Property Summits LIVE Webinar - Nova

Property Summits LIVE Webinar

Kate Faulkner:

Good morning everybody and a very, very warm welcome to our second Property Summit. For those of you that were there at the first back in February, it was a time when you were allowed to shake hands. It was a time when you could even have a hug and a kiss rather than swerve people to make sure you are sticking to a [inaudible 00:00:21] distance. But hopefully we’re, now we’re kind of all doing this from our homes, hopefully it’ll work for starters. So really kind of looking forward to the next few hours. I tell you now, having done the one in February, you’re not going to be disappointed. So the aim of today is really to help you understand the likely impact of COVID-19 on the property market, both from an economic perspective, a government perspective. But most importantly for you, then in detail about what might happen to your project, what might happen to your investments, and if you’re looking for new opportunities, what they might be at this moment in time.

Kate Faulkner:

Just a few housekeeping things. No idea what’s going to happen. I’ve got a dog here, he may well bark at some stage. There’s a few allergies running around. So you might have people blowing their noses, et cetera, but also with YouTube, just one thing that you know there is around a 20 second delay. So I think … So just bear that in mind, particularly I’m about to do a presentation. So my words might be slightly ahead of the slides. So please, please don’t shoot us down for that.

Kate Faulkner:

So my name’s Kate Faulkner and I’m going to be hosting today. And my job really is to, first job is to introduce our superb panelists. And the first one is Nicholas Wallwork. He’s an incredibly [inaudible 00:01:44] and CEO of the world’s largest international forum, propertyforum.com and that’s a pretty good wave there, Nick, I think we need another one.

Nicholas Wallwork:

Double wave.

Kate Faulkner:

It’ll come in 20 seconds.

Nicholas Wallwork:

Double wave. Thanks for having me on. Glad to be cutting this out for everyone and sharing what is a difficult time. And hopefully, yeah, having a good chat and answering some questions later on in the seminar.

Kate Faulkner:

There we go. Next one is John Howard. We call him a seasoned investor. Obviously that just means old.

John Howard:

Thank you.

Kate Faulkner:

Because he is, I think-

John Howard:

That’s nice.

Kate Faulkner:

Industry expert, author, event speaker and an absolutely super mentor. So if that’s something you’re looking for, I have to say I don’t normally recommend people take mentoring, but John really, really knows his stuff.

Kate Faulkner:

Our next expert is Tony Gimple. And he is founder of Less Tax 4 Landlords, which good thing really can argue with that, can you? Absolutely essential to have Tony on your side now. If there is one thing you do following this summit, please go and get yourself some property tax advice. If you do not, don’t come crying to us in a year’s time when the tax changes and you haven’t had a chance to mitigate it. So incredibly important, he’s a media commentator and a superb speaker as well.

Kate Faulkner:

Next we have Paul Mahoney, and he’s founder of Nova Financial Group. He’s an expert qualified IFA and that is one of the things that I really, really love about Paul. I’ve always said people giving advice on property should become an IFA, effectively. Giving you advice of all of the different ways you can invest your money, but always with an eye on the price. If I put 50 grand in, what’s the best way for that money to deliver to me? Is it property? Is it something else? So a really, really good, he’s a landlord as well. So understands what you’re all going through at the moment, author and speaker.

Kate Faulkner:

And then last, but by no means least, and he’s [inaudible 00:03:54] one of you is going to take some really, really wise advice and words from people that genuinely know what they’re talking about, and have been in this market for some time. People, you’ve always got to be careful. Anybody can be an expert in this UK market from 2012, because all the market ever did was go upwards. Whereas what you need to do is work with people that have been in the market when it’s crashed down. Because if they survive that there’s a good chance they’ll survive into the future.

Kate Faulkner:

So that’s everybody that’s here. And moving on to the format for the next few hours. Firstly, I’m going to do you a presentation on how the economic situation and government reaction to COVID might impact on you from a property market perspective. Then I’m going to each of our panel experts. Between us we tried to think what are the three options we can ask them that would deliver some really good quality, and as I say, real advice for people that are actually doing property in the best [inaudible 00:04:52] time.

Kate Faulkner:

So first up is me and for those of you that don’t know me, I used to write all the property books for Which, and I focus my time now a lot on what influences property market, what makes it go up, what makes it go down. Right [inaudible 00:05:09] a little bit of a delay. So I will just kind of walk you through what the agenda is on this. You will be hearing huge amounts of information, and lots of forecasts, and most of that information forecast are going to be utter rubbish and they are not worth listening to. And I’m going to explain that.

Kate Faulkner:

And what I hope at the end of this presentation is it will give you some time to … Or that you’re … The tools that you need to be able to follow good forecasters, good economic [inaudible 00:00:05:46]. So you understand what’s kind of happening in your market. So I’m hoping this has now reached your screen. So, talking about general forecast for the economy, why you should ignore property market forecasts currently. And there are some which I think are quite good and worth watching. Most importantly what the government’s going to do. Most of the property market’s been very [inaudible 00:06:11] by the government over the last 12 years, whether you realize it or not. And then what this means for investors and landlords.

Kate Faulkner:

So, always get a time like this to put a love heart up. And I love this. This was on News Night and it really stuck with me because it’s a great way to think about recessions and to remember it. So basically, this comes from, there are three types of recessions. There is the L recession, where basically the economy crashes down and stays at the bottom. Pretty much what’s happened in Japan. You have the U, which is very much what we’ve seen in the last two recessions in this country. So 2007 when we had that crash, that was probably lasting from there until about 2013 and we started to … Got to the bottom and we start to move out. And the hoped for V recession, which is what people are clinging onto now in that we have a big crash, but then we recover really, really quickly.

Kate Faulkner:

So that’s the kind of forecast. The next slide is from the office of budget responsibility. So these are the guys that independently look at the work that the government is doing. And what you can see is it is not unusual for house to have crashes. And certainly if you’re investing property, which is not a quick investment unless you’re doing something like a flip, the market, the economy constantly goes up and down. And I did mention before that John has a lot of experience, so you can see his first recession started in 1908, followed by one shortly after in 19- [inaudible 00:07:51].

John Howard:

Thank you, yeah.

Kate Faulkner:

Tremendous amount of experience. So let’s run through more importantly today, there is no doubt that the economic impact is going to be massive and nothing like we’ve ever seen before. But the hope is that the recovery, because this isn’t a crash per se, COVID is a very, very different impact on the economy, and hopefully something that is relatively short term. But we don’t know that, it may recover quickly, it may turn into a new recession, but this is what most people are kind of hoping.

Kate Faulkner:

A lot of people have said because the kind of money that’s pouring in, inflation will be massive. And I just thought this is quite useful because what this does is that takes that kind of graph that I showed you before and it shows you what they expect to kind of really happen over the next couple of years, is that 2020 we’re going to really dive bomb as far as the economy is concerned, unemployment is going to go up dramatically, and of course average earnings are going to be affected enormously. But the interesting thing is that’s not expected to stay down for long, and more importantly, we’re expected to see a massive rebound in 2021 moving on to 2022. And kind of things are expected to go back to normal partly because that’s the timeframe that we’re all hoping for a vaccine to come through if it doesn’t come through faster. So for those that think that all this money pouring in is going to affect inflation, the economists out there saying that it won’t.

Kate Faulkner:

And I think the kind of really important thing to remember during these scary times is whatever happens in the economy, people still need to keep a roof over their head. This is, you’re not selling cars whereby for the next two years that’s probably going to be quite a rough job. If you think of property as a box, and you think that the fact that in the main, not everywhere, there are more people than there are homes to put them in, there is always an opportunity in property and it’s just being ahead of the curve that’s the most important thing to do. So the big impact that we will see and you will see as property investors, or may even already have seen as vital as landlords already, is the damage this unemployment will do. And we’re expected to see that peak may be up to as high as 10%, which is a lot higher than we even saw in the last recession.

Kate Faulkner:

But the fact that unemployment is going up isn’t really the most important thing. The most important thing is looking at your area and understanding who your employers are. Because we have a really weird situation this time, in that in a recession, normally everybody does badly. Some do less badly than others, and some do collapse, but if you take a look at South Hampton for example, well the city council still going, NHS is still going, university at this moment in time doesn’t have the funding, [inaudible 00:11:03] may lose some international. Viva, they’re still going. And the likes of B&Q have just opened up as well. So if you’ve got people, and this is ways to think about it to tenants, or your target audience, are likely to be working [inaudible 00:11:17] brackets.

Kate Faulkner:

They are actually going to be doing better than you would normally see them do. But on the other hand, if you’ve got properties that are near the docks and you’re letting to people who worked for P&O, Cunard, et cetera, Princess Cruises, will know that a lot of the horror stories are from the cruise ships, and therefore those areas are going to kind of really suffer and the people that kind of work there are going to have a tough time. So linking your investment to the jobs and how well they survive a recession is incredibly important.

Kate Faulkner:

Just put that, Milton Keyes because that was quite interesting. Logistics doing very well, Satander will be fine. Open University probably improved, but the likes of Volkswagen and Mercedes probably having a little bit of a tougher time. But they’re quite rounded in Milton Keynes, so they’ve got quite a good longterm employment. So it depends who’s being made unemployed. Are they renters or homeowners? And actually in a lot of cases I think you’ll find they’re renters in this moment in time, which then may well mean that the crash that it’s expected might not come to much if people own a home and they’re going to hang on to their jobs. As I mentioned, some areas will be worse hit than others and some properties won’t be affected at all.

