6 March 2016
This book is subtitled “The New Buy To Let Award Winning Retirement Plan”
I was hoping for some revolutionary new insight, but there’s nothing new here that isn’t already extensively blogged about across the internet. But if making money from property is new to you, reading one persons experiences contained in one book might be useful... to a point.
The book opens with 6 pages of self-promoting testimonials on “how good Marco Robinson really is”: The first page alone recants how a housewife in her first month “made $49000 without breaking a sweat”, and how Marco “made me an iron-clad, money-back guarantee... that within one year I’d be financially free”... and that they were. More on that “iron-clad, money-back guarantee” later.
There are currently more than 1.4 million Landlords here in the UK, and none of the maybe 100 that I personally know – some seriously successful, the majority less so - have experienced such an easy ride. As a Landlord myself of some 30 years, who (through as much luck as sound judgement) first managed to retire with a small(ish) portfolio of property at age 42 (I’m now 55), Marco’s “plan” as presented here isn’t all guff, but it does have more holes in it than a broken colander.
Marco’s plan relies heavily on the established idealistic principles of buying the right property, in the right area, at the right time, negotiating hard and buying cheap (below market value), borrowing cheap, improving the property, hard leveraging... using rates of 3.99%-4.5% interest only and 30 year loans, and capital growth assumptions such as “imagine in three years your property increases in value by 40 percent (this is easily achievable in the right market)”. History tells us growth of that magnitude has occasionally happened... but oddly, Marco makes scant mention that prices can also collapse by 50% in 3 years too (Ireland is just one of many recent examples). Importantly, none of Marco’s general assumptions holds consistently true over any market over the whole term you’re likely to own the asset(s). Factors outside your control will change, and if you’re heavily leveraged as Marco suggests you should be, Marco’s Property Plan is certain to fall flat on its face. It happened with the financial crash in 2007 – and before that in the 1990’s, and before that in the late 1960’s... some may even remember mortgage interest rates sky-rocketing overnight to 15% in October 1989. The impact of such uncontrollable external factors has ruined many a property investor. From what we read, it seems Marco has acquired much of his property in more recent times of rapid growth and keenly priced money (He personally owns 200 properties; 107 properties were acquired in the last 12 months).
There’s also a distinct absence of costs being accounted for in Marco’s income/yield examples – legal and financing fees, void periods, repairs and renewals, insurance, Tenancy Agreement and Inventory fees, HMO licensing costs... no account in his income/yield calculations for troublesome Tenants who don’t pay rent, smash up your property, and the legal costs of eviction (if you’ve been in the game long enough, it will eventually happen however thorough you are). In mitigation, Marco does appear to employ a magical Management Agent that manages to avoid all of this cost, trouble and inconvenience... one that works for an average of just 5% of rental income. Really? Maybe by this time I’d just lost interest and read that wrongly. Either way, the example figures are glossed over – with remarkably few exceptions, the reality isn’t nearly as attractive as it’s being made out to appear here.
Many have been lured by low-cost easy finance, rapid price growth, and leveraging (and this book relies on it)... There is no doubt that several speculators have made handsome returns using Marco’s core principles, but for most it’s easy to get caught with your “trousers down”: This book is overly confident, idealistic and optimistic, with few clues given on how to spot forthcoming market trouble, when to apply the brakes, consolidate or even liquidate your assets before that trouble hits you squarely in the face and ruins you... as it consistently has proven to in the past and inevitably will again at some point in the future (study the cycles/bubbles of house price growth and corrections over the last 50+ years – there are plenty of internet sources). The clever money spots these signs and retrenches, but Marco doesn’t seem to be concerned with such possibilities (or did I miss that chapter?). The book is titled “Financial Freedom Guarantee... a Retirement Plan”. Property values are cyclical. The market will almost certainly cycle (drop/crash) at least once before you retire. If you’re financially geared according to Marco’s plan – for most ordinary folk – it’s fiscally reckless and (I’d guarantee) almost certain to fail...
Read the story of Judith and Fergus Wilson: Two maths teachers from Maidstone who in 20 years and starting with nothing – at their peak pre-2007 – had amassed an empire of 700+ BTL properties worth £180 million... using EXACTLY the same principles Marco is endorsing here... although it was never made known how much of that £180m headline wealth was really debt/mortgage. According to newspaper reports, the Wilsons also believed that property values could only rise, and with more leveraging, further expand their empire. The property market subsequently collapsed, and by late 2009, the Wilsons were (reportedly) in serious debt with negative equity, empty properties, unpaid mortgages, court action for unpaid council taxes, and mass repossession orders being threatened. It is also speculated/reported that it is largely only because one of their lenders (holding 177 mortgages, and themselves in dire trouble with sub-prime loans) renegotiated the high loan-to-value mortgages, cutting the interest payments in half, and avoided the whole enterprise folding with bulk repossessions. Such pragmatism from a lender certainly isn’t to be relied upon.
I didn’t pay for this book and I’m glad I didn’t (it was sent to me as a free review sample). The book is an easy read, and some of the advice is undeniably sound. But frankly much of it, from my own 30 years of personal Landlord/Speculator/Developer experience, is made to appear far easier to follow than it really is... an abundance of contradictions, unrealistic/unachievable expectations, and an acute lack of risk being discussed (especially considering the heavy promotion of interest only funding and maximum leveraging). There is no balance. Maybe I’m just not bold (or stupid) enough to want to take the level of risk Marco enthuses bullishly about here, or want to work that hard at it. Marco’s “Guarantee” of your success (by the way) is assured by his underwriting your purchase price of his book plus interest at 24% PA. Great. You’ve had all your properties repossessed, you’re homeless and bankrupt, and he sends you a cheque for $58.80 (p211). That’s reassuring.
If you want to know the real truth about investing in property, explore the internet for real-life Landlord blogs, or join one of several Landlord Groups who meet to discuss their true-life experiences of property investing - including the pitfalls, of which there are many. Many property investors are indeed very successful, and achieved that success – and resultant wealth - without putting their necks in a noose...
“Banks are happy to lend you an umbrella when the sun shines, but the first sign of rain and they want their umbrella back” – My Uncle Steve, a now retired CEO of a large American Bank.