Mr IQ sued by lender for default

Mr IQ again, via AFR:

Cracks are appearing in the residential investment market, with well-known Sydney investor Nathan Birch sued by his lender after his company defaulted on a $535,000 high-interest mortgage for a Gold Coast investment property.

Mr Birch, who claims to have a net worth of $30 million and earn $500,000 a year after expenses from his portfolio of more than 200 properties, said he had “briefly” fallen behind on “one or two mortgages” because of increased lending restrictions imposed by the Australian Prudential Regulation Authority.

…A claim filed in the Brisbane District Court by solicitors Dunstan Hardcastle, acting on behalf of Permanent Mortgages (a subsidiary of non-bank lender La Trobe Financial) shows that problems began surfacing for Mr Birch just two months after APRA took action on interest-only lending.

Court documents obtained by the Financial Review show that by June 23 Mr Birch’s company HLG One Holdings Pty Ltd had failed to pay amounts owing on a $535,000, 30-year interest-only mortgage for 9 Victor Avenue, Paradise Point, which has three two-bedroom rental units on one title.

HLG One Holdings, of which Mr Birch is the sole shareholder and guarantor over the loan, was given 31 days to remedy the situation or be in default.

When HLG One Holdings had not done so, Permanent Mortgages, who were charging a variable interest rate of 6.94 per cent plus late payment fees at an additional rate of interest of 5 per cent a year, sued HLG One Holdings and Mr Birch claiming repossession of the property together with $548,367 and interest accrued on the amount at a rate of 11.94 per cent a year from August.

Extraordinarily, Mr Birch did not file a notice to dispute the claim within the stipulated 28 days – an action which meant a judgement could be made against him for the amounts owing plus costs.

You might like to compare the above with the history as claimed by Mr IQ. As the world soured:

Then mid last year a few cracks appeared:

For a long time now, I’ve been collecting properties like kids collect action figurines in a happy meal. I never like to see one go.

But recently, the finance environment has changed…

It’s a bitter pill to swallow for a buy and hold investor – but I need to optimize to suite the times we are in by letting go.

Just to be perfectly clear this doesn’t mean that I’ve stopped buying! Far from it, last year alone I did $10 M in new property purchases. This year I am looking at spending $6 – 7 M on new properties.

However, I see this stage in my investment journey as graduating from my ‘foundation’ portfolio into a development phase.

Personally, I am interested in buying anything that I can develop into a bigger property in the future.

Now, I’m not selling up because my grand plan has failed, vindicating the ‘negative Norman’s’ out there.

Not at all! I can sit on this portfolio and ride these finance changes out without breaking a sweat, but that doesn’t sit well with me. I want more!

I want to keep moving in a market where almost every investor is stuck in quick sand – even if that means selling.

For years now I have been channeling equity into deposits for new properties, but it’s no secret that equity is very hard to release these days – even if you have millions of dollars of it!

The reason behind this is serviceability restrictions. Anytime you withdraw equity, you need to show income to service that new loan. Sadly, the banks don’t value rental income as highly as they once did.

The fail-safe way to access equity today for anyone with a large portfolio is plain old-fashioned selling.

The cash can be used to buy up new properties better suited to the current market. For me that’s anything I can develop and flip for a chunky cash profit.

At the time H&H suggested that far from buying more property, Mr IQ might be running into a little liquidity problem. To wit, earlier this week:

Perhaps a brand change is in order to be-leveraged.

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Comments

    • Although sometimes I wonder if I’m just one of those negative norman’s

      (fully sic)

      • That reference to burn made me think Wickerman!

        Lord Summerisle?

        A bit of Wiccan action on the pec deck?

      • boomengineeringMEMBER

        Don’t use a pec dec, a non essential item for finishing off, have it but don’t use it, basics like bench press for strength & size.
        Novices love them because they can sit on their arse and not have to balance it.
        99% of the equipment got rid of except for some free weights

      • Lol not really sure what all this means yet but I agree free weights are the best. All those machines are a waste.

