Archive | May, 2011

Holiday Home Rentals Vs. Long Term Rental

30 May

Today I decided to work out the difference between renting my house in Fuerteventura as a holiday let vs. a long term rental.  I sacked my agents last July which I wrote about here, I also updated you about the joys of holiday home ownership here!

Now almost a year on and with my bookings calendar complete to the year end I am able to sit down and calculate was the extra effort and expense worth it?

So let’s be honest when I decided to rent my property as a holiday home and manage it myself there were cost implications. Firstly, I had to provide a lot more furniture and stuff at the apartment than what I did before and I had to upgrade several pieces. The sort of furniture you have in a holiday rental needs to be a better quality than in a long term rental – after all you only have a week to make a good impression so the bed better be comfy!! In a holiday rental you also need more “stuff” than you would normally provide in a long term rental – so I had to buy some added extras such as an ironing board, an iron, hairdryer, TV, stereo etc. And all those extra things cost money!

As a holiday let you then have the cost of advertising.  I decided from the outset to go with Holiday Lettings and they have been very good. It cost me about £280 to advertise for the year.  While the cost of advertising on holiday rental sites seems quite a lot (especially when you have to pay for it in a lump sum and upfront) when compared to the 10% you would pay an agent for managing your property it compares very favourably indeed! But let’s be honest, if you are paying an agent a managing fee then you don’t have to manage the property and so you don’t have to worry about the advertising at all –  so I’m not comparing like with like there.

So let’s compare the amount of time I now spend managing the property as a holiday let compared to when I had it managed by an agent as a long term rental. I have totted up the amount of time I spend on the property and it works out about 2 hours per week, or around 8 hours per month as a holiday let. Previously I would spend maybe 2 hours per month as a long term rental as the agents would always be onto me about something – whether it was the water meter reading or to tell me about a maintenance issue – there was always something which required me to think about, decide or act – or do something!

What I want to stress though is the quality of that time spent now as a holiday let vs. the time I spent when the property was managed as a long term rental. Previously I found everything to do with the property was a problem that was being reported – a maintenance issue, a tenant issue – whatever – it was always negative. Now, when I look at the time I spend on the property it is always positive! Yes, I have had a couple of maintenance issues but in the main my time is spent chatting with holiday makers in a positive light.  My time is spent recommending places to go, listening to what they’ve got up to, taking bookings, taking monies – it’s all positive!  So in terms of a trade off yes I spend a bit more time on it – but now the time I spend is positive. It’s fun stuff. I get so excited for the holiday makers as well and I love hearing their recommendations and things they’ve done – and it also means I have more things to discover when I go back.

Now the biggie that you are waiting for – financially was it worth it?  The answer is a big resounding YES! The property now earns 44% more as a holiday let than when it was let as a long term rental and the huge benefit for me is that I get to use my home as well! Before when it was let as a long term rental I couldn’t stay there. But now it’s a holiday rental I get to spend a lot of time there, have friends and family there – and I am still financially better off! And amazingly in the first year we have now already recouped the additional monies that we spent upgrading the property to a holiday let.

So I am chuffed – I am thrilled to say my first year in managing my holiday let from thousands of miles away has been a success. I am financially better off and I am emotionally better off – I now have a place in the sun which I can properly call my own – and which I can stay at too!

 

Are you a brave, rich and inspired developer?

26 May

Today I had the honour of having a sneaky peak inside a building in Stoke on Trent that the council are desperate to save.

The building is the old Indoor Market in Burslem. It a beautiful Victorian building which occupies an area of 11,000 square metres in the town centre. Sadly the market closed in 2005 and since then has fallen into disrepair.

The incredible steel roof structure is reminiscent (on a smaller scale) of the likes of Kings Cross and St Pancras Station in London. But it is a roof which needs work – and it needs a lot of money spent on it – estimates for the roof repair are in excess of a million pounds.

The building truly is magnificent and has great kerb appeal.

There is great potential here for a mixed use development site to suit both residential and commercial purposes. And with 11,000 square metres you’ve got enough space for a variety of ideas!

