Lee Rotbart

Posts Tagged ‘mortgage’

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.

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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.

If I had a time machine…

In The beginning on August 9, 2010 at 3:08 pm

Having spent all weekend writing about our USPs, marketing strategies, and sorting out cash flow forecasts I am a bit out of steam for updates. Not that there’s that much to report. I should mention that much to my chagrin our commercial mortgage broker did not jump up and down with joy when I sent him the business plan, nor did he claim that it was the best piece of writing ever seen, hence I’m currently feeling rather under-appreciated.

It did occur to me however, that this process would be so much easier if I had a time machine and could fix the following elements that I have absolutely no control over at this stage in the game.

My current mortgage

I would have been very grateful if a little mortgage fairy had visited me in 2008 and mentioned that interest rates, which were standing at 5%, were going to go down and there was no need for me to get a fixed rate mortgage for 5 years at an interest rate of 5.69% – which seemed like a phenomenal deal at the time.

Saving: £5,800 in early repayment charges + £thousands in reduced monthly mortgage payments had I had the courage to invest in a tracker.

Porthminster View accounts

Without divulging too much information, if I had a time machine I would pop back to 2006 and tell the current proprietors of Porthminster View how to set up their accounts to ensure that they would have no trouble selling it as a profitable business should the situation ever arise.

Saving: Hmmmm, this is a difficult one. Probably would have saved us lots of time and made the process of borrowing money a lot easier, however, it may have meant that we wouldn’t have been able to buy the property at such an affordable price; so maybe not such a bad thing after all.

Plan A

With the knowledge I have now, I would never have invested so much of our time and energy in Plan A which was a bit of a non-starter. Plan B all the way.

Saving: £1,500 in survey and broker fees + a healthier mental state which wasn’t driving me to think homicidal thoughts about all surveyors in the South West of England.

My car (RIP)

With advance knowledge I would not have turned right out of a side road, on 28th December 2009, straight into the path of an oncoming car, irrespective of whether he was indicating to turn left or not. Without making that slightly disastrous decision I wouldn’t have written off my car in a matter of seconds, therefore resulting in having to buy a new one with our ever depleting funds.

Saving: £2,000 + insurance, etc. to buy a new car, plus I would not be rendered uninsurable through losing my no-claims discount which was tenuous to say the least.

The Big Chill

I might have hidden Danny’s Big Chill ticket so he would have had to stay at home with me all weekend and help me write the 20 page business plan.

Saving: Not sure if this would have saved me anything; it may have made me feel better briefly, yet I suspect my relationship would have been in a worse state than it is now had Danny and I been stuck in my flat all weekend drafting marketing plans together (plus this way I get my own way).

Like I said, I am feeling unappreciated and therefore indulging in a little self-pity.

All in all, there are a few things I would like to wind the clock back on under the supposition that it would make life easier at this stage in the proceedings. However if, like Doc says in Back to the Future (and I’m paraphrasing here), “each action has a direct and opposite reaction” then any of these things actually changing may have resulted in us losing this opportunity; so I guess it’s a good thing I can’t go round fiddling with time… God only knows what kind of chaos I could cause.

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.

Losing momentum

In Getting the mortgage on July 30, 2010 at 11:42 am

My usually optimistic, enthusiastic, nature is taking a battering. There are only so many ups and downs one person can go through before losing the ability to swing back. Like a pendulum slowing down my highs just aren’t reaching the heights they were.

The momentum which this project had a few weeks ago is slowing down like a bunny without a Duracell.

Two weeks ago you read about how I was struggling to focus on the next thing because I was so excited about everything else; and now I’m in the complete opposite place. I can’t focus on anything but the next thing, as I’m so unconvinced that anything else is actually going to happen.

I sigh and I answer the emails, and I pick up the phone and I respond to the questions; yet I do all of those things with almost zero enthusiasm and, to those of you that know me, you know that unenthusiastic is one thing I am not. The image that I have of myself is of a go-getter, a vibrant, slightly OTT, chatty activist. The image I have of Danny is of a laid back, occasionally cynical, occasionally excitable, practical, manager of things. It seems we have swapped places.

Weeks of moaning about how I am doing all the work, has resulted in him taking on all the work. He has spent the last 3 days phoning lenders, having conversations with banks, brokers and solicitors; while I have taken on the less than stressful task of staying in touch with the current proprietors in order to ensure that they don’t sell the guesthouse to anyone else. I genuinely believed that this swapping of responsibilities would help me just get on with my day job, whereas in fact I just feel less engaged, less bothered, and more accepting of the fact that this might not happen. Don’t get me wrong, I’m not depressed, I just think that 2 weeks of being battered by lenders has resulted in my inevitable surrender.

I’ve stopped leaping up and down everytime someone new starts following us on Twitter, I’ve stopped checking my blog statistics every 10 minutes, and I’m not even reading Cornwall related news because I genuinely feel like we’re never going to get there. The other day I even entertained a recruitment consultant’s offer of a relatively interesting (industry related) job that he phoned me about, going so far as to send him my CV and a cover letter.

I’m not talking about sausages, room decoration, turnover, business ideas, and dog breeds that might be acceptable for a guesthouse. I’m like a tired fish who’s stopped swimming down the river, and is just drifting with the current. Everyone – friends, family, friends of family – are being incredibly supportive. I’ve had offers of money, business expertise, time and skills from so many people, all of which I am really grateful for; however I can’t help but just give them the same line “Thanks for your offer, but I’m not feeling particularly positive that it’s going to happen at the moment, so I’ll give you a call if anything changes”.

I genuinely hope something does change, and I hope that Danny has enough enthusiasm to get us both through the next week or so of yet more mortgage conversations; and I hope even more that the little spark deep inside me that still thinks we cannot lose this opportunity remains alight for just a little bit longer.