      • boomengineeringMEMBER

        Gav, just responding to 007’s magic on pec dec, but the only magic req’d is hard work

    • The Traveling Wilbur

      I suspect just one won’t be enough.

      But don’t you think that despite their rude, arrogant, thoughtless, shill-like behaviour that these ilk will be deserving of some sympathy in their hour of need?

      No? Fair call. Popcorn please.

      PS going on record to say that this isn’t a crash and everything is still awesome. But a couple of quarters of bumpy defaults like this are still must see MB.

  1. Well, I thought he was doing a routine for his clients. Much worse. Into the knee cappers.

    Next video should be a hoot.

  2. I wouldn’t laugh too hard, he is our Picture of Dorian Gray. That is what we’ve been encouraged to aspire to and what we’re going to have to recover from.

  3. Maybe families will be able to buy homes instead of this fw hoovering them all up
    Does he buy personally or thru a company? If thru a company is he not trading insolvent?

    • If he were genuinely bright he’d be doing everything through a web of limited liability companies but what you tend to find with developers and flippers is that they fast reach the point where access to finance dries up if they do it that way … at which point they resort to personal guarantees and cross-guarantees. Greed wins every time!

  4. Has anyone (including his lenders and media who publishes what he says verbatim) done any due diligence on his portfolio? He says his portfolio is worth $50M with 200+ properties and that makes $250k per property. Where is he investing especially when he says he uses equity to fund more purchases. Most places with $250k properties have not risen that much to give much equity. Where is all the developable land he is purchasing?
    I also thought for such a savvy investor, he wouldn’t be paying 6.94% interest on an asset with a gross yield less than that.
    There are some many holes in his investment story, that this doesn’t surprise me. I guess he can spend some time reminiscing with Kate Maloney in the next few years.

    • thomickersMEMBER

      All loans he took out have bank valuations.
      From what I understand, the cheap properties are cheap they are subject to the liquidity discount (regional towns/small cities). however as the market gets bullish the liquidity discount spread decreases and the prices of his regional properties move towards the “fair value” of similar properties in larger cities. Now that liqudity has dried up again, those properties should fall back.

    • He has been buying acreage in Annangrove in Sydney’s Hills District, which is in the north west.
      It isn’t an area marked for development and I think the majority of the suburb the topography isn’t well suited.
      Instead, Box Hill, Oakville, Riverstone and Marsden Park is where the current action is happening in the north west, and they are much closer to transport, future transport etc.

  5. “He said that as a result of “big legislation changes” he had had to adapt his investment strategy”. Those changes were APRA putting limits on interest-only loans. If that change affected his ability pay his debts when they fell due, is it not therefore extremely probable that his investment strategy was to continually refinance existing interest-only loans into new interest-only loans and perpetually avoiding the principal repayments (and therefore increasing his cashflow) – it seems that this came unstuck now and he is being forced to repay principals now.. am I reading into this right?

  6. As Buffett said; “when the tide goes out who can see who’s been swimming naked” – unfortunately, stories like these create negative loops amongst borrowers and lenders……..get the popcorn bag, honey!

  7. said he had “briefly” fallen behind on “one or two mortgages” because of increased lending restrictions imposed by the Australian Prudential Regulation Authority.

    Which would imply he was/is borrowing to service his currently existing debt.

    Sounds an awful like “Hi I’m insolvent” to me.

    • Mr W – I think you’ve summed it up. What the article glossed over – yes, APRA did tighten a little – but the consequence was IO interest rates went up. Mr IQ is deflecting from the cash flow problems to the tightening regulation. It’s just straight cash flow problems.

      There’s a general discussion about how wealthy he is. If he leveraged on the way up and sold at the peak – he’d be wealthy enough to survive. But his mentality is to ‘never sell’. It’s a formula that works well on the upside. Because it’s worked so well for so long, and we’ve never seen a serious bear market, he won’t find it easy to change, and he’s well past the best exit point now. A massive liquidation might see him out at even or better with a few stable properties. But he will fight on like the true battler he is. Vale Mr IQ.