Kate Faulkner:

And I might be being quite optimistic here, but I’m probably about to sell one of my relative’s properties. And I’ve looked around, and most people who buy on the road my relative is on are either doctors, consultants, or they are the management that actually aren’t going to get hit at all. The property that we’re looking at selling, two in the road sell every year. That’s about it. And they’re usually bought by cash buyers. So because this is such a sort of unique supply and demand situation, I’m not expecting this value. I might be wrong, but I don’t expect the value to be to drop that much if at all.

Kate Faulkner:

And then of course if people are losing their jobs, and certainly in the rental market, the government are going to have to keep people in the accommodation, potentially in the private rented sector, because there’s no social housing to put them in. And the only other place is on the streets or B&Bs, way more expensive than keeping them with you, for example.

Kate Faulkner:

So it’s unemployment, yes it might ride high, but then you’ve got to think through how that might affect people. And it’s crucial, if you want probably one of the best tenants you can have, somebody in retailing. So food retailing always does well in a recession. So a nice safe bet for somebody in that market. So what drives property prices up? Well, lending. Well lending’s fine. Unlike the subprime crash that we had before. We know our economic performance is poor, so that’s going to be a drag on prices. But then we’re in this weird situation. Some companies are taking on so many people, so many jobs and giving people wage rises, never normally happens, whereas other people are losing their job completely. So we’ve got this really weird plus and minus situation that goes on, exactly in same wages.

Kate Faulkner:

And then what will really kick in is the local supply and demand. How many people in the area buying with cash? About 30% typically, but you might be in an area where 50% people buying cash, and therefore, again, you might find that for me, I think property prices at the moment … In the past before 2005 regionally prices used to go up in the same way, or the same amount, and come down the same amount. That all changed after the credit crunch. So some areas are doing well, so areas aren’t doing well. What I think is going to happen now is the individual property price is really, really going to be impacted. And all the kind of national, regional stats are going to be fairly useless over the next few months, certainly the next six months.

Kate Faulkner:

Now rents are quite interesting because where you have somebody that’s in retail, for example, we know that the rents are capped by wage growth. All this idea that rents are extortionate, and skyrocketing, and landlords would just up their rents as much as they like. Basically that’s just simply not true. We know what this chart tells you, if take a little time to have a look at it, is basically when wage growth is higher than inflation, basically you can put up your rents. When the wage growth is lower than inflation, in other words, people earn less money [inaudible 00:15:48], you can’t, it’s very difficult to put your rents up.

Kate Faulkner:

And almost you’ve got to split this chart then into two for those people that are moving from a job onto Universal Credit, rents are long to suffer there, but for those people in retail who probably all getting a wage increase, then they may well be able to survive a rental increase this year. So again, rents just as before, we’re in this weird kind of two tier system and the impact that it’ll have overall perhaps not expected to rise at all. And it will depend if your tenant is moving onto Universal Credit is whether you can keep the rent to the level it was.

Kate Faulkner:

And this is the most important thing here, because when you’re renting, you’re renting a box. People need that roof over their head, and whereas Universal Credit hasn’t been a great tenant in the past, not their fault, very much the rules set by the government, potentially they’re one of the safest lets. You could even … John talked about last time, handling the portfolio, or buying a portfolio, or selling it on, they’re getting a hundred thousand pound a year income more. And LHA rates have increased to match [inaudible 00:17:00] and to lets.

Kate Faulkner:

And you might think, well that’s not a big thing, but if you’re in North West Kent, for example, that means potentially you can charge an extra £59 a week. Not so much if you’re in the rural, but if you go to Newbury, that’s an extra £38 a week, and it may well be that you need to have a look at … Relook at Universal Credit if it’s something that you haven’t done before. And perhaps, and again you guys will know better than I, but maybe Universal Credit for the next couple of years is now going to become the number one tenant of choice. You never know.

Kate Faulkner:

So moving onto kind of property forecasts, this is why you shouldn’t trust them. So just to kind of explain this table. Basically what you’ve got in the first column is in the north east, house prices fell from the height of 2007 to the low, which might be 2010 in one place, 2013 somewhere else. In most places, 2009 was the low of market, pretty much by 20% in the north east, and it was pretty much the same everywhere else. The next chart shows you that in the north east the average house price is £126,500, and this is the interesting bit, that is still 9% lower than it was 12 years ago. So you add inflation, if somebody invested in a property in the north east, it’s actually worth probably 35% less, not more, than it was when you bought it in 2007. And they still haven’t recovered.

Kate Faulkner:

We move, say to these midlands where I am at the moment. House prices have gone up since the last recession by about 23%, so it’s still only just in line with inflation. So again, cash buyers won’t really have made any money, and then you can see that they fell for about 18 months and it took them about six and a half years to recover. And up until the sort of January we saw price increases, but this is the first time ever we’re going into an economic recession where property market hasn’t boomed. What we don’t know is whether that will impact or reduce the impact of how much it can fall by because it wasn’t inflated in the first place. And certainly some areas as you can see, like the north east, haven’t even with covered from the previous recession.

Kate Faulkner:

The other difference is that our structure of our property market is completely different to 2007. 120% lending, which is just crazy. 6/7% interest rate, and this goes to my point earlier, loads of city center flats completely sold and over overpriced, certainly in the midland, and the north, Scotland, et cetera. We have the subprime crisis, so very little money available, and it affected the whole economy. And you can see the tenure there. Whereas you’ve got about 40% of people who are owning their properties with a mortgage.

Kate Faulkner:

Let’s move today. Well lending is restricted, but there’s still plenty of money. Mortgage rates are tiny. The majority of people are on five year fixed. So not two years, so they’re on these five year fixed in a really, really low price, or low cost living. Bar London, there’s been little over pricing. Plenty of money sitting around, and it’s affected part, not all of the economy.

Kate Faulkner:

But then it gets really interesting, because from a tenure side, look at the difference that you’ve got here. You’ve got 20% of people renting. You got a similar on the social, but now this is where it gets interesting. So all of the people that own a home, over 50% of them, own it outright. So they’re not going to be affected unless … The chances of them being [inaudible 00:20:42] probably is really low. And then the number of people that own it by mortgage. So we’re talking the people that are under threat of losing their home, which can drive prices down through repossessions, is less than half. So you’re looking at about 30% of people potentially affected. So it’s very, very different, the structure of our market.

Kate Faulkner:

And the next bit is how are people’s behavior going to change? So are renters going to be more inclined to buy post-lockdown because they didn’t enjoy being in the rental market during this period? Do homeowners, you got people who are in their mid-50s sitting there thinking, “We’ve been talking about moving for the last couple of years, we’re just going to do it now. Whatever happens market wise, we own our home outright and we’re just going to go for it. Life’s too short.” Or are they going to say, “30 grand left on the mortgage, we’re going to pay it all off so we’re safe.” And we don’t know therefore whether people are more likely to move or less likely to move page lockdown. And from an investment perspective you got to think from the buy to let investors that I talk to, who for example started court proceedings last September, they’re looking at a year before they can get their tenants out who’s been renting for free and how’s that going to impact on them?

Kate Faulkner:

So the behavior will be key. Don’t know, won’t know until the market reopens how people will react. So just run quickly through some of the forecasts, CEBR are very, very good on their economic [inaudible 00:00:22:04], but I don’t think they have in their idea of the 13% fall, I don’t really trust that. Because I just think that’s too generic, and sub-prime properties might fall at that, but it certainly won’t be all of them. I prefer Savills forecast, maybe 5 or 10%. but I actually think you’ll get some not falling, some will fall by 5 to 10%, some will fall by 13%, some will fall by a lot more, depending on that local supply and demand.

Kate Faulkner:

Knight Frank are doing some really, really good forecasts. So you can see those, they’re similar. They’re thinking there’ll be a big fall this year of about 3%, but then they’re expecting that to recover by the end of next year. So quite probably the most optimistic forecast so far. But they’re also doing a daily briefing on COVID, so worth signing up to that. And even they think rental values will rise in the Prime Central London market. Not my area of expertise, but they’re definitely the most optimistic I’ve seen so far.

Kate Faulkner:

From a rental perspective as I mentioned before, this idea that rents are skyrocketing [inaudible 00:23:10] London is hard. Actually in the rest of the country, it’s not … Rent is pretty affordable. So in theory this year there was some room for growth, but I think [inaudible 00:23:24] see many landlords put up the rent. Most of them will be just grateful, if you like, to receive that rent this year. So on the rental side, as long as people have retained their jobs, they should still be able to afford the rents that we’ve got there.

Kate Faulkner:

So the next big question, and we’re coming on to the last bit now, is what is the government going to do? And this is critical, you’ve really got to follow their thinking to understand what the opportunities are in the market moving forward. See, the thing they’ve got to keep people with a roof over your head. You know that they’ve already tried to do that already. But since 2010 homeless has risen by 165%. They have nowhere to put people who are thrown out onto the streets. So they have to keep people in the homes they’ve got already as best as possible, because there’s nowhere else for them to go.

Kate Faulkner:

So of the people that are sitting at home with a mortgage, they’ve already introduced a mortgage rate, and it’s going to be at the rate’s likely to be a lot cheaper to keep them in that house than it is to move them anywhere else. And I think they’ll do their level best to get the lenders to keep them in there. From a renter’s perspective there is some good news is there is a bit of an understanding that private landlords can’t bail out tenants ongoing, despite what some tenants are asking for. And they may have to look at matching Universal Credit to the rents that are there, or doing some sort of deal with you on an individual basis.

Kate Faulkner:

They may extend the ability to only offer three month eviction notice periods. So be aware of that. I doubt that will go in June. I expect that will be extended to September and if not beyond. And the big problem the government has got is if landlords decide to sell. Because then people are going to be made homeless because there’s nowhere else for them to go. And the one that I’ll pick up from Tony is they’re going to have to raise taxes and you are going to be on the list. So that’s why that’s really important. So just to sort of close off, we’ve got to open the market first, understand people’s behavior, better gauge supply and demand at a local level, and understand how lenders are going to react. And again, I’ll talk to Richard about that as well.

