget why we’re doing all this, and fight the temptation to just settle for what I know, and what’s comfortable.

Never has the following expression ever rung so true.

‘Experience – something you get only after you need it’

Tiptoeing into uncharted waters

In Getting the mortgage on October 4, 2010 at 12:53 pm

This morning there was another tube strike and I walked 4 miles into work. During this walk I composed a ranty letter in my head to Bob Crow while fantasising about walking along the coastal path.

London looks like Gotham City in the grey light of a wet morning; and along with a touch of light rain – the kind that’s not heavy enough to warrant an umbrella, yet gets you very wet really, really slowly – I can think of better ways to start the week.

20 minutes after breakfast I received a phone call from our mortgage broker. He asked me if I was sitting down (of course I was… that’s all I do 9 – 6, Monday – Friday) and I knew then that this could be the phone call we’ve been waiting 3 1/2 months for. He then proceeded to inform me that Lloyds Bank have agreed – IN PRINCIPLE – to our commercial mortgage application. There’s a bit of work to do yet, a survey, a valuation, and maybe a few other things that involve us paying out lots of money; but we’re over the second big hurdle (the first one was getting them to look at the proposition in the first place), and into uncharted territory.

It went like this: Excitement, followed by ‘I must tell Danny’, followed by more excitement, followed by ‘I must tell my folks’, followed by more excitement, followed by terror.

For the last few weeks Danny and I have been making lists, choosing furniture, and fantasising about breakfasts; and now it’s a reality. Now we’re really going to have to do it. Somebody somewhere has deemed that we are responsible enough, and our business plan comprehensive enough, to lend us lots of money; and I find myself in that place where I think that someone is going to come up behind me, tap me on the shoulder, and say:

“Excuse me, Miss Rotbart. Hello. We’re sorry to disturb you but we’ve identified you and your partner as people who are pretending to be adults, you haven’t done a bad job of it but we have found you out. We got our first clue last year when we observed you making monkey noises at the gorillas in London Zoo, our suspicions were aroused when you went to London Zoo without any children. We also noticed that you skipped across the road in the New Forest last weekend, again, not really behaviour befitting the 34 year old you’re pretending to be. In conclusion, while we love your enthusiasm, we really don’t think that you are grown-ups and therefore cannot lend you this money”

As much as I don’t want anyone to do that it would be the easy option, it would give me the opportunity to RUN. Run like the wind in the direction of a salaried job and a mortgage that isn’t reliant on people wanting to stay in my spare bedroom. Run back to a world with no buildings insurance (I have a leasehold) and a location where I have friends, family, and a solid network.

I wonder if others who go into business on their own have these kind of fears. They must do, surely, but just choose not to talk about them.

I do want this, I really do, the thing is I want it NOW, I want it QUICKLY, and I want it without having to go through all the stuff I’m dreading, like packing and moving (I hate packing more than I hate the aforementioned Bob Crow); setting up the internet / electricity / phone lines / fire systems; having the inevitable arguments over decor; living through the moments when we realise something is suddenly going to cost £5000 more than originally budgeted; need I go on?

I want to be like Dorothy in the Wizard of Oz, I want to click my heels together, say the magic words, and end up in a beautiful, fully-booked guest house in St Ives. In other words I want the rewards but none of the reality.

Just in case you’re curious as to my state of mind I should tell you that I am ecstatic. Sitting at my desk overlooking a Soho back alley (you’ve got a window seat – count yourself lucky!) I have a bubbly feeling in my belly. It’s a bubbly feeling that foretells of a life with no tubes, no smog, no desk job, and no hamster-style running machine. I just need to keep the ‘one step at a time’ philosophy close to my heart and all will be good.

Loyal readers, friends and family, it seems we are full steam ahead into the next part of our journey.

The fat lady is warming up

In Getting the mortgage on August 18, 2010 at 9:56 am

They say it ain’t over till the fat lady sings… well, she may not be singing, but I can definitely hear her warming up.

Yesterday I was given some bad news about Plan B. The bad news being it hadn’t worked. Apparently the banks are so scarred from all their crazy spending a few years ago that they are demanding an income (from PV) that is 200% more than the business needs to pay out in mortgage.

To those out there, like me, who have very little experience of running a business / getting a mortgage this means that if the mortgage is £31,000 per year the guesthouse must be making £31,000 in profit (before tax), meaning that the turnover must be £62,000 + all the costs of running it + living expenses + wages. As per my cash flow projections we were coming in around 175%, but not meeting that 200% threshold means that we either have to pull £70,000 out of our arse, or ask the vendors to lower the price by that much.

That’s the news, now for the rant.

It’s absolutely bloody crazy that two (relatively) young, accomplished, experienced, intelligent people with a significant 6 figure sum in cash for a deposit, stamp duty, etc. cannot get a mortgage. It’s insane that these banks – who caused the credit crunch in the first place – now have such ridiculous lending criteria that a business with a projected £15k profit in the first year cannot get a loan.

It’s barmy that a 7 bedroom, 4 storey guesthouse which overlooks one of the most popular beaches in the UK, in the heart of the tourist destination of the South West, is not enough collateral on which to base this loan, a loan that isn’t even that much (in the scheme of things). 3 years ago they would have been throwing money at us.

