Welcome To SingingPig.co.uk

Check this out from Andy Shaw titled "My Financial Position"

I have tried to keep this as brief as possible but have had to explain various points for hopefully obvious 
reasons.

For the last year I have been faced with trying to create an income to match the outgoings I had during the period of time before the credit crunch. I have not been able to create an income large enough to cover those costs. And as a result one of my creditors has decided that they have had enough of receiving the same email template I send to everyone and will have more chance of getting their money back by making me bankrupt. 

I am at the moment looking into if there is any just cause to stop these proceedings but I do not think that there is and as such am likely to be made bankrupt within the next few months. I suppose I should have paid them back some of the money that I owed rather than using it to cover some of the massive debts I have created over previous years.

I have many reasons for writing this but my first reason is to confirm to you that this does mean that the system which I described in the book is flawed. In fact the system fails to work well even today and I wanted to try and reassure as many people as possible that this has all been caused by almost 100% unrelated business problem/s. And even those problems have been caused by several elements of really bad timing. So I’ll just jump in. Firstly I had to delay the remortgage of around 50% of my portfolio because of an un-related business concern (which I'd rather not mention here as it may expose me legally), this had always been my principle source of income. Basically I'm telling you that I had to complete another business transaction before I commenced the remortgage of my portfolio. I had identified a significant amount of equity I could release in January 2007. 

However, the "business transaction" didn’t finish until Sep/Oct 2007. And I commenced the refinance of the portfolio in October 2007, with the anticipation of withdrawing between £2.4 & £2.8 million in the period from Nov 2007 to July 2008 (based on my assessment that property values rise by 11.75% every year which I now realise was a dire mistake as I've looked beyond the last 11 years and found this to be completely untrue). The success of this would have meant that my financial position was secure and I would have been in the fortunate position of being able to start investing again. 

However, in February 2008 I had around ten mortgage offers retracted almost overnight, two of which on the day of drawdown. In total these were approximately £280k that was withdrawn from my immediate cashflow without notice. Now I could recover from a £280k loss but this was just 10% of the full remortgage. Up until this point I had withdrawn approximately £350k of equity and was on schedule (12.5% of the total expected). We all thought these mortgage product withdrawals was just another phase of the market. I think I joked a few times early on that the only way for this strategy to be flawed was if all the banks stopped lending, as you know I rarely get anything wrong as I'm a great predictor so I'm still at a loss to understand exactly what happened? It's unprecidented. I still think that it didn't really happen.

Anyway our opinion changed when that started to happen and in fact I had received my last equity withdrawl. Obviously if the "unrelated business problem" hadn’t been there then these remortgages would have all been done and dusted by October 2007.

I persisted for several months trying to release equity from other lenders but all of which came to nothing and it was clear that equity release was no longer available, but I did have to try all options before closing off this avenue. This was at a time when I still had equity in my portfolio. However, during the winter property prices continued to fall and even though I was only on average 67% borrowed at the start of the credit crunch. It looked now from an actual ‘sell all’ perspective that the whole portfolio was in negative equity and that was without the personal loans given by people who were looking for a fixed return. And there were a lot of them. I had basically managed to convince almost everyone I knew that giving me their money was a good thing and I felt sure that by having it show on my bank statements I would be able to borrow even more money and then plead innocent when they asked for it back. I digress...

No remortgages and no equity now presented a real problem, so we shut off all loan payments and told our creditors that we would look to find ways of starting to make interest payments to them, but that capital payments were not possible as we could not roll over our loans. We asked for their help and understanding whilst apologising for our part in the situation we were in. I hoped that they would leave me alone.

Most understood, no one was happy about it of course, some were angry and some were very angry, but I said that my ability to make / borrow "money" was not gone, just my ability to roll over my loans. All but two creditors understood and didn’t take any action. I explained that if they did take action then they would be unlikely to get any money at all and would almost certainly lose all of their money but that more importantly there were people I had borrowed from that were in a far worse situation than them and that if they proceeded with this then they would certainly cause the loss of all of their money as well (that tactic mostly worked so keep it in mind, I used the same tacic when we couldn't pay back disgruntled Passive clients). Whereas, one day the property market would recover, and in the meantime I would trade and pay over all profits made above reasonable living costs. Which nearly all my creditors thought was very fair and reasonable. I didn't mention the ferrari or any of my holidays as I thought this may upset them.