Kate Faulkner:

So, and until then we won’t know the true impact of prices and rent. It’s probably going to be the summer because we don’t quite know what this weird impact of this year performance of companies is going, how it’s going to impact. You got to watch your government changes in policy. Basically decisions based on the various forecast from rebounding to falling off a cliff, and then really the focus of today, you’ve got to work out a strategy that’s going to get you through the next two years as well as [inaudible 00:26:06]. So I hope I’ve relatively time that with a 20 second delay. Either that or you’re four slides behind, but hopefully you followed my words. And I’ll stop sharing and we will move on to first person that we’re going to ask the questions. Have I got Nicholas there? Are you there Nicholas?

Nicholas Wallwork:

Still here, Kate, yes. We’ve survived with a bit of buffering so thank you for everyone’s-

Kate Faulkner:

I’m thrilled to hear that.

Paul Mahoney:

People always talk about the property market, and there’s not really such a thing. You can’t invest in the property market. There’s no index for residential property. But yet that’s what everyone seems to talk about. You can only invest in individual properties, and they are driven by individual driving factors. So completely agree with you and John with regards to … Some areas might actually do quite well out of all of this, whereas others might do quite badly.

John Howard:

I agree, yep.

Kate Faulkner:

Nicholas said we got you back.

Nicholas Wallwork:

You’ve got me back. Sorry, I’m not sure if the whole stream went offline or if it was just me. I seem to have had a minor blip, but I’m back with you. See how long that lasts.

Kate Faulkner:

Well we just carried on chatting.

Nicholas Wallwork:

Hopefully-

Kate Faulkner:

So in case it was out there, hopefully that was reasonably useful commentary.

Nicholas Wallwork:

It may have been amongst your self, but we don’t know.

Kate Faulkner:

So, Nicholas, just … Well we have a nice time. That’s … Whether anybody was listening or not. So just to kind of, I mean you’re really into doing property development that’s on a day to day basis. So what I really wanted to ask you was what are you worried about during this lockdown period and the impact on your business? Help us out about … You’ve got the property, [inaudible 00:28:10] sets here. We tell it as it is, and I’d just be really keen to know how you’re feeling and you must have some worries and fears and what they are.

Nicholas Wallwork:

Yeah, absolutely. I think like anyone at the moment, I’m human being like everyone else and I think just because we’re up here with huge amount of experience and track record and doing these developments for many, many years, and investing for many, many years doesn’t make us real people. And I have days where I’m panic stricken, and scared witless and there are other … And thankfully that’s the one in ten days.

John Howard:

Really? [inaudible 00:28:46].

Nicholas Wallwork:

That’s not every day. So, but the nine out of ten days, I remain hugely positive. I’m looking for the opportunities, I’m doing everything I possibly can in the various areas of the business to survive, to buffer, to build cash reserves and keep cash reserves, and to keep the business going forward in a positive way. To ask the question a bit more specifically. There are two main areas to our business as developers and investors. We obviously own and operate propertyforum.com as well. That’s really an aside where we are helping other people. We’re giving out free education, there’s a chat forum, obviously. It’s the largest international chat forum in the world. So jump on there with any questions on the community and we can obviously chat to you and we’ll be online to help you with any questions that are ongoing, lots of relevant education eBooks and things like that.

Nicholas Wallwork:

But specifically on the development side of the business, which is different to the investment side. The investment side, we’ve got a couple of hundred units that we rent out, so that’s a very different sort of strategy to the development side. We’re very lucky that we’ve had two sites complete just at the beginning of lockdown and just in the week or two of lockdown, which we’ve managed to physically finished. So we’re renting those out now. Gradually, slower than normal I might add. We’ll get onto the rental market in a moment. But we’ve got one large site in Newbury, actually. I notice you mentioned Newbury there on the housing-

PART 1 OF 6 ENDS [00:30:04]

Nicholas Wallwork:

A large site in Newbury actually. I noticed you mentioned Newbury there on the housing association rents, social housing rent levels. Great town on the fringes of Reading, 20 minutes into Reading. Crossrail in Reading. We’ve got a lot of portfolio throughout the Thames Valley area and we sort of, we like that area because there’s lots of professionals, like you said, in your street where you’re looking for your mom’s house to buy, lots of doctors. We’ve got Royal Berkshire Hospital here. Where incidentally, that was the first ever recorded death of Coronavirus in the UK, which didn’t make me particularly happy at the time, I might add, in my hometown, but that’s life. Ultimately that site in Newbury, 42 studios, it’s an office to residential conversion, 10 and a half thousand square feet, 42 studios, bit of a worry.

Nicholas Wallwork:

We’re about halfway through the site. It was due… We started it in about December I think it was. And we’re literally halfway through. We’re due to finish at the end of July. Incidentally, the site only shut down fully for three weeks. Building is still considered an essential business. People are allowed to travel it to it. There was a period of panic right at the beginning, locked down, sort of one week into lock down. Everyone was panicking, everyone’s running around like headless chickens, not in the street, in their own houses. But ultimately the builders wanted to shut down, the builders merchants all shut, everyone panicked shut. And I think there’s been news that’s come out more recently that a lot of these building merchants probably didn’t need to shut. They certainly weren’t forced a shot. It was more of a knee jerk reaction of what do we do? Let’s shut it and then work it out and then reopen.

Nicholas Wallwork:

Thankfully after about three to four weeks, these builders merchants and even the high streets and building supplies, people like B&Q and Wickes and these kinds of people opened back up on either a click or collect service for the first week or two. And now, starting to see people actually go to the stores. And certainly deliveries started to happen after sort of three weeks. So that’s allowed our site to start back up. Hugely grateful for that. During that period, we’re obviously working very closely with the bank that’s funding it. We have a development loan on the site, so that’s obviously a concern, but with any development we did careful planning to start with. We built in a good buffer on the timescales. We weren’t overly optimistic as to how long it would take to build the site, so we had a buffer of, I think at least three to four months on the whole site to finish it, which is going to be eaten up by this Coronavirus. That’s a whole contingency plan towards the end of the development loan.

Nicholas Wallwork:

We’re talking to the bank. It hasn’t even been discussed yet, but I’m pretty confident that if we even needed to go past that the banks will be reasonable if they see good progress on site being made at the best possible speed, with people being safe, working at safe distances on site. There’s lots of measures that we’ve had to put in place to ensure a safe site and to ensure it runs within the bounds of the current rules as well as people’s safety. Ultimately, I’m sure the bank would be reasonable of extending that land loan, actually a development land loan. So I’m pleased to say that that site is going, it’s going at about probably 25, 30% capacity at the moment. And as materials come through quicker and as lockdown hopefully gradually eases you, that’s yet to be seen, there are plans to ease it in May as we know, that that site will gradually build up in line with the lockdown sort of going… lockdown going down, building going up.

Nicholas Wallwork:

So again, lots of health and safety measures being put in place, extra PPE put on site with people. There’s a three story building, so we’ve got lots of different trades in, but they’re on different levels. So we’re segregating them per floor. We’re kind of working up through the building with the trades following through, which happens normally in the development, but it normally happens with a lot more people and a lot more overlap, but now it’s much more segregated. It’s definitely going slower, but it’s great to see things happening. It’s great to see some materials turning up on site. It’s great to see progress happening. So we’ve been quite lucky there, touch wood, but again, I think that comes back to proper planning.

Nicholas Wallwork:

If you’re thinking of starting any development now, and there will be people doing that, people that have bought buildings that are stuck on them, they’ve maybe got them financed or they’re about to get them financed to develop, I think you’re far better off getting on developing them than having an empty building sat there that’s going to be costing your money, whether in a standard mortgage or buy-to-let mortgage or a bridge loan. I think once you’re there and the materials are available, you probably want to get it done, but you only want to get it done if you’ve got plenty of buffer to do so. You don’t want to use up all your cash going to get done. Cash is king in any market. It’s particularly important in a recession. It’s particularly important in a what I’d call a black swan event. And that’s events like 2008 stock market crash, Black Friday and Coronavirus, cash is King. Businesses go bankrupt on lack of cash.

Nicholas Wallwork:

If we run out of cash, doesn’t matter that we’ve got a 30 million pound property portfolio that’s maybe geared 40, 50% that means nothing. We can still go bust if we run out of cash. That’s critical to understand as a business or as an individual investor. If you’re investing in your own name, if you run out of cash, you’re bankrupt, your bust, your cashflow is gone. So cash is king. I can’t stress that enough. So we’re doing our best to preserve cash. Anything but absolutely emergency maintenance and upgrades and building work is carrying on. We’re not splashing the cash, we’re not putting any unnecessary works in place. We’re not doing any unnecessary upgrades. We’ve stopped our whole upgrade plan on a lot of the portfolio, and ultimately trying to preserve that cash as much as possible.

Nicholas Wallwork:

Moving quickly onto the to the rental business. I’m conscious of we’re only sort of trying to run for about 15 minutes each here, so give me a sort of five minute warning if you can Kate. Ultimately-

Kate Faulkner:

[inaudible 00:35:50].

Nicholas Wallwork:

Yeah, so the investment side of the business, rental side, again this will be prominent for everyone out there. Anyone that’s got one property/perties, it’s the same for all of us. It’s about renting those units. And I think what we’re trying to do, and with roughly 200 units to rent, and that’s a blend of studios, micro studios, flats and HMO rooms, we’ve got a reasonable chunk of our portfolio is HMO rooms, it’s about… you’ve got to reduce your rents. We reduced our rents this week and yesterday, the day after we reduced our rents by about 25%, we rented four studios. The studios were sticking because they were slightly higher price point than, say, HMO rooms. So we went from I think 14 voids last month to 20 this month, which wasn’t that bad actually, it’s only and an additional six voids.