And here’s the real irony. If we were buying this as a residential property our combined incomes (which come to less than our projected 1st year turnover) would have been enough to secure a loan on a 25% deposit, whereas for a commercial mortgage we need to be bringing in more money than that and need a 30% deposit. Go figure?!

Yes… I’m frustrated. I’m frustrated that these hugely greedy banks who are absolutely incapable of seeing past an application number, and looking at the real detail involved, are sitting back on their fat, fat bottoms telling the government that “they are doing everything they can to lend money”. The fact that they’ve considered our application means they can fill in their pathetic little statistic forms and say that they were looking to lend but on this particular occasion the applicant couldn’t meet their criteria, criteria that Bill Gates or Richard Branson would have failed to meet in their early days.

I mean… come on! What business is expected to make a profit in the first year? It’s a given that most businesses need between 1 – 2 years to start turning a profit, so the fact that we were showing a profit in the first year, well – we’re already ahead of the game.

I do apologise for this rant and I know that up until now I have refrained from using this blog to spit fury about banks and all their little ‘computer says no’ minions; please excuse me this one time as there was just no other outlet, and I realised that I wouldn’t be able to get a scrap of work done today if I didn’t vomit all this up onto (virtual) paper. Danny should count his lucky stars that he’s in France as this way it’s the blog that ‘gets it’!

OK… on to Plan C; I have no idea what it is yet but I refuse to believe it’s not out there.

The Waiting Game

In Getting the mortgage on August 11, 2010 at 5:30 pm

I have no idea why they call it the waiting game.

There may be waiting involved, but it’s not a game. It’s not fun, competitive, or remotely satisfactory.

My English teacher (c.1987) told us never to use the word ‘nice’ or ‘boring’. She said that it didn’t describe anything; I’m sorry Mrs. Hunn, but I’m BORED of waiting. I want news, even if it’s bad news, and I suspect Danny is deeply concerned that I’m going to drive our new mortgage broker mental while he’s away in France for a week (yes, he’s going away again – don’t worry, I’ll get my own back eventually).

Waiting: not something I’m proving to be very good at and, funnily enough, that doesn’t surprise me in the least.

Danny seems completely capable of sending the odd email, and just sitting back and saying ‘He’ll call if there’s news’. Me, on the other hand, I am suggesting that we call the proprietors of Porthminster View every week “just to ensure they don’t sell the house to anyone else”, or the mortgage broker every day “to see if he’s heard anything”. I am perfectly capable of driving everyone around me completely bonkers, and can only thank the relevant God that I have people in my life that offer me some sense of perspective, and remind me on a daily basis that I cannot affect the outcome of this, no matter how many calls I make, or how many times I rewrite the business plan.

To all of you out there that are following our journey, and being incredibly supportive, and loving, and patient… thank you ever so much, and in answer to your question there’s no news yet.

Planning to run a business?

In Getting the mortgage on August 5, 2010 at 3:03 pm

Apparently a business plan consists of more than forecast figures we’ve plucked out our bottoms, and some high level grand ideas about organising guided walks and afternoon teas. Unsurprising really, and more than naive of us to assume that was all commercial lenders would need. We’ve been wittering on about our enthusiasm, passion and general bonhomie but you might question (and someone has) if that alone is going to deliver a return on investment.

Now this isn’t high finance, it’s not even a small start-up, however it IS a business, and we cannot defend our position when friends accuse us of retiring if we are approaching this the same way a retired couple might. Nor can we moan about lenders not funding us based on our overall determination and passion, when we have provided them with little evidence (bar figures that we’ve found in aforementioned parts of our anatomy) that we can pay them back the money we are asking to borrow.

We can, by the way, I’m sure of it…. but I’m beginning to understand how it might look otherwise. Now we know that Porthminster View is in an enviable location, with phenomenal views, and lots of potential, we just need to show the lenders that.

This weekend Danny is off to the Big Chill festival… and while he is dancing in a field I will be ordering take away and getting down and dirty with the SWOT analysis and cash flow forecasts. Am I secretly looking forward to it? Yes, I think I am, for a couple of reasons (1) this is something I really really want, and if that means spending a weekend writing a business plan so be it (2) we need to know if we can pull this thing off. Maybe, just maybe, this is why guesthouses are being repossessed up and down the country? Not because the industry is bottoming out (soaring UK tourism statistics would suggest otherwise), but because people forget that this really is a business, as nice as it is it’s still real money, and real banks, with real consequences.

It’s surprisingly easy to talk about £hundreds of thousands without ever really grasping what this means; even if I think of it as my annual salary x 7 it still doesn’t really hit home. It’s money we’ll never see, loaned out by people we’ll never meet, and paid back by banks we’ll never visit. For us however it’s not just a business, it’s a lifestyle, it’s a massive change, it’s an opportunity to build a life together. However, while that might be all we need and all we want, I doubt that’s a good enough argument to make it past the Dragon’s Den panel of lenders.

So… I like to think that this blog follows the very good advice provided by a friend – it is positive, yet realistic. We’ll see what happens on Saturday, you may yet find me on http://www.callthisabusinessplan.com.