8:44 AM, 15th June 2024, About 6 months ago
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I’ve got election overload. The editorial team thought it might be time for something slightly different, and so an article journaling my relatively fast rise to being a landlord in volume would make sense.
I’ll start by saying – the property world is full of fluff. Puffery, they call it in American commercial law – a great word. An “exaggerated description of a good or service”. I’ve never been one for puffery, and have always been horrified when I’ve uncovered it in many others who “sell” themselves as the next big thing. If you don’t know what I’m talking about, I’d be stunned (or this is one of the first property articles you’ve ever read on the internet). All I’d say to those is – be healthily skeptical.
I’ve been involved, now, over the past 12 years (and a bit) in over 700 UK property transactions, with the vast majority of those being residential. The aim has always been to hold property – although I had a very fixed mindset years ago when I would never consider a sale, and have resolved that by becoming much more fluid around decisions on a sale. For example, one of the post-Covid pivots I have undertaken (of which there have been several) was to make the most of what was such a buoyant market in late 2021 and early 2022. I just “felt” like we might not see prices like that again for some years – regularly achieving 10-15% above what I “knew” those houses were worth, simply because of the way the market was operating.
Selling a house is a fragile operation, of which one day I will write something more substantive. Anyway – I started as an accidental landlord in 2008. Made all the mistakes in one go – bought a new build, at the top of the market (2006), with the wrong partner, and that all fell apart in early 2008. It wasn’t saleable at anything like what we’d paid for it – so we kept it. The selling agent blackmailed us into renting it through them, which we did for about a year – then they charged more than the cost of a new washing machine to replace a part, and I thought – sack this for a game of soldiers, I’ll manage it myself.
Not much more happened – in 2010 I bought my first “deliberate” BTL but it was to help out a friend, rather than as an investment. We did an OK deal because the market did the legwork. We exited that in early 2022 to a tenant who had been there 8 years – they were delighted and so were we because the yield was weak and the CGT allowances were evaporating.
In 2012 I underwent a pivot (seeing a theme here!) – and decided I wanted into the game, in volume. I read about what I’d missed – quite a lot, no-money down, etc. etc. – and thought – may have missed the boat here. But let’s see. I refinanced what I’d got, and went off to find some JV partners. The idea being – I could do more with more people, the whole would be greater than the sum of the parts. I also tapped up the usual sources for seed capital – friends and family.
It didn’t take long before all that was deployed. One flip turned into a hold (which performed OK, and is sold now, but it was held for 8 years as a rental); a couple of HMOs went well, although the exit on one was disappointing; the others (high-yielding single lets) are still in the portfolio to this day. At that point, capital had been turned into monthly income – not retirement money, but healthy enough. However – I always set out not to “need” that and to be in the position of being able to reinvest 100% of it. That’s the first secret really – something you already know – the miracle of compound interest.
Those purchases – in which I heard “make your money on the way in” a whole number of times – were not bought badly at all. One high yielder at near market value – I’d probably do the same these days, and sometimes do. One at over 25% below – the holy grail. The rest, disappointing on revaluation, and I wasn’t au fait with the tricks or even the intricacies of the 6 month rule. I dislike the acronym BRR(R) – and prefer “momentum” – but the principle was always the same – buy cheap, add value, refinance and rent. Move on to the next. (Nugget 2).
The difficulty, it was very clear to me, was finding the deals (that’s until I ran out of money!). My JVs were structured fairly, but well in terms of protecting me – an interest rate on any money I brought to the table, plus equity and control for me. I’ve fine tuned that over the years, but the basis was a good one.
So, I spent years on a voyage of discovery which now I can condense into a small number of steps:
You get the picture. I set an objective to buy property in every way it could be bought – and to try to master that craft. Agents – auctions – traders – direct to vendor – receivers/liquidators – lenders.
I needed money (remember, I’d spent mine and tied it up!). So – given I’d committed to JVs – and also, I was advised that one single partner over time would expose me to their preferences, life situation, health, etc. – I embarked to find more. I moved from “the money” and learning the game – valuable lessons learned with that relatively small amount of seed capital that I’d put together – to “the doer”, getting the legwork done.
It was obvious to me that working with JV partners would allow me to scale more quickly – it would be harder work, but I learned to look less at my slice and more at the size of the pie. It was only year 5 when the portfolio was large enough to start looking at letting agency solutions – because I wanted to spend less time on property management and more time on deals and finding partners. Should I start one or buy one? I ended up doing both, and buying more than one (and exiting a couple too, over time).
It’s worth highlighting an error I made over the earlier years. I bent over backwards to accommodate what JV partners wanted. They wanted equity plus a coupon – I complied. They wanted majority shares – I complied. Whether this was a lack of self-confidence or something else – I am not sure. I didn’t really stop for long enough to think about it – just ploughed on. The result – sometimes some really good deals went to people who were not long-term partners (that I was seeking) – that didn’t do what they said they would do – and simply sucked time for limited benefit. Don’t do the same as I did – define what you want IF you decide JV is the way you want to go – and go out and get it.
In order to keep this at a workable length – there’s one more part I wanted to include. A sensible approach to taxation. I learned from Amazon as they grew – a huge company, but making an accounting loss for 20 years before turning a profit. How? They reinvested aggressively on growth. I felt I could do the same (to be clear, I’m not building Amazon or anything like that) – and by stretching equity, using bridging finance, and also proposing and executing some creative deals using payouts over time, any profits could be reinvested in growth of the portfolio.
Everything looked like a typical growth company before Covid. The number of deals done was increasing year on year. Property market moving upwards – not rapidly, but steadily. Perfect scenario. Covid came – super-cheap money came, but inflation was always lurking. Rates had to go up. Would the economy cope? I didn’t know. So much weak, baseless analysis was published during Covid that I knew I had to start doing my own, and I started to publish it.
Stock became thin on the ground. Traders volume absolutely cratered, as did auction – two of my sectors of suppliers knocked quite significantly. I had to turn to more awkward stock such as “tenants in situ” because no-one else wanted to buy those it seemed, and also larger deals which I’d historically stayed away from because the smaller stuff, in volume, had margin, and very little risk – and was simply rinse and repeat. That hasn’t gone too badly – in fact, in percentage terms, I’ve done some of the very best deals I’ve ever done – but they are few and far between, take a long time to get over the line, and bring a completely different level of competition with them as well. They are now simply part of the buying strategy.
It’s been a blast, and still is – I’ve always said I’ll carry on whilst it is viable to buy investment property (that’s a cheat, really, because it is always viable – but what was viable to buy in 2023 looked very different from 2019 looked very different from 2014). The reality is, I’ll carry on whilst I enjoy the challenge, and am determined to enjoy the ride first and foremost. Just like writing – I enjoy writing and creating content, which is why I’ve been doing some more of it, including this article after a kind invitation from Mark to contribute to the site! Until next time.