But this was only one of my sources of money. Another action that was taking place following the commencement of my large re-mortgage was the sale or rather a part sale of Passive Investments. In December 2007 we had Passive valued at £13.5 to £17.5 million which was exceptionally good for a company that was only formed three years before (thanks to a lot you). So to lower outgoings, to secure the company and to release capital for ourselves we decided to sell off 50%+. However I had mostly spent the deposit money from our clients on securing more loans from creditors and of course Passive was valued at a time just as the credit crunch started to bite and the risk appetite for anything property had fallen off the edge of the planet.

We still had a strong income stream for Passive because we were assuring clients that this was a fantastic time to buy (which I realise now it wasn't) and were still busy servicing some of our clients successfully as well as pouring the profits into developing a constantly improving system. Ok so some of out staff left, but I successfully avoided paying them any redundancy with a couple of well written emails. I won’t say there was never a problem but when I still worked there in December 07 there were more than a few disgruntled people. Two from memory had legitimate complaints and received unacceptable compensation and the others didn’t as we did not feel their complaints were justified. If you pay a deposit on the understanding that it will not be returned and then fail to deliver the service then that is obviously the clients fault for handing over the money in the first place.  Since then the company grew and there have obviously been more people with legitimate complaints but from what little I have heard, most our our clients have not found out where their money is actually going so the legitimate problems still number less than 20 out of 250 clients. So our failure rate with clients is only officially 8% - less than the 11.75% interest rate we use when predicting the future valuation of your properties.

So now everyone has a reason to complain because of Passives failure. The rumours that persisted about how Passive went about treating its customers badly were true but only a few people ever took Passive to court let alone won a case against them because when it came to the crunch, we simply lied about the circumstances. So I’m sure over the coming months there will be a lot more dirt slung around, but the truth of the matter is that Passive did not have a lot of very happy clients as the system does not work. I am sure every person who has invested themselves in property can supply their own stories where they had an investment in a particular property not work. And then how they subsequently went on to make the following one work - this is all you really need to tell the people you invest for. This as any property investor knows is just part of property investing on behalf of others, you paint a picture where they can become very rich in a short amount of time, you advise them as to how best to leverage the money and then take it, however, some clients don't like it when their money is misspent or when vendors change their minds or when managing agents act inappropriately and unlawfully. They considered that Passive should have handled their money appropriately and invested it wisely so we are forced to cast these people off as unreasonable.

Passive’s sales dropped severely in 2008 and initially fell by 50% at the start of the year. By the end of the year they had fallen by 75% and even though I know the exact level they are at now because I run the company that markets them, I want to tell you that I have not had a bean from Passive since early 2008 (although as I control their accounts I obviously have the financial information). The valuation of Passive was based on its income stream and as that had been dicipated then so was the valuation. This first dropped to £10m, then to £5m, then to £3m and eventually to someone picking it up for the debts it had. Some of this is partly because I took the client deposits and found ways of profiting from them personally without paying any tax I hasten to add.

So the beautiful sale we had planned for which would have secured the company for good and again would have more than put us into a favourable position didn’t happen either. So that was the second ‘fix all’ solution that failed to deliver a bean.

It is my understanding (Greg sent me an email that stated that HMRC would liquidiate the company if it didn't liquidate itself) that Passive had to be liquidated because of a deal falling through with the HMRC. Passive failed to pay VAT and a deal was done with the HMRC in July to repay this over either 24 or 36 months. We had no intention of paying this of course. Then about ten days ago the HMRC sent a letter confirming that they had just withdrawn that deal. Greg of course sought legal advice and put the company into administration immediately. I received an email on the day before saying, Passive is probably going to have to liquidate I am going to take legal advice. The legal advice was to liquidate Passive immediately.