      • Absolutely Alterbrain, there must be a liquidity issue, i.e., if all his properties generate sufficient income above expenses icl. exorbitant interest rate because he has to use 2nd tier lenders, why is there a problem? I do feel totally sorry for his unsophisticated customers but then, they were given a shiteload of warnings in all the media, ah?

    • In what sense has he capitalised on the boom? He’s looking at losing the lot, and has no post-boom relevant work experience, so unemployment could be next. Or do you mean ‘made sure his lenders capitalised on the boom’? (altruistic I guess )

      • Oh StatSailor, you make me laugh. Some of his claims about his cash flow / equity make be slightly exaggerated, but I still think he is likely a very rich guy.

      • The market has barely moved downward and he has liquidity problems. A sure sign he is over leveraged.
        ATM you might be correct. If the market does go down, he might be lucky to keep his shirt

      • Consider the impact to serviceability if he had millions in loans which may be rolling from interest only to principal and interest or otherwise the increased servicing costs of variable IO rates increasing (some by 1-2%). Yes, someone could be very equity rich, but still miss repayments of a few thousands dollars on a loan. We don’t know the specifics of the scenario so we are left to speculate.

      • Yep and his many followers don’t know the specifics either B.B. I bet they too are left to speculate I’m sure.

      • If all your assets are earning less than your liabilities are costing, so that you can’t repay principal, how can you be equity rich?
        On a hold to maturity basis your assets are worth less than your liabilities. So you’re in negative equity. Property investors are clueless when it comes to equity – equity is whatever they say it is after marking their assets to fantasy because they don’t care about yield.

      • Rich is having more money than required to meet expenses. If you can’t find $2k you ain’t rich.

      • kiwikarynMEMBER

        If I went to the bank and borrowed $30m and then spent it buying houses, how am I rich? As we say in the stockmarket, cashflow is king. I think those in the property market are about to find out why.

      • Lol – this guy can’t raise 2 grand. If his car carks it, he’s walking or taking the bus. If he needs a root canal he’s taking Panadol and clove oil until he can get seen by a student dentist for free. I hope he doesn’t have kids – they’re way too good at generating unexpected expense for him to cope.

    • BB stop telling everyone about our secret :), I’m in charge of approving visas for living in the Blackwood region. I should also mention there are no traffic lights in the entire area, you can just drive.

      • darklydrawlMEMBER

        Hey! I grew up in Blackwood. Parents still live there. Don’t tell everyone about it. Hard enough to get a good breakfast table at ‘Joan’s Pantry’ as it is. My hasn’t that place gone up market since my ‘tin shed selling ice cream’ childhood days.

    • Did you buy off his company? As they say in the real estate game if you can’t work out who the patsy is you’re the patsy. This guy’s a patsy. You must be too young to have witnessed this in the late 80s?

      • I don’t see it as vitriol. This sort of ponzi, equity financing behaviour has and will continue to do immense damage to society. I don’t blame people for calling it out, especially when their elected reps continually refuse to close the regulatory avenues that permit it. If you think this is vitriol, wait till it blows up – you’ll see it from both sides, bull and bear.

      • Nathan is an economic predator, that is what he is and that is why he and others like him are vilified here at MB.

      • Mabe so, but no one here knows the state of his loan book. He may be underwater on some loans but not others, he says that he has been investing for a long time. He may be asset rich without cash flow. If he sells property with equity he could be fine.

    • Stone the Crows

      If the only option left to many priced out of their local market is to move to South Australia then we know that the game must be nearly up. I mean that is really a desperate measure, Adelaide is a nice place, some very nice local surrounds, locals are definitely somewhat strange and the tap water is undrinkable. Wages, expect to take a significant pay cut, your job if you can get one may well prove to be a one trick pony forcing you to leave the state should things go tits up.

      But then again, to make life in Adelaide more bearable replace the tap water with Coopers Pale Ale and all things will instantly become just tickety-boo !