Nicholas Wallwork:

And we have a two month rolling notice period on all our contracts. So actually the voids that we’ve got now are from people that handed their notice in before lockdown. Next month we’ve only got, I think three voids coming available. So we’re seeing a sort of a delay in people that are vacating now from previous notices. It’s not new notices we’re receiving. People are actually staying put. So I think next month we’ll see less voids. As I say, we rented four studios yesterday. Hopefully all of those guys conclude that that requirement and we will continue to fill units. So people are out there wanting to move. I would say there’s probably 20% the demand that we’re seeing across the professional sector in the Thames Valley from tenants and I think the key is to be the best landlord you can be, the best advertiser of rooms, the best facilitator of viewings to make sure that you’re the person getting that 2020 5% demand, not other landlords. And I think that’s key.

Nicholas Wallwork:

Someone that’s watching these live streams and taking the time to educate themselves and work on their knowledge and work hard on their portfolio, not burying their head in the sand, those are the people that will get that demand from the professional sector that are still having to move for whatever reason. Maybe those are people that handed their notice in two months ago on someone else’s unit and need to move.

Kate Faulkner:

Nicholas, are you having any problems with tenants not paying their rent? We’ve seen a lot in the papers about that.

Nicholas Wallwork:

We are. Ultimately, what we’re seeing there is what percentage, I’m trying to remember the percentage off the top of my head, but it’s much less than we feared actually. We’ve probably got across those sort of 200 units, probably five to six people that have not paid or paid partially. And out of all of those, I think there’s only one or two that haven’t paid at all. And we’re working with all of them. They’re all saying, look, we acknowledge we need to pay our rents. We acknowledge that we’re going to go onto a payment plan. If they end up physically not being able to pay, we’re going to have to work with them for a long time. If they potentially file for their own bankruptcy personally, I’m not sure what you call that, or have a [inaudible 00:38:55] or whatever you call it on a personal level, that’ll be lost rent to us. That will be something that you may have to swallow with a number of tenants if they’re not physically able to pay.

Nicholas Wallwork:

But I think the reason we’ve had such a good success rate, and the advice I’d like to give people is to communicate with your tenants. It’s absolutely critical to communicate with them early on. Don’t be afraid that that communication is going to spur, oh actually, do I have to pay my rent? Not at all. That communication is, if you’re likely to struggle with your rent, here’s all the available help available to you from the government. Here’s all the benefits you can get. Here’s if you’re a business, here’s all the grants and loans you can get. And giving, making that information freely available to people. Making also very clear that the rent is due. This isn’t a landlord concession. The concessions that are out there are from the government level and that will filter down.

Nicholas Wallwork:

Also, when you are a larger investor with a portfolio such as ours, we’ve got quite a high proportion of our rent is cashflow. Our mortgages might be 30% of the income. So actually a mortgage holiday break, it doesn’t mean everyone gets a rent-free break from the back of that. And then people are aware of that. We still got to cover all our bills as well. And ultimately the mortgages have to be repaid back. So, we can work with people on a temporary basis and we may be maybe forced to do that. But ultimately, it’s less people than we feared and we’re working very closely with those people, being on it, communicating with them on… I’m physically calling tenants after my lettings manager and my bookkeeper, and those are the two key members of my team that chase rents normally and communicate to tenants. And us as management we will draft those letters that go out to tenants.

Nicholas Wallwork:

Then I physically will call people as the landlord to say, look, how are you going? I understand my team’s been in touch. You’re having issues. What help do you need? When do you expect to be paid? When you expect to get another job? If they’ve been laid off. What’s the situation? We’ll work with you, but keep communicating with us so we understand that situation and we can work together to find a solution ultimately. One key bit of advice for anyone renting is will be to ask for evidence from the person stating they want a rent reduction or a rent free period or whatever. Ask for evidence. And we’ve created a little form, a set of questions to ask for evidence of that, whether it’s a letter from the employer, an email from the employer, whether it’s a bank statement or some form of evidence that they are suffering due to Coronavirus. And then we can take that application for a rent reduction or a rent payment holiday of some description seriously. So that’s a really important point. That will weed out the people that are just trying it on.

Kate Faulkner:

What if they refuse?

Nicholas Wallwork:

What if they refuse? Well, then you’re stuck, aren’t you? I mean, if you… There ultimately is nothing you can do. I think-

Kate Faulkner:

I know some people refuse to give anything at all. I know there was an investment banker that was claiming they were in trouble financially and then refused to hand over any cash, they looked like they were just after a three month break.

Nicholas Wallwork:

Yeah, I think there are going to be one or two like that, but we’ve got to hope that most people are decent people. We’re lucky enough to rent to professionals and usually they are, being a professional, they communicate well in business. They usually have a reasonable job. In our sector we picked those people and vetted them for a reason. So hopefully they will be communicative. And you know what, out of 200 people, there’s a good chance in the next couple of months we’ll get one or two people like that, that just switch off the phone, they don’t answer our calls, they ignore emails. What we do incidentally then is we will knock on their door in the nicest possible way, not with a baseball bat, but with a friendly knock and a conversation. We don’t just sit back and let them ignore emails and phone calls.

Nicholas Wallwork:

Within a few days, if we’ve had no response, we’ll knock on their door and say, “What’s going on? You haven’t got back to us. We need a conversation because we’ve got liabilities that we need to cover. It’s not fair that you don’t communicate.” So we really do make sure we are there. Not in any aggressive way. Don’t get me wrong, I’m… It’s a funny joke, we’re not bailiffs knocking on the door. Certainly in difficult times, absolutely not. But if people don’t communicate, we get less flexible. That’s the bottom line. We get less flexible and we will knock on the door and find out why you’re not communicating. And I think, if someone’s had a knock on the door on a conversation, it’s a case then of, right, we’ll open up and communicate at the very least.

Kate Faulkner:

Okay. That’s brilliant. Thanks Nicholas. And what we’re going to do after this. I’m going to go to each of our panelists, have a chat like we’ve had with Nicholas now and then it’s, I know we’ve got quite a lot of questions from people sending in, which is great, but the job then is just to hear from these guys first and then afterwards get them question Victor. So we’re going to move on to John.

John Howard:

Yes.

Kate Faulkner:

My first question is… And I’m slightly rude, I apologize about the 1908 recession.

John Howard:

I’ve forgiven you already for that one, Kate.

Kate Faulkner:

Oh, actually you are such a gentleman. But you have been through quite a few recessions.

John Howard:

Yes.

Kate Faulkner:

Do you think COVID is going to be very different type of recession or is it like, Kate, I’ve been through them all and whatever’s causing the recession, you still get the same results. What are your thoughts?

John Howard:

I have to say, Kate, my thinking at the moment is, I mean this is unique because literally the market’s been closed down or it will be closed down probably for 12 weeks. And this has never, ever happened in the whole history of property basically. So we are on totally uncharted waters. My only concern is that it started in a very different way, but the outcome could be the same as the last three property recessions I’ve been in. And that’s what concerns me. I do think though, Kate, that it’s really… There’s two different markets. I think there’s the domestic market, which I think the figures that Southall and Knight Frank have been throwing around that’s probably on average maybe about right. And I don’t think that’s going to hurt anyone too much.

John Howard:

The whole market for me, the property market for me is always driven by employment. Because even if you haven’t lost your job, who’s [inaudible 00:45:18] and this bunch are very cautious. And even if they haven’t lost their job, they are concerned about one losing their job or just concerned about the environment because people have lost their jobs and some people don’t like to be seen to buying a bigger house while everyone else is struggling. But actually of course, if you’re in the market, it makes no damn difference whatsoever because you get 20 grand less for your house. And of course if you’re buying a bigger house, you get a bigger discount. So actually it makes no difference. It never does make a difference to anyone if you’re already in a property. And even if, like Paul says with a buy to let market, actually, if you’re buying to rent for the next 20 to 25 years, yeah the market goes down a bit, so what, it comes back, it goes over and above.

John Howard:

And the great thing about being with buy-to-lets of course, if the mortgage is over 20, 25 years, there’s nothing the banks can do about it as long as you’re paying. Now that’s very different to the sort of borrowings I’ve got, and other people like me have got, who if you’re borrowing 60% from the bank, the bank then revaluate because the market, they then say, well, the property has gone down in value, so we now lend you 70%, which was against the banking covenants and we’re not happy with that, so we want you to put the extra cash in to bring it down to 60% again or personal guarantee or both. And that’s what happens. So don’t let anyone, please, think that these banks are just going to let you get away with it by not paying your mortgage for a while and all the rest of it, they won’t.

John Howard:

These banks are businesses, Kate, and they will have to, because they’ve got shareholders and other people, they have to look after themselves and they will do so. And they may not do so the first three months of a problem, but within six or nine months they’ll be getting their act together and they will be doing what they have to do or what they meant to do. So don’t let anyone think they’re all nice and cuddly and kind, they’re not, it’s a business and they will run it like any other body would run their businesses. Like you would, like I would. If someone hasn’t paid for or can’t pay or the situation’s changed, we all need to react to do something about it for our own steaks.