The council are desperate to find a brave, rich and inspired developer who could assist them in bringing this building back to use, and there is real flexibility for the right developer  – could this be you?

This really is a REAL opportunity that exists right now – if you are interested, please get in touch, it would be wonderful to see this building back in use.

Forget Estate Agents – Deal Direct For The Best Property Deal

20 May

Today I learnt the importance of doing a deal direct with the vendor!

So the story starts a couple of months ago. I had seen two flats for sale above a commercial property in the High Street in Poole. The flats were going to have new leases and were for sale individually with an advertised price of £99k each. This didn’t sound such a bargain, but  I wondered what could be done if I was to try and buy both the flats. I booked a viewing and went to see the flats – I loved them. They needed a huge amount of work, but they had period charm and could be worked into something nice at the end.

However, the building needed serious work and given I was only going to be a leaseholder I was not happy to just buy the flats. I wanted control of the whole building and that meant I had to buy the shop and the freehold as well. So I suggested to the agent I would be interested in putting forward an offer in the region of £130k for the 2 flats, however I wanted to buy the shop and the freehold as well. The shop was vacant and needed a shed load of work and so I didn’t value it very highly (and I knew the bank wouldn’t either!) . However, the agent came back and said the owner wanted £200k for the shop. That meant it was a total of £330k for the building. I replied that was too top heavy and while the agent seemed to agree with my sentiments with regards the works that were required, he wouldn’t entertain my proposal of putting forward a lower offer for the building.

And so I thought, well I ‘ll bide my time, wait and try again shortly…or so I thought. While on a viewing for another commercial building going to auction I then happened to get talking to a local investor. And this is where appearances become deceptive.  I had accepted his offer of an ice cream at the store he owns round the corner and which he runs himself. I knew the store and had seen him working there before and thought nothing more of it. But this ice-cream vendor had much, much more than I could have ever imagined – in fact he owned a good chunk of Poole High Street, residential properties in London, retail in Westfield, properties in Bodrum, student properties in Hatfield and much more! It was an eye opener for me and really goes to show how you cannot categorise people! This ice cream vendor was in fact a multi millionaire property guru! As it turns out he only opens the store in the summer for a few months, sells a few ice creams and does a few property deals!

And so we’re talking about the property market and different deals and it only turns out that he had been dealing direct with the owner of the property which I had been trying to buy through the estate agents. In fact, he had made an offer of £200k to the owner for the whole building which had been accepted (this was versus the estate agent not even entertaining me trying an offer below £330k!). Well I was gob smacked…  as it then turned out the owner had accepted the offer for £200k cash (which at that time the whole building was being marketed by an estate agent for approx £400k).

But the story continues, as after the vendor accepted his offer, the next day the vendor calls the ice cream man/ investor and claims he has been offered another £10k and would ice cream man/ investor increase his offer.  The ice cream man/ investor agrees to give another £5k –  so the the total price was going to be £215k for the whole building – still an absolute bargain. Then just as the call is about to end the owner says there is a “condition” to the price being agreed – that condition is that £40k is paid to his solicitors account as a non-refundable deposit if the property did not proceed. Ice cream man/ investor laughs and says “Listen, we’re not talking about £4 or 5,000 here – you’re talking £40,000 non refundable deposit. That’s ridiculous and I am not prepared to do that. I’ll give you £5,000 non-refundable deposit but no more”  The building owner was not happy and refused to do the deal.  That was two weeks ago.

In the meantime – the other party who had increased their cash offer then reneges on the extra and the building got sold last week to a local builder for just £205k!  So this building which was advertised with agents for a total price of £400k – the agents who would not entertain my discussion of an offer below £330k…actually lost their sale as the owner sold it direct for £205k. The moral of the story – deal direct!

Pick Your Property Battles Wisely

14 May

Today I went to see a commercial property in Poole which is being sold at auction. As you may remember I got outbid on the last commercial building I tried to buy in Poole – but given the High street is getting worse I thought this time I may be in for a bargain…

And my hopes seemed to be boosted when the viewer disclosed to me yesterday I had been the only person who had called about the lot so maybe I could pick up a bargain!