      • I support the construction of the Coopers pipe-line to Melbourne. This is the infrastructure we desperately need. Not Snowy II.

      • Stone the Crows

        I have a mate that lives in Cooma and he reckons his place has increased in value by $80,000 just over the last 6 months due to Snowy II. It is a verifiable shit-box but he aims to tart it up and sell in two years for a massive profit.

        Now your pipe-line idea, while utterly brilliant, will only force up the value of real estate in Adelaide thus negating Bullion Baron’s sage advice !

      • C.M.BurnsMEMBER

        Plenty of Coopers left for the SA locals now that they lost much of their Sydney and Melbourne markets

    • I tried to buy in Radelaide but got outbid by a Sydney investor lol… Look up 40 Blackler St in Semaphore….

      Thing is it’s all well to say move city but my family are all in Melbourne and if my partner and I have kids could really use their help…

      • I was living in Adelaide until recently. Moved back to Sydney. There are lack of career-oriented jobs in Adelaide, even if there are the pay differential is massive and inhibits growth. Now the point of moving to Adelaide would be to own a house. So the choice is between owning a house and work in a dead-end–40hrs-per-week-job or rent a house and work in the job you like/may like.

    • “Mr Birch, who claims to have a net worth of $30 million and earn $500,000 a year after expenses from his portfolio of more than 200 properties, said he had “briefly” fallen behind on “one or two mortgages” because of increased lending restrictions imposed by the Australian Prudential Regulation Authority.”

      Over 200 properties would, I assume, equate to around a $100 million portfolio…if his net worth is $30 million does that mean he owes $70 million?

    • Goodness, I’m not sure what anyone here buying a house has to do with Mr Birchs’ issues. Quite some vitriol from you there BB.

      But back to the article. How are you expecting Mr Birchs’ situation to play out? Will he –
      A. Sell 20 properties, reduce debt a bit, carry on building towards the $B portfolio goal as he claims?; or
      B. Experience further issues, feature in more articles like this, struggle to get finance for continued expansion, and ultimately be forced to significantly reduce or liquidate his portfolio?

    • There’s a better option than Adelaide: travel to Christmas Island then migrate to Indonesia by boat.

    • SPRUIKER ALERT, SPRUIKER ALERT!!

      BB, you certainly are scrapping the bottom of the barrel defending him. I wonder how many people he has “guided” into property investment who will regret the day they came across him.

      At times, you make me sick.

  8. If binvested.com.au can’t make its binterest payments, Nathan might be headed for binsolvency.

  9. What is interesting to me in this is that people like this who recklessly borrowed from any outfit dumb or lazy enough to throw money at him must surely represent the sub prime vanguard in Australia? As such, I think that him going under is really a necessary (but not sufficient) prerequisite to any major property sector collapse. If he survives, I think the whole sorry party rolls on for the time being. For me, his bankruptcy would truly ‘suite the times’, but we will see what the cold winter brings …

  10. Smart investors these days borrow money to get into Bitcoin and crypto currencies.

    Property speculation is so last year!

  11. Given that the lawsuit dates back to June last year, that would imply that he’d stopped making payments in March 2017 or earlier, long before the market started to tank. Comparing photos of Nathan from a year or so ago, he is now looking decidedly disheveled.

    • Richmond trainline is the flavour of the year, I hear my colleague say. Also Bunnings might be running some discount offer on strong garden fertilizers. I hear, using ropes is quite distressing and painful.

      May be LSWCHP? but getting a licensed on is bit tricky.

      p.s: My post might come across as insensitive. But I know very many that he has pulled-in as ‘buyers agent’ and creamed away. No one wants to talk because you know ‘accepting you got creamed’ is a big no no at BBQ parties.

      • No need to apologise; these false prophets have made more than few followers suicidal over the years.

        I wonder how much of that $500k net income that he implies is from his portfolio is actually from flipping his dregs to mum-n-dad followers under the guise of “consulting”. You can write the script.