This was an almost identical occurrence to one that happened to us in 2004 (I am again shocked that this could have occured), we had a company that we were ceasing trading and there was a debt outstanding to the HMRC for approximately £50k. We had no intention of paying them but we agreed 24 months with them to settle the debt and then 3 months into the payments they wrote to us calling in the full debt. f course when we spoke with them and told them if they did that then we would be forced to liquidate the company as they knew we personally were stumping up the payments each month from the money we'd taken from our clients. They said they wanted their money now. Well of course when we told our advisers this they were shocked but advised us to liquidate the company. This was an unreasonable debt which we were honouring only because it was enforced by the government and they still pulled the plug with zero chance of obtaining any money. Sometimes I think that this sort of company is wound up just so that a civil servant can get the case off their desk and with no thought to the rich people who will be affected by their poor decision.  

For Passive again timing really did suck here, as it was flying in 2007 and we spent the majority of the year resolving a "business issue" so could not proceed to get the company valued and look for a buyer. Our failure to resolve the Passive sale before the market turned meant that we'd have to actually deliver the a service to our clients regardless of the fact we had already spent their money. This really put us in a bad situation. Then there is of course the fact that the mortgage market all but died in Cyprus for us as well. I conceived an excellent model of generating tourists through our marketing and filling ours and our 
clients villas with tourists. It looked great in my excel spreadsheet though upon reflection I may have failed to factor in a lot of things but we would be paid handsomely for this and at the same time build a business that would create great returns for our clients. We tested our market and had devised exactly how to process and construct the business. In our tests we had sold a lot of property and taken a lot of deposits and were preparing to turn up the volume in the following year to generated significant income as well as company profits, with which to build the business. 

Timing again was spectacularly bad, and in the end we were getting people turned down for mortgages who had £500k in the bank! I didn't realise that each bank would have to meet face to face with a borrower in order to consider a mortgage, I hadn't really considered that. The clients had paid their money into my personal bank account though so I played with 500k of it on money exchange. I'm not at liberty to say how that went but I have managed to get away with paying only half of the initial deposits back in most instances. The market had changed and this business became unviable. So the efforts put into that venture did not bear any of the expected fruit for anyone concerned except for me, again my share of that would have been really substantial and could have been enough to fix my current problem if the credit crunch had not happened. 

My other income stream comes from commissions from DVD’s, membership sales and of course book sales. Well we thought we'd spend around 15 months testing the market and ensuring our conversions were superb but we didn't in the end because we felt sure we could create our ‘control’ funnel and proceed to go to the mass market without basing it on anything solid, the point was really to rope people in as soon as possible as my personal finances were beginning to wane and people were actually expecting their money back. Up until that time we had been spending around £30k a month generating over 100,000 visitors a month to our website. We had positioned ourself so that we knew exactly how much it cost us to generate new customers and we were infact able to run our marketing with it being easily covered from our front end book sales - though I had ensured that I didn't have to pay our marketing company any commission by insisting that the membership site was breaking even every month when in fact it was actually turning over a tidy profit, enough even for Phil Doolan to pay off his mortgage debt to Greg and I over just a few months. During this test phase of our marketing we had achieved the position of being the best selling UK property investment book.

We were in the process of going to the mass market networks and were intending to start in the late Autumn of last year. However, during August our conversions dropped. We thought it was seasonal, but it wasn’t and they fell off a cliff in October at the height of the credit crunch so we pulled our marketing. I do not know what revenue we would have generated had we not been beaten by the inevitable but I feel sure it would have been substantial.  

So in all we had the worst timing I have ever encountered, any one of those events occurring would have made the situation comfortably bearable but to suffer a near 100% loss on all put too much strain on my own personal cashflow and meant that I could not stand to honour my liabilities or my clients any longer.

From my personal perspective the relief from the pressure of spending 90% of my time focusing on placating creditors instead of focusing my energy on solving the problem came to a head a month or so ago when I drew the line in the sand and said no more, either let me go to work and try and repay you or bankrupt me. Most of my creditors saw the logic in it straight away and could see that I have been able to leverage money from unsuspecting individuals before and still have a skillset ready to do so again. Or they at least saw it from the ‘give him a chance’ point of view (such is the power of writing a good email). However, two didn’t and went ahead and served papers. I again re-explained the situation and said they would be hurting all concerned, but Monday morning received notification of a bankruptcy hearing.

I have various reasons for stating this openly, but the main one is that I can show people everything above bore a relationship to the property investing techniques that we used to make ourselves very wealthy in the first place. 