So it’s a sunny morning and I am feeling happy – it’s amazing how good properties can look when the weather is nice!

The property I am here to see is a former Indian restaurant with 8 rooms above. It’s located in a pedestrianised area of the high street in Poole which is a bit of a mixed bag. The area immediately surrounding the subject property is in a  state of flux – transitional and uncertain would be the best words I could use to describe the location! Basically you have blue chip retailers opposite and 2 shops down – but at the same time there is a healthy dose of charity shops, pound shops and boarded up shops.

So I’m a little bit put out to arrive and find two other developers looking at the property – I no longer appear to be having a monogamous relationship! However, I am even more put out when it turns out the safety key box which was attached to the property has been stolen by the former owner and we now can’t even gain entry!

So I only have photos of the outside:

 

While we wait for the man from Allsop auctions to make it look like he is trying to do something useful, I get talking to the other property developer who is waiting.  And while you may be thinking developers are all competitive and dog eat dog (and sure that happens) but sometimes – just sometimes –  you come across developers who have made their money, have made their mark and are ready to impart their knowledge, mistakes and learnings to those further down the ladder.

And so frankly I was over the moon – I didn’t care I couldn’t get in to the property for the viewing. I learnt far more talking to this developer who has been in the game for 28 years!

So what did I learn?

Specifically about the property; I learnt that the Indian restaurant has been repossessed by the bank, that the former owner still owns the building next door (different bank so he still has that). That he’s furious and vengeful (hence why the keys have been stolen). I learnt the property has a flying freehold with the next door building (owned by the ex-owner of the Indian restaurant). That the Indian guy is well known in the town, has had many properties and cars taken off him and that they mysteriously catch fire. That the biggest landlord in Poole (over 3,000 properties and collecting £1.4million per month in rent and employs a team of “boys”) has also been trying to buy the property from the Indian, that another local restaurant on the Quayside was also trying to buy the building and it only came to the market after their planning was refused by the council and they pulled out of the deal. That the lovely new build which had been built next door and was an effort to spruce up the shabby end of the high street had been sold last year to a housing association after the developer went bust and was now causing trouble with the sort of people it attracted (I had noted the distinctive smell of majuirana and seen the lads sitting on the walls drinking cans of beer at 11 in the morning).

But most importantly, I heard his story. I heard what it was like to make a load of money and lose a load of money. Mr Developer was 42, has a successful building company and property agency (I know that I’ve seen them on the high street) Mr Developer started at the age of 16 and has always worked for himself. Mr Developer (who was clearly hugely successful) was also so modest, so well spoken and so nice. He was generous with advice, honest that he didn’t know it all and could only share his opinions and learnings. Mr Developer lost his entire property company before in the previous recession and this time around with a young family doesn’t intend to do the same. He only came today to view the property because a friend of his is interested in buying it for his restaurant business.

Mr Developer while having over 500 properties, a massive income stream and 2 successful companies can still get caught out. Last year, one of his bank’s recalled the property loans he had with them to the tune of £3 million. He had done nothing wrong, he was on a capital and interest repayment loan – but the bank decided to send out a valuer who claimed the properties were worth less than what they were valued for and they wanted their money back. At that time he was on 60-65% LTV loans. He had a perfect credit score, successful businesses, had never missed a payment, had plenty of money going in – but there was nothing he could do – the bank wanted their money and that was the end of the story. He had to move the loans to another lender.

And it was while he was talking, while we were in the depths of our conversation he said something to me – which could have just been a flippant remark – but I took it to heart. While we were discussing the issues of the Indian restaurant property, the land registry issues, what to do about the flying freehold, how to approach the council and the different policies they have in force, he turned to me and said:

“When I was younger I would’ve relished this battle.  I would’ve taken the neighbouring Indian guy on, I would’ve taken the planning battles on, gone to appeal and got a rush out of proving that I was right and that I won. Now, I look at these difficult properties and I just walk away. Why fight with everyone? I’ve reached a stage where I pick my property battles wisely. I lost so much time working 18 hour days, staying at the office late, arguing with planners and trying to prove I was right. Now I realise the wise thing to do is to let someone else fight these battles. There are so many easier returns to be had, why make life difficult? Now I pick my battles wisely”

And in that moment, I realised what wise advice he had imparted. I could argue that he had an ulterior motive and he was trying to put me off to get a clear run. But, to be honest given the sort of people who want this property I am the least of the competition. What he said rang so true. In property we often feel that it is the hardest battles we fight which will make us the most money. We believe we have to work hard, solve complex legal issues and do major renovations to make it all worthwhile . But do we? Maybe the smarter money is in choosing the right property battles to fight from the outset.