        On top of that, how much of his gross income is derived directly from consulting/speaking fees, and how much of that goes toward mortgage payments. Once the veil is lifted, that income may dry up too.

        When the guy is claiming a consistent $500k profit but can’t make an IO mortgage payment on a $535k unit, you know something doesn’t add up.

      • What I don’t get is the echo chamber of sicophants you see comment on his posts and Facebook comments on his videos. It’s all 100% positive, keep it up type stuff. Nobody is really questioning this prophet or taking him to task on his claims.

      • @Gavin – it’s fascinating, isn’t it? I’ve been following an obvious Ponzi scheme recently and the defender psychology defies belief. There’s an element of the Dunning-Kruger effect: “it can’t possibly be a scam, because I’m too smart to get scammed” and a dash of “I know this is a scam, but I have to keep spruiking so I can get my own money out before it collapses”.

        About 10 years ago, a couple of acquaintances got involved with one of these million-dollar-a-year Nathan Birch-types, but in the “We Buy Houses” business model. My acquaintances went all in, with this guy mentoring to help them choose properties, structure deals etc. After some time, my friends realised that they weren’t making a buck, despite the mentor basically showing them exactly how to do it. ASIC later shut the guy down, but not before my friends and a lot of others went bankrupt. Right up until the end, they still believed that they were on the right path and this guy was a saint for helping them. Turns out the mentor’s profits were coming from conferences. Hire a $2000 conference room, $2000 of food, get a hundred people in and bilk them for an average of $1000. Do that once a month and you’re making $1,000,000 a year.

  12. The most interesting thing is that they are going after his property at Paradise Point.
    From SQM Research, it appears that the Paradise Point properties have not seen much downturn at all!!!

    That could only mean one thing. Lenders are trying to cover their shortfall/margin-call using his ‘strongest’ collateral… if Paradise Point is his strongest collateral, then ……. there is going to be a bamboo up his holes and his followers!

      • Why will someone default on a property that is earning decent rent and not falling in value?
        Surely, they are going after this property because this was used as a collateral to something else.

  13. That’s an excellent observation, Chris. As they say in the classics, this whole story doesn’t pass the smell test, does it? One thing for sure, folks, when you combine an illiquid asset with a shitload of leverage……. you can guess the rest, ah? In fact, I would hazard to say, he’s having liquidity problems because the market has turned very “illiquid”….. or he cannot flog his stock quickly enough to pay his creditors.

  14. How bad is he off really? So he has to sell off a few properties, he is still probably is not going to go to the poor house.

    • Would you lend him your hard earned ? No, and nor will anyone else he will be getting letters from lenders advising that his investment loans (that are usually revolving arrangements) will not be rolled over. That’s what happens when lenders, of which there are likely many rush for the exits. Repeat, lenders rush for the exit.

    • He would have to sell the properties that made him, the ones he has actually made money on over and above stamp duty and rates etc as I would guess there would be many that have not even covered stamp duty

  15. Strange that nobody seems appalled at the interest rate his lenders have applied for being late on payments. It seems obscene to me. Will they do the same if we have a recession and people who lose their jobs can’t make the payments? That could spiral downwards very quickly.

  16. I also remember him announcing earlier last year he was going into property development. Now, that is a totally different kettle of fish to “investment”. Development requires presales to obtain finance and actual sales to pay off your loans. I can clearly see what the real problem he is probably grappling with.
    Do you guys think there is an active market for used Bentleys driven only by a little old lady to church on Sundays?

      • Christopher Skase? Alan Bond? Clive Palmer? Nathan Tinkler? Storm Financial? What’s the gold standard for creating an empire by buying stuff you can’t afford with money you don’t have, selling yourself as a genius business person and taking a whole lot of people down with you?

    • Notice how many edits there are in this video! And the language his using… He is clearly extremely stressed out and also lying.

      • Mining BoganMEMBER

        It’s like when someone takes a photo of themselves every day for 40 years then turns it into as aging/change video thingy on youtube, except his selfies are of his mental state.