Kate Faulkner:

Yeah. And have you got projects on there at the moment that are impacted or ones-

John Howard:

Yeah. Yes, I have Kate, thanks for reminding me that. That’s very kind of you. So the start of the year, we had about 40 million pounds worth of property on the market to sell. We’ve now got at the start of the COVID, we have 35 million. We sold 5 million the last few months. I can now report, I’m likely to report it to my shareholders here, Kate, I can now report that we’ve sold about one and a half million pounds worth during the recession… recession, during the COVID, where people have exchanged completed same day. Now isn’t it amazing, Kate, that these solicitors have been saying forever, ever since I’ve ever known solicitors, well, we can’t exchange complete same day. No, no. We need a week in between time to get the paperwork done and the money in. Well, well, well isn’t it strange they can now do it on the same day. Happy days for everyone. So we’ve got a-

Kate Faulkner:

Basically it’s because they were having less distraction.

John Howard:

Funny that, yeah, suddenly when they need the money in themselves, they’re a bit more efficient. Funnily enough.

Kate Faulkner:

Yeah.

John Howard:

So that’s one. There’s very much a two tier market. So the other side of the market. The domestic market, I think will just about be all right. We’ll muddle through. But the other side concerns me greatly, people with bridging. And I know obviously we’ve got Richard on a later, crowd funding, and he’s a great man. He’s a decent man and he will do his best to help anyone who’s got loans out with them. I know that. But at the end of the day, we’ve got peer to peer lending. We’ve got bridging. The bridging really worries me because they are ruthless, bridging companies. And they won’t take any… they won’t give you an interest holiday or anything else. If your property is worth less in certain cases, of course the property, if you haven’t been able to refurbish it during this period of time and your loan runs out with a bridger, guess what’s going to happen.

Kate Faulkner:

Yeah, yeah.

John Howard:

They are going to charge you even more interest going forward because they’ve got an opportunity to earn more money, or they’re just going to take it off you and sell it. End of.

Kate Faulkner:

Have you got… And yeah, no. That’s really, really important to understand. And have you got sort of, when you knew that this was kind of coming, you knew we were heading back into a recession and the [inaudible 00:50:00] do you kind of sit down with everybody and go, right, we’ve got to do these three things, these five things? What are your kind of top three things that you do when [crosstalk 00:50:09]-

John Howard:

Okay, well, what I would say… What I would say is that we’re all in the same type of situation here. Unless you’ve got a lot of tenancy, you’ve got the income coming in over 20 years. If you’re not in that situation, then there’s three things or three or four things to remember. One is to never bury your head in the sand. I mean so many people, you’ll be amazed, do still. Please don’t do that. Stand up to the situation and deal with it. That’s what captains do. Yeah, they don’t hide. The second thing is you need to talk to your bank. If you can negotiate… Like Nicholas said earlier, cash is king. If you can do that, try and reserve as much cash as you can because you may need it. You don’t know. We don’t know when what’s going to happen, Kate.

John Howard:

We all think, we’ve all got an opinion. And I think, but we don’t actually know. No one does. And we just don’t know. The other thing is, what I would always say is no one can take away your ability. They can repossess a property off you, but they cannot take away your ability. And you’ve got the ability. If you’ve done it once and you have a problem, you’ve got the ability to do it again without question. You have to believe in yourself and be strong. And the other thing is, it’s all right bleating on about problems and the market and so on. Actually the properties I’ve got now, I’m not disinterested in them, Kate, because I’ve got loans on them. Luckily for me, a lot of the loans I’ve got at the moment are with the government, so that’s not so bad, won’t be so much of a problem. And I do need to keep selling those properties and deal with it, but I’m more interested in the future.

John Howard:

I’m always more interested in the future. And you always need to make sure you’ve got some money from somewhere to deal, because the future is what it’s about. Because you’ve bought what you bought, but actually with the future you can buy at the right prices now, probably, going forward and make more money. I’ve made more money coming out of a property recession than I have at any time in my career, by miles. So that’s so, so important, to make sure somehow you’ve got some funds because there’s lots of people who won’t have, so the market will be depressed. Auctions are the first thing to look at for that. It’s a great barometer because what happens in auctions happens on the overall, in the open market, slower.

John Howard:

So the auction market price will reduce quicker and they’ll go back up again. You’ll have a barometer. So you’ll tell what’s happening via the auctions.

Kate Faulkner:

John, have you got, just to jump in, have you got any opportunities? That’s what everybody wants to know. What do you see as the big opportunity? I mentioned universal credit or whatever, again, you’re still the expert here not me, but what do you think are the safe bets or big opportunities?

John Howard:

Well, I’m looking, Kate, to be fleet of foot. I’m not looking to be starting big developments that I don’t know what their value of them is in two or three years time. I’m looking at properties that are part finished. I’m looking at residential portfolios that I can get in, I can break them up very quickly, and sell. Now, should I be doing that? Because as the saying goes, never catch a falling knife. You’ve got to wait til it bounces off the floor. But if you are going to play in this market, and I see a bit like a frozen lake for me, and a frozen lake, the further you go into the lake, the thinner the ice and the more risk there is, so you’ve got to be careful. In this type of market you don’t need to take big risks because the margins will be there on pretty basic, basic, basic property.

John Howard:

The other thing I’m doing, which is very exciting for me, I’ve got together with a former hedge fund guy who owned part of a hedge fund, which is always a good… for me it’s always a good sign if you’re getting involved with these guys, and we’ve formed… we’re doing a property fund. We were offering a five year bond, FCA regulation and all the rest of it, for high net worth individuals. The idea with that, the funds were going to raise for that is to lend to other investors and developers who may be have difficulty, but also use the money to buy, hopefully, residential portfolios and that type of thing across the UK going forward.

Kate Faulkner:

And you still see sort of resi side as the opportunity and I’m guessing that’s because you can buy, potentially, some good deals now, and then sort of ride the wave as it goes up.

John Howard:

Yeah, I’m not very interested in… I’m not interested in doing very, very detailed development because I just think, as I said, that it’s too long winded for the moment, I want to be fleet of foot, I want to know I can get out of whatever I’m buying within six months in case the market does drop further. So I think the key is to be… don’t get sucked into anything mid-term. If it’s long-term on a buy-to-let, I wouldn’t worry too much. But it’s the mid-term, it’s the year to three years that concern me. And of course don’t forget, banks aren’t going to be as generous. If they lent you 70%, they’re likely now to lend you 60 or less, so you’ve got to bear that in mind. And that will have a detrimental effect on the property market. And when I say the property market, I mean the investment developing market, whatever you’d like to call it, not the domestic market.

Kate Faulkner:

And on, you mentioned auctions a good place to go, totally agree with you, have you got a kind of best source? Because I think a lot of auctions companies that weren’t keen to go online have rapidly moved online. So auctions are still so many people can access, do you have a best source for that?

John Howard:

Well, I do. I have cheated a bit because of course we own Auction House UK. We have 42 franchises across the UK, so I do know a few of those auctioneers so I’ve probably got a bit of a head start on one or two. But the trick to that at the moment is probably, I only tend to look at the properties that are not sold. I don’t rush around looking at everything. All I want to know is what hasn’t sold in the auction and then I’ll look at those and work that market rather than running around trying to bid against everyone else. I wait to see what hasn’t sold.

Kate Faulkner:

Yeah, brilliant advice. And you can go onto the auction UK house, I guess to go and have a look to see what’s coming up now.

John Howard:

Absolutely. Or you could, of course, buy my new book on auctions. That would help. [inaudible 00:00:57:00].

Kate Faulkner:

Where’s that available, John? You’re not on the BBC so you can plug it if you like.

John Howard:

Obviously it’s available on Amazon and also from my website. Yep.

Kate Faulkner:

There we go. Fantastic. Thanks John. That was actually superb.

John Howard:

Pleasure.

Kate Faulkner:

So moving on to Tony, and like I said before, I cannot stress enough, do not, do not go into this recession not having somebody like Tony by your side. Property tax person, an expert you were going to need him and you’ll be very, very grateful for me saying that if you haven’t got somebody already over this coming year. So Tony, what’s your… I had a chat with John about his, what’s the first three things that kind of he does at a time like this. From a tax perspective, what do you think? What are the three first things that people should be doing following this summit from your perspective and experience in the past?

Tony Gimple:

Well, it’s [inaudible 00:57:53] the tax, so whack the plan and dog for a start. You have to make a profit before you pay tax. Make sure that you’re talking to the right specialists who understand that property taxes are not like ordinary commercial taxes. The whole bunch of that market has been heavily targeted by government quite unfairly and everything. Normal cases it assumes that we’re all [inaudible 00:58:22] who don’t do any work and just sit back and enjoy the proceeds of other people’s misery.

Kate Faulkner:

If only.

Tony Gimple:

If only. I mean, they couldn’t be more wrong if they tried. Virtually every landlord I know provides good quality, fit for purpose accommodation. They develop well, they really are interested in their tenants and have to deal with a whole range across all of the social classes, from people coming out of rehab to those who are in reduced circumstances to those who make positive decisions to rent. And not landlords are villains and not all tenants all rent dodgers.

Kate Faulkner:

Yeah. I think the bit that always surprises me that I think nobody really talks about is the fact that a million households in the private rented sector are on benefits. And that’s because they are also sitting on council waiting lists, waiting for a social home because they’re eligible for one. And I don’t quite know how, but it’s a clever bit of PR. Somehow that’s all landlord’s fault as opposed to government’s fault, successive government fault, let’s face it, going back to the nineties, for not building enough social homes that they should be providing. And yet it’s the landlords that are looking after them. And like you say, most doing it really well.

Tony Gimple:

Yep. The one, if you like, silver lining to this COVID cloud…

PART 2 OF 6 ENDS [01:00:04]

Tony Gimple:

The one silver lining to this COVID cloud is it will start to change values, how society interacts with each other. I’ll come onto the state protection racket doing its job at the moment, effectively subsidizing people, keeping the economy going, we’ll all have to pay for that at some point, but that’s why you have a protection racket. Pay in when it’s sunny, and hopefully umbrella stays there when it’s raining, unlike bank supports, who have a completely opposite view of things.

Tony Gimple:

What will come out of this, and it’s a combination I think, of a Brexit bounce and a COVID bounce, people will want to see UK PLC start doing the right things. A change in the social contract, almost immediately where we had after the second world war, the rations started to ease and it was in everybody’s interest to rebuild the economy. Whilst property prices in themselves may not rise, and I’ve always said income is the thing that is important, yield, not a sentiment based stock.

Tony Gimple:

Whilst we start coming out the end other this we will be a in much stronger position as a society, as an economy. And going back to the several predictions you went through earlier, well every time I look in the crystal ball I get a somewhat distorted image. There probably hasn’t been a single prediction from the CBI, The Federation of Small Business, Bank of England, any of the major institutions which have proved right.

Tony Gimple:

It’s always doom and gloom, the truth of the matter is people don’t give a stuff, they just get on with their daily lives, and paying tax happens to be one of them.

Kate Faulkner:

That couldn’t be more true. And do you think, with your wider industry hat on, do you think we’re going to see a lot of agents, a lot of landlords going bust? What do you think is going to happen to the real property industry itself? And the more, not maybe landlords that have got one property, but not portfolio led landlords?

Tony Gimple:

Okay, it depends how highly geared they are. If you look at the less tax for landlord client community, on average it’s about 50% geared.

Kate Faulkner:

Okay, that’s interesting.

Tony Gimple:

And that’s pretty damn good.

Kate Faulkner:

Is that why you’re looking relatively relaxed today?

Tony Gimple:

Well … There’s a whole load of answers to happening, but not for this session. [inaudible 01:03:06].

Kate Faulkner:

Give me one then?

Tony Gimple:

Yeah, you might say that I couldn’t possibly comment goes the phrase. As long as you’re not overly geared, as long as you’re talking to your tenants, they’re talking to you. And you’re having an open, honest conversation, and realizing generally everybody around the world is in the same boat. This isn’t a manmade Chinese Coronavirus conspiracy theory from one side. We’re all dealing with the same problems, and we’re all dealing with the same opportunities.

Tony Gimple:

So back to the core of your question, the true zombie businesses will go under. Those who didn’t have proper plans, didn’t have proper finance, literally surviving on one days income to the next, they will go under. And there will be consolidation.

Kate Faulkner:

Yeah, no, that’s fair enough. I guess the final question for you is, this is costing the government a lot of money, somebody is going to have to pay for it. How do you think the government are going to get the money back? Or, do you think they’re going to be … I know one of the things I read, or have been hearing about was if the UK was borrowing a ton of money when nobody else was, it was a problem, but the fact we’re all borrowing money, it’s fine, we won’t have to worry about it. But I don’t know the truth behind that, and I’d be really interested, and I think everybody else would be, into your insight on how you think the government’s going to tax this?

Tony Gimple:

Okay. Landlords on the one hand are an easy target, going back to the beginning of this segment. On the other hand, we’re a vibrant, powerful community, and so much so that it’s a helping hand to pull us together in a really strong vice, and a good vice at Westminster. John’s politically active, I’m politically active. And regardless on which side the divide one is, taxes will rise overall, but what government has to do it start treating the private rental sector as it would any other business.

Kate Faulkner:

Yeah, it’s stopped doing that hasn’t it really?

Tony Gimple:

It’s never really treated it as a business. We’ve still got the 18th, 19th century [inaudible 01:05:38] when it comes to landlords. The market’s moved on, life has moved on. So the entire world is in exactly the same position. And the way things are at the moment, yes, taxes will rise across the board, the coffer’s going to have to be replenished. Will that be a quick process? No. Will landlords in the short-term think they’re being unfairly targeted? Well clearly, yes, everyone needs a hobby.

Tony Gimple:

Overall, as long as we keep talking to our tenants, as long as we keep talking to our MPs, as long as we keep voicing legitimate opinions we’ll survive. Meanwhile don’t over borrow, keep your loans and values as low as you can. Take the leaf out of John’s book, out of Nick’s book, Paul’s book, when you want to do a development, make sure you’ve already got it sold, make sure if you want to rent it you’ve already got a tenent in mind, otherwise why are you doing it? It is opportunity. And those people who act with conscience now will get a dividend later.

Kate Faulkner:

Brilliant. Okay, thanks Tony.

Tony Gimple:

Pleasure.

Kate Faulkner:

Moving onto Paul Mahoney. Paul, this is going to be one of the best questions to ask you. How do you safely invest in buy to let? Is there such a thing as safely investing, in this crazy economic climate when we have no idea what’s going to happen

Paul Mahoney:

Yeah, look, I think there is, and John, for example, often calls my approach to property investment quite boring, but boring is safe, boring stops you from going bankrupt.

Tony Gimple:

You’re not the only one Paul, don’t worry.

Paul Mahoney:

Most people aren’t suited to taking an awful lot of risk. And I would say that’s the vast majority of landlords. The vast majority of landlords want to better utilize their spare resources, they want to improve their financial position, but they have a job or a profession that they work in nine to five, Monday to Friday, and they’re not looking to risk their life savings, they want to invest it safely and get a half decent return.

Paul Mahoney:

So for that type of person, in my view., the best approach to invest safely is I suppose somewhat against conventional thinking. I wouldn’t necessarily say keep the loan to values as low as you can. A honest debate is always good between the panelists, and I don’t necessarily agree with Tony just said, about trying to keep your loans value low. Because I think so long as the property you’re investing in gives you a sufficient yield buffer over and above the cost of your mortgage it doesn’t matter how high your loan to value is. Because so long as you’re servicing your mortgage, that’s the most important thing.

Paul Mahoney:

So what you want to be working out is what’s your monthly and yearly outgoings for the cost of your mortgage? And if the rent that you’re very confident in being able to achieve is more than sufficient to sustain that, actually, although having debt does mean you incur slightly more risk, it also enables you to better utilize your money.

Paul Mahoney:

So when we’re talking about risks, it’s not just about the risks of losing money with your investments. There’s also another very big risk in that you don’t achieve your goals.

Nicholas Wallwork:

There are calls from the audience there Kate, to get the dog on camera, so well done.

Kate Faulkner:

I have a dog, he’s quite a needy dog, and he just wanted a kiss, he’s off now.

Nicholas Wallwork:

He’s beautiful.

Kate Faulkner:

Sorry about that. What can you do?

Nicholas Wallwork:

Can you ask the dog a question?

Paul Mahoney:

Woof.

Kate Faulkner:

Yeah, what do you want to ask him?

Paul Mahoney:

Or do you want to vote?

Nicholas Wallwork:

What’s his favorite lunch?

Kate Faulkner:

what’s his favorite lunch, now there’s a good question. Well he likes a cocktail sausage.

Tony Gimple:

Oh, very nice.

Kate Faulkner:

Get out a cocktail sausage and he’ll do pretty much anything you ask him to, actually. Apart from go downstairs and leave me alone.

Nicholas Wallwork:

Brilliant. Where were we? Keep the questions coming in guys.

Paul Mahoney:

Yeah, investing in buy to let safely.

Nicholas Wallwork:

Keep the questions coming in guys. Keep them coming in please on the chat. Sorry to interrupt Paul, bit of a delay.

Paul Mahoney:

That’s all right.

Nicholas Wallwork:

Everyone who’s watching, keep the questions coming in, we’ve got a big Q&A session at the end, please keep them coming in, please, please. Over to you Paul.

Paul Mahoney:

No worries. So if I was investing safely in buy to let, if you are investing in properties in locations where there is significant want or need to live there, and the key drivers of that is employment, a broad range of industries providing that employment, so you’ve got diversity of the provision of that employment, facilities, amenities and infrastructure, we’re ticking as many of the boxes as we can for what tenants and potential future buyers want and need, then we can be confident in doing well regardless of the economic cycle.

Paul Mahoney:

Because as you quite rightly said before Kate, in a recession people don’t just disappear, they are still there, and the predominant place they’re going to be is where there’s still jobs.

Kate Faulkner:

Yeah, I think Paul that’s one of the things I loved when we were working together, and taking the videos and creating the e-books that we did, is it’s very rare I meet somebody that has a like mind that goes through, it’s yes, we’ve gone through the national economy today, but that local economy, understanding those jobs.

Paul Mahoney:

I agree.

Kate Faulkner:

They’re there, it’s just, it really is. People always say to me, this is why it’s lovely because I can now pass them onto you, where should I invest? And what should I invest in? And actually it really is down to a financial advisor really to help you with that because it’s about if you’ve got 50,000 what’s going to give me the best return for what I need, according to my risk.

Kate Faulkner:

I think when you look at the risk for buy to let I think you think it through a lot more than properly gurus think about it.

Paul Mahoney:

Definitely, definitely. And look, a good example Katie, is you went through some figures in your presentation about the north west, as an example. The north west as a whole. The whole region hasn’t actually performed that well since the last financial crisis. As you mentioned, I think it was only 8% above the previous peak.

Kate Faulkner:

No, below. It was below.

Paul Mahoney:

It was below? Okay.

Kate Faulkner:

It still hasn’t recovered from the previous peak, as a region.

Paul Mahoney:

There you go. Now, that would be driven by the greater areas of the north west. There’s a huge difference between the likes of central Manchester and a much smaller city or town. Because central Manchester has performed fantastically well over that timeframe, versus your smaller cities and towns that haven’t really had much inward investment or inward population. Haven’t really had many people leaving or population … Or employment leaving either. It’s kind of just maintained the status quo, and that’s why prices hasn’t moved in a positive direction.

Paul Mahoney:

So yeah, going back to what we were discussing before, so far as those micro climates, what we try to aim for is driving factors and fundamentals that are somewhat exterior to the market. I’ll give you another example, I’ve just bought a few properties myself and our clients have bought a few hundred, in an area in central Birmingham called Digbeth, so it’s south east central Birmingham. It’s the under loved area of central Birmingham, a bit boho. It’s a bit like Shoreditch 10 years ago.

Paul Mahoney:

The main reason for that is it’s been cut off to the rest of the city by a big market called Smithfield market. So you pretty much had other walk around that to get to any the place in gt city. That’s now been knocked down. It’s been bought by Lendlease, and it’s being redeveloped, it’s a £1.5 billion redevelopment, mixed use, resi, commercial, retail. So that’s opened up that whole area of the city.

Paul Mahoney:

On the other side, about another 500 meters the other direction you’ve got Curzon Street Station, which is the high speed rail station. And then you’ve also got the commonwealth games in 2022. So that’s just three factors that in my view you have billions of pounds being spent on a small under loved area that’s about 20 or 30% cheaper than the rest of Birmingham central.

Paul Mahoney:

There’s no logical argument to say that that area won’t do well, regardless of the direction to market. And that’s usually what we tend to look for, to create safety and confidence.

Kate Faulkner:

No, I think that’s right. As a girl that was born in Dudley, I know Digbeth quite well. And how are the lenders reacting? How easy is it to get a mortgage? So if I came to you today and said, “I want other get into buy to let, I think it’s the right time, I feel comfortable, help me out.” How are the lenders going to treat us?

Paul Mahoney:

So right at this very point in time, due to the lockdown it is slightly more difficult to progress mortgages at the higher loan to values. The main reason we are being given for that is that they are essentially under resourced and they can’t do valuations.

Paul Mahoney:

So most lenders are being inundated with inquiries about mortgage holidays, valuations aren’t able to be … Really they could be done, but they’re not doing them. And therefore they’re not progressing mortgages really over the 60% loan to value range, it seems at the moment. Some lenders are, but lots have stopped progressing them. For example, I have a mortgage going through for myself with a firm in Liverpool, 75% loan to value, it’s at the valuation stage and it’s just been paused.

Kate Faulkner:

Right.

Paul Mahoney:

Until that valuation is able to be done. That’s pretty much the case with all of our clients as well, current applications that were in have been put on pause. So aside from that, what I need to clarify there is we’re getting a lot of questions about lenders withdrawing from the market and pulling back and not being interested in offering higher loans to values. That’s certainly not the feedback that we’re receiving, that lenders are withdrawing or aren’t interest education in lending anymore. It’s just the restrictions the lockdown is causing that has stopped them being able to progress them.

Kate Faulkner:

Yeah, and do you have any sense of when the market’s going to open up at all? There’s a question.

Paul Mahoney:

Well, look, I think it’s all going to be dependent on this lockdown and how it’s released. It seems now that it will be in stages, and that will be based upon how essential certain things are. I would certainly say that property transactions are very essential.

Paul Mahoney:

I read a report a couple of days ago from Home Trap, which I think is a great source for property analytics, and they were saying there’s currently 380,000 property transactions on hold, which amounts to £82 billion of property value, which is crazy.

Paul Mahoney:

Therefore plenty of pent up demand in the market, which again kind of ties into some of what you were saying, is that transactions are very much slow. Interestingly because most of our clients buy new build or off plan properties we still have a lot of clients transacting at the moment. They’re pretty much the only properties you can buy at the moment, because the process is much more straightforward, whereas with second hand properties the process takes six months, so everything’s much more difficult to progress there when you have chains and things. But new build and off plan is an easy process, you can do that in six to eight weeks.

Kate Faulkner:

And the banks are opening up now aren’t they? So is it Vistry? The Taylor Wimpey, I think they’re going back to work?

Nicholas Wallwork:

Yeah, they are.

Paul Mahoney:

Some haven’t shut. We’ve got quite a few developments that have just kept on working, whereas others have shut down. But yeah, it seems that a lot of them that have shut down are now returning because they can.

Kate Faulkner:

Yeah, my thought process is if the new build market is opening up, the only way they can survive ongoing is if you open up the second hand market. It has to be put … So, say for example, somebody’s sitting at home and they’re either a seasoned investor or they’re somebody that’s looking new to this, what are the first three things? Is the first thing just to call you?

Paul Mahoney:

Well that would be very self serving wouldn’t it Kate.

Kate Faulkner:

Ignore more, Paul, please.

Paul Mahoney:

Well look, obviously we’re happy to help in that regard, but I think that main thing, taking from some of what Nick said before, making sure your property is rented is absolutely important. If you have to drop your rent to do that then do it and do it quickly. Preempt thee things. I’m quite proud of myself in my business in how quickly we reacted to this and got things changed and done, brought down our business costs substantially really quickly. And I think everybody should be looking to do that if they haven’t already, just to put themselves ina stronger position.

Paul Mahoney:

As Nick said as well, cash is king, make sure your properties are rented, don’t be stubborn about the rent you think you should get. Because if you can get the rent just to cover your mortgage then, again, you’re safe. If you need to then apply for mortgage holidays. Some of the other guys have said as well, communication is key. So communicating both with your tenants and your lender, don’t just stop paying your lender, that will get you in trouble. You need to communication, you need to get approval for anything that you want to do.

Paul Mahoney:

And likewise with your tenants, if you’re being proactive and they feel like they’re being treated well they’re far more likely to treat you well and to communicate with you so that you know what’s happening as well.

Kate Faulkner:

If you’re new to this, what is the homework people should be doing before they maybe pick up the phone so that you can have quite a good, useful conversation from day one? [inaudible 01:20:19]

Paul Mahoney:

Well I think if you’re new to this, something that maybe might be a bit surprising and I’m often surprised about it is how little people often know about their own financial position. And it’s one of the first things that we do with clients when we meet with them, is do a full review of their current personal investment assets and debts, and just get an understanding of their net position.

Paul Mahoney:

But then also the goals they’re working toward and the timeframes they want to achieve them in. That’s often a bit of an eyeopener so far as how active someone might need to be in such a short period of time. Because I certainly find that most people aren’t on track to achieve their financial goals, and therefore perhaps haven’t been as motivated to make positive change as they should be.

Paul Mahoney:

So I think that’s something that anybody can do themselves. You can sit down and write it on the back of an envelope or on a spreadsheet or however you want to do it, but at least understanding your current situation is something that’s really important.

Kate Faulkner:

Yeah, that’s understanding what you’re spending, what money’s coming in, what your spending is, what assets you have, so what value you have, what properties, that kind of thing.

Paul Mahoney:

Yeah, absolutely.

Kate Faulkner:

And do you also … The thing that I always found quite funny with people when I used to do one to one consultations at shows, they’d come to me with a deal, and they’d go, “Is this a good deal?” And I’d go, “Well I don’t know, because I don’t know what your objectives are.” I actually found is quite hard to draw that out of people, I’m guessing that’s something that people really need … I don’t know if you can explain how somebody can understand what their objectives are? Because I think that’s quite hard for people to explain.

Paul Mahoney:

Yeah, I agree, and I think part of that is driven by just the general thinking when it comes to property, because it tends other be much more about the deal and the type of property, probably the most common one people bring to us is, “We want to invest in HMOs.” And my first question is, “Why? What are you actually trying to achieve?” And it’s probably because they’ve read HOMs give a much better yield.

Paul Mahoney:

I say, “Okay, so you want a good yield? You don’t want HMOs, you just want a good yield, let’s look at all the options that are available to you.” So I support almost think the opposite way, reverse engineer it. First think about your current situation and what you’re working toward, what are your goals? And then allow that to determine, what’s the best location to be investing in? What’s the best property for that particular location?

Paul Mahoney:

Rather than starting out with the deal and then trying to determine whether that deal’s right for you.

Kate Faulkner:

Yeah, I think that’s a really, really good explanation. Thanks so much Paul. So Richard, you’re our last but not least panelist. Hello. Hope you’re still with us, haven’t disappeared off to the … Well, you can’t go to the pub can you really? So you’ve got to stay where you are. So I guess the first question to you Richard really, is what is happening on the funding front from your perspective with regards to the lockdown? Where are you at? What’s your understanding?

Richard Bush:

Yeah, it’s interesting, listening to the other guys talking, because I think there’s often two sides to the funding equation. Obviously the guys speaking often see the borrowers point of view or the investors point of view. And the truth is the lenders that we speak to and ourselves, we don’t know what’s happening. And that is the underlying issue. None of us know how long this is going to last for, none of know what impact it’s going to have. And therefore as lenders we need to be cautious, and that is what we’re seeing in the market.

Richard Bush:

The main impact at the moment is the lack of mobility, so surveyors can’t give valuations, TOS’s can’t do reports, agents aren’t doing viewings and so on. That’s causing a big pause. And that is an issue for lenders and that’s an issue for borrowers. And that’s making is seem worse than it is, I suspect.

Richard Bush:

Some lenders are stopping lender completely, others are lowering their loan the values significantly, by 15, 20%, which is causing an issue for a lot of borrowers. So everybody’s reacting in a different way, but the underlying sentiment is we don’t know what’s happening, let’s watch and wait and then decide.

Kate Faulkner:

Do you think that will almost drive a problem though? Do you know what I mean? If they aren’t confident in coming out and lending, that almost drives us towards heading downwards, when actually if they came thank you and said, “Well, look, we’ve got the money.” That might be a little bit of a naive question, but I wanted to ask it anyway.

Richard Bush:

I think that’s true, and I think actually for the economy as a whole, not acting or overreacting makes the problem worse. I think that’s true for lenders, it’s true for the rest of us [inaudible 01:25:15]. So I think that is the case, but they have a responsibility to their funders and to their shareholders and for us to our investors, to be cautious. Students whilst you’re right Kate, I think it makes the problem worse, it makes the situation safer for those that are providing the funds. So it has to be a balance. I can’t argue against you, I think it is making it seem worse than it is, I suspect.

Kate Faulkner:

Yeah, okay.no, that was great. And have you yourself changed the investment criteria that you’re working with when you’re looking at projects?

Richard Bush:

Yeah, well as a platform we don’t have fixed criteria, which is a bit unusual compared to more traditional lenders. The volume of deals that we do is a lot less, so we look at every single deal in isolation. And it was interesting what came up earlier in the very first presentation, in your presentation in fact, about how doff local markets are to the general market. So we don’t look at averages, we look at every single deal in itself. And therefore we haven’t changed out criteria, we will propose investments up to the same level and we do equity as well, so that’s not limited by any particular loan to value.

Richard Bush:

So what we are doing though is being even more in depth in our due diligence for each investment, at the very local level.

Kate Faulkner:

And would you only now look at experienced investors? Or would you still take on new business with what you’re doing?

Richard Bush:

Investors or developers?

Kate Faulkner:

Sorry, developers?

Richard Bush:

Yeah, we only work with very experienced developers, we don’t do first time, we would never fund a first time developer, sadly it would irresponsible for us to do that.

Kate Faulkner:

Yeah. And when investors … Say somebody is today thinking, well, I’m not sure that I want to put all my eggs in one basket, or whatever, like that, is now the time for crowd funding and looking at that more of an opportunity? It is still a bit of an unknown isn’t it? Without wanting to put it down at all, but do you think crowd funding will grow now and this is actually quite a big opportunity?

Richard Bush:

That’s a really good question, and when John was talking it struck me how great is must be to be as successful as John and his hedge fund partner and to be able to make the most of the opportunity. I don’t begrudge you John, believe me I don’t begrudge you.

John Howard:

Thank you.

Kate Faulkner:

It’s what happens Richard when you’ve been doing this since 1908, it’s a breeze.

Richard Bush:

What I thought when I heard John speaking was that’s why platforms like us are so important, because as bad as it is, and we don’t know how bad it’s going to be but there will be opportunity. That’s something that we are all certain about, there will be a tremendous amount of opportunity coming up over the coming months and years. And our role really is to make that opportunity available to as many people as possible.

Richard Bush:

So we might have 100 people clubbing together competing with John on a particular deal, and that way I think the opportunity gets shared amongst more people. I do believe that whilst we are seeing people being more cautious and we are recommending that they’re being more cautious it will actually end up with more people having access to the opportunity that John talked about.

Kate Faulkner:

Yeah, no, that makes an awful lot of sense. And is there anything else, I mean in terms of somebody, either on the investment or the developer side, or both? What’s the first three things, really, I guess it goes down to cashflow, et cetera, what are you looking for? Is there any projects that you’ve got through the last few weeks and you just think, oh my word, I don’t care what’s happening today with COVID and the economy, this is so exciting, it’s just brilliant? What sort of projects are you seeing that you’re getting so excited about?

Richard Bush:

Oh, Kate, we are seeing a lot of really good projects at the moment. And it’s because the lenders are lowering their typical loan to value and therefore developers are looking for that extra layer of funding from private investors. And it’s frustrating at the moment, because investment volumes have reduced significantly since the lockdown because people are uncertain. And so we are turning away great opportunities. That’s not a problem in the short term. My slight concern is that it will put developers off in the longer term.

PART 3 OF 6 ENDS [01:30:04]

Richard Bush:

My slight concern is that it will put developers off in the longer term in that they’ll think, “Well we tried crowdfunding,” but they couldn’t raise the funds. But there is a tremendous amount of opportunity around at the moment. Both in, mainly in new build developments where people are getting much better purchase price. We have seen the price of land drop. People are willing to take lower offers at the moment. So I think it creates a tremendous opportunity for, I wouldn’t want to say speculative, but for the confident developers who know they can make a project work.

Kate Faulkner:

Yeah, yeah. No. Got it. And is there anything else you think from the crowdfunding and just funding side in general doing projects, anything else you want to kind of raise or think is good advice for people today?

Richard Bush:

Well something, I think it was Nick said, Nicholas said that his recommendation for developers is to get the project completed as quickly as possible. And one of the things that strikes me is that, as the development progresses the amount of money that you’ve borrowed increases at each draw down. So before you start construction, you’re probably at about a third of your borrowing. At the end of construction you’re at a hundred percent of your borrowing. And then you’re waiting to sell. I actually think if you’re worried about the sales cycle at the end when you think it’s going to take longer and chances are it will take longer.

Richard Bush:

Then if you’re going to have a pause, it’s better to have a pause at the beginning when your lending is less, materials are hard to come by, there are various unknowns. So why not pause whilst you’ve only borrowed the land element, and then by the time you get to completion the sales market will have picked up. So I don’t believe it’s always the case, but it’s best to finish a project as quickly as you can because the cost of finance can multiply. If you pause now for three months, you might pay an extra 5,000 pounds a month for interest. If you pause at the end, in the sales cycle, you’re paying 50,000 pounds a month of interest and that’s three times the cost. So it’s not always the case to finish a project as quickly as you can.

Nicholas Wallwork:

No, I think Richard, in that situation-

Kate Faulkner:

That’s clearly some good advice.

Nicholas Wallwork:

… I was referring specifically to, if you’ve got plenty of cash in the bank, and I think from an investor’s point of view, if you’re going to rent it at the end, that rent will then hopefully, it might take a bit longer to rent and maybe rent for a little bit less, but then you potentially are covering all of the mortgage rather than none. If you’re a third of the way through and you’ve got a thousand pounds a month repayment or 3,000 pounds at the end, you’re better off being at the end where you rent might be four or five, six grand as an investment. But I agree with developers are looking to sell on. They’ve got the build-to-sell model. Absolutely better to pause earlier on as you say.

Richard Bush:

Yeah, and actually Nic, that’s a really good point. Kate, if you don’t mind me asking Nicholas if…

Nicholas Wallwork:

…actually finished. And even if we don’t get a refi at the end with our model, but we’ll have to see, we’re going to have to see. I may end up refinancing these buildings to get that extra 10% out in a year or two if needed, or just keep it slightly lower leveraged. But both of those lenders are kind of typical buy-to-let style lenders rather than full commercial lenders. They’re a bit of both, aren’t they? I mean Shawbrook is, you know, they’re quite chancy. They like to do a little bit more speculative stuff than Lloyd’s or NatWest, the standard banks or the standard commercial loans, which would rarely go above 60% anyway in a normal market. So I’m not sure what they’re lending at the moment. Possibly less. They might be 50%, but that’s speculative.

Richard Bush:

Nothing probably.

Nicholas Wallwork:

Yeah, or nothing. Yeah.

Kate Faulkner:

There was a big story about HSBC pulling out of buy-to-let mortgages and that was kind of like a big statement, but it’s a time where you have to get underneath the headlines because if you stand out, I think you’ll probably know this better than me John. But so it turns out HSBC, only did about 2% of their mortgages than they only typically do for their high net worth guys and girls anyway. So it actually didn’t mean anything really. And I think that’s one of the things you’ve got to watch is that. And for me, having the opportunity to talk to these guys today who really understand the nitty-gritty of this stuff as opposed to reading the papers.

Kate Faulkner:

I mean I saw something in The Express the other day and I don’t normally slate journalists for obvious reasons, but this person clearly knew nothing about the housing market. She got a press release, banged in with a couple of other stories, and it was just enough to disgrace. And I called her out for it because it was, people will believe what she says and it was just a very, very, it was a property price piece written by somebody that hasn’t got a clue. Probably was still at school when the last recession was [crosstalk 00:04:51].

John Howard:

Yeah Kate, what I would say if banks was measured and as professional as Richard is, they would, Richard wouldn’t have a job.

Richard Bush:

Thanks John.

John Howard:

No, it’s true. Richard, it’s absolutely true, you wouldn’t have a job. The fact is they’re useless.

Kate Faulkner:

[inaudible 01:35:11].

John Howard:

True. True.

Kate Faulkner:

Nicholas, are we okay to go on to, is everybody happy if we go on to some questions now?

Nicholas Wallwork:

Absolutely. Sounds great.

Paul Mahoney:

Kate, do you mind if I just comment on that point there?

Kate Faulkner:

Yeah.

Paul Mahoney:

With regards to the media? So something that I’ve been talking quite a bit about with people lately is because they’re reading negative media articles and getting quite worried. And no offense to any journalists or anything like that, but the media, the mainstream media, if you look historically, especially the last recession, they were grossly wrong. If you read the media or if you asked the general populous opinion just prior to the last crash, everyone would have said it’s the perfect time to invest.

Paul Mahoney:

But in fact, it was the worst time. And then if you move on two or three years as the market was starting to recover, everyone was depressed, it was the worst time to invest. Sorry if you asked people or if you read mainstream media, it was the worst time to invest, and in fact it was the best time. So I suppose the point there is to just ignore the media-

Nicholas Wallwork:

Do the opposite of the masses.

Paul Mahoney:

… and make good investments that tick the right fundamental boxes.

Kate Faulkner:

And find your trusted resources. And obviously as I write about this, and I’ve been doing this for a little while, not quite as long as John obviously.

John Howard:

Wicked.

Kate Faulkner:

I know who I can trust. So I