From Ugly to Gorgeous – How to ‘facelift’ a building

13 May

Today we have completed the first phase of our Gorgeous Homes office refurbishment!!

Now up until a year ago we used to rent a property on the other side of town. We had taken a pretty dull building and made it our own:

Inside I spent a lot of money replastering, rewiring, putting new lighting and trying to make it look nice – this is how it was before:

 

And this is after:

However, we soon outgrew the property and despite looking all over I could not find us suitable premises to move into…until a member of staff told me about a building which she had seen was going to auction.

It was in a part of town which was not our “home” territory – but she convinced me to take a look as it had huge prominence in the town. It was located on a traffic thoroughfare and was located on a 4 way cross roads with traffic lights. Now, I liked that as the previous shop had also been located on a major road next to traffic lights – now you may be wondering what is my obsession with major roads and traffic lights? Well the simple fact is, that when the lights are red, traffic stops…people look around and they see you!  It was a strategy which had worked well for us when we had first opened the office – we had gained huge visibility on a limited budget and had quickly become well known in a large city (c. half a million people) where to gain business stand out is pretty difficult.

And so I went to take a look. As you can see it is one of the ugliest buildings ever. It had been left derelict for years and needed a huge amount of work. How on earth could a company called “Gorgeous Homes” open in such an ugly building?

Inside it was full of rubbish – and it was very hard to see the potential.

 

Unbelievably though, I was in love. The location was just as prominent as my staff member had promised – plus we had some blue chip and local retailers surrounding us. But, it was a huge gamble – it was a different part of town and a major project. I got the shop manager to also take a look and get her opinion…she was as blind as me. She loved it!  The building just had such a great feel we knew we had to buy it.

However, the property needed so much work and given I had spent so much money on the rental property we had, plus I had to fund the purchase of the new property I didn’t know how we were going to do it. And then I did some research and found out the local council were running a regeneration scheme to bring these buildings – especially ours (which was in the conservation area) back into use. They had funds available to help us with the refurbishment! I told them of my plans…they gasped at my ideas (which involved my facelift of the front) and almost died when I told them I wanted a pink building with a bright pink sign in the conservation area.  However, they could tell I was passionate, and having proven to them that pale pink was a heritage colour they were won over and loved my ideas for how we would transform the building.

And so I sent Steve, a member of staff, off to the property auction armed with a signed cheque (as a well known business person I felt it best not to be seen buying the building). The bidding started quickly and soon it had gone over our top budget by £3,000. I was sat on the other end of the phone in despair – I knew I should hang up – tell Steve to leave it, to tear up the cheque – but I couldn’t – I wanted this damn ugly building!

And so just when the bidding had stopped, when it was about to be sold to the final bidder (for the third and final time), when it was now £5,000 over budget I told Steve to bid £250. Now up until that point, the bidding had been going up in £1000 increments. I could hear Steve in the auction room shouting “£250” and then I could hear the whole room pause. The auctioneer hesitated, you could hear I had confused him with my bid.  And the room went quiet. Without hesitation Steve shouted again “£250”.  The auctioneer turned to him and you could hear the whole room shift their heads to look at Steve.  The auctioneer sounded incredulous “£250?” he repeated as a question – as though, you boy – you dare to try and change my bid amounts. Again, Steve repeated his bid “£250”. The auctioneer befuddled by this chain of events accepted the bid…and it must have confused the rest of the room as with that, the building became ours!

But today I am proud to say, we have now finished the first phase of our office refurbishment – the “facelift” as I call it!