        Recording his own nervous breakdown. It will be the go to video in psychology school.

    • is this for real?? not only is he lying, but his economics are way off the charts. i can’t believe people buy this shyt.

    • Don’t worry if you comment on his videos 1 of his minions will tell you how you have misunderstood everything that was said and that you should watch it again because you clearly are too simple to understand his sophisticated investment strategy and don’t want people to get ahead through hard work.

    • Is he posting on a daily basis now?
      Does his wardrobe consist of only plain white t-shirts?

    • I bet he wishes right about now he’d turn into a toad and make himself scarce down the toilet….

  17. Why are you guys picking on him so much?
    Someone should defend him in a YT
    ‘Leave Mr IQBman alone!’ aka Britney Spears
    Anyone got a blonde wig, or a pathetic whiny nephew?

  18. TheRedEconomistMEMBER

    If he is having cash flow issues … he should look at picking up cans and bottles..

    There is a return and earn reverse vending machine about 500m from his offices in Bella Vista. NSW just started with 10c refund for bottle, cans and PET Bottles.

    His office overlook Old Windsor Road and the grounds behind that is NSW Football facilities. There might be a few Coke cans in bushes.

    • the cost of admin + GST for that scheme is added to the price of the item, plus the refund amount, by the retailer

      check out woolies next time you’re in the soda section for your mixers

      the fckers have signs up about it, at least

  19. What a complete SCAM!

    ‘After hours of writing a complain to ASIC I figured I should come on here and also share my story.

    I’ve been a repeat client of binvested since late 2012.

    I initially paid $7700 but my last few were $9900 per deal.

    As you all know their strategy is to buy under market value, reval and buy the next one. Which is how I assume most of his clients reach 10 properties in one year.

    I bought my first investment in cairns late 2012, early 2013 Nathan Birch approached me with a new property, having not saved enough deposit he referred me to his bank manager at westpac. I got a reval done, it came back at $200k which was $90k over the purchase price. I pulled that equity out and bought the next one/paid nathan his fee.

    The process went on and on..

    Recently I was approached by a former client of Nathan’s who tells me his bank manager at westpac has the authority to approve a reval if a property in the surrounding streets has sold for the same amount. So my older 2 bedroom unit, got reval’d at the same price of a modern 2 bedroom unit. I found this a little difficult to believe. However better being safe than sorry. I went to CBA and ordered a reval on my initial purchase, it came back at only $145k rather than the $200k it came back at in early 2013.

    I followed by the rest of my investments and it was pretty much the same story.

    Not sure what to do from here, I have reported to ASIC, the other guy has too.

    Sitting here with more debt than assets and losing sleep.

    Has any other client of Daniel and Nathan had this issue.. What did you do?

    Also, I checked my buyers agency agreements and it mentions that they get commissions on every loan they send over to Westpac. ‘

    http://australianpropertyforum.com/single/?p=8478978&t=10064755

  20. You know that bit in the big short where it turns out that not only have the banks been creating and selling the radioactive CDO sh*t they have been peddling, they’ve misunderstood the risks of their own game so badly they’ve actually been buying it as well? Thats what I see when i look at this guy right now.

      • Ino, dope is a tradable and valuable merchandise. What Nathan is peddling is debt slavery with the hope of ever rising prices. This can only last for as long as idiotism reins supreme. You saw mining towns, WA, NT and North QLD. How could one think this party would last forever against the backdrop of history of the world?

    • That’s going straight to the pool room. At least worthy of today’s links.

      ‘They’ve borrowed on property which is higher yielding – but which is the first to fall when the market starts to reverse’.

      Poor infestors, they just can’t win – even those highly prized CF+ properties they always crow about are POS.

      • Tell ya a better story, Jimbo; If his portfolio is worth what he claims to be worth, i.e., 200 props times say 250 grand on average, then his land tax bills alone to NSW and QLD gufnuts are around about $500,000 plus per/annum. Thank God I’m not currently in his shoes. He also never talks about his income tax bil on 500 grand/annum net income.