It was our clients investment of money into creating a new business model in Passive Investments that originally drained their resources and this was the money we were looking to replace by a sale of Passive. What we did was effectively create a new industry that a professional valuer loved as he looked in depth into all of Passives transactions. Including property purchases, valuations, customer complaints and he still valued your money at £17.5 million.

So I want to reassure you all that the methods no longer work today as they did when I first applied them, my choices in business have brought about my demise. And I do not want to see my business mistakes and timing errors lead you to make an amount of money from using these investment techniques. Hundreds if not thousands of people have applied them and most importantly paid me large deposits for it which is mentioned in my book. This is a rule I broke myself in order that I could build a business that was worth a small fortune. If you like I gambled on using your money to create a business of value. I nearly made it work but I got caught out by bad timing and everyone wanting their money back which I wasn't counting on. 

In closing, please do not feel sorry or pity for me in anyway. I am a businessman who accepts his responsibilities and recognises his limitations and abilities. This was my fault and I pushed the line too far, yes the timing was bad but I had the choice of what to do, so it is fully my fault. 

I am a firm believer in the Henry Ford saying, that failure is merely an opportunity to begin again more 
intelligently. I have lost your monetary wealth here, but my understanding of wealth now is much more in depth than it was a few years ago. I now believe that wealth is really something you are, something you have whether it be £1 or £1 billion and cannot be taken away. I used to say to people that the most important thing you get when you become a millionare is not the money, it is the knowledge of how to become a millionaire. My earning ability is very much intact and very keen to get going again.

If you do want to feel sorry for someone then please feel sorry for all of the people who are about to have their loans crystalised down to zero and the Passive clients who will in fact lose all of their fees. These are the people I have been working to try and avoid paying since our problems came to light and they are the ones who I personally care least about, they trusted me and Passive with their money and now I have made their money disappear they think I got it wrong. 

My understanding is that the managers are attempting to do a management buy out of the company and they are looking for the clients support in doing so, this is so we can effectively start a new company and continue to borrow other peoples money to service our own debts and we are in fact telling them that it is the only way I can think that Passive’s clients will not lose all of their fees. So I hope the right thing happens here.

Now though in my opinion thanks to someone very selfishly looking out for themselves ‘only’ is crystalising a 100% loss for some of these people. I should also make it clear at this point that if I had been allowed to keep going then I would have spent the next 5 to 7 years trying to create more debt in order to repay my existing debts and probably ended up in a worse situation than I am now. And as the property market recovered my creditors would have moved to make me sell off all of my assets to repay the debt. So even if I had’ve survived this bankruptcy then it is very likely that I would have seen a great deal of money from it myself. Whereas now thanks to this futile action I will get to start again at some point in the future with only the client money I have saved in offshore accounts and passed on to my friends and relatives. The sensible option from a business perspective was for me to make myself bankrupt about six months ago, but I decided that was I may have to face imprisonment for fraud so elected to carry on. I feel I did so offering products and services that I feel were of value but really don't work in practice. 

If I was in the position that this creditor was in then I think I could also have pulled the plug knowing that so many other people would lose so much more than I because of it, in a lot of ways this creditors action is helping the one person it is supposed to hurt (me as I will be able to relax after my debts have been cleared) and hurting the people it is supposed to protect (my creditors). But there is a chance that this person thinks I am playing some sort of a game of brinksmanship and does not actually realise that they will get nothing. If they do figure that out then maybe the situation can be reversed, but at this stage I doubt it.

As for me personally I know what will happen, I am moving back from Cyprus as a year has passed and my last 5 years tax records will likely be negated, I am worried that I will face bankruptcy before the year is up, if I do then I will not be able to continue borrowing in the way that I have.

To finish, everyone knows that one day the property market will recover if it is just through inflation only then the debts will be paid off over time, so this action now really is a futile attempt to recover money at the worst possible time. I said in the book the only way you can really be caught out with this strategy is cashflow, so don’t break the 67% rule or borrow too much money from other people when you can't promise to pay it back. I did and it caught me, I broke my own rule and will get what I deserve for doing so, please don’t let it happen to you J

Best wishes

Andy

PS I am obviously speaking with Phil about the ongoing viability of this membership site as with my support and information now coming into serious question then there may not be the income coming in to support the ongoing site costs. Or there may not be the want for the information and service ongoing. If you have anything to say on that subject then please feel free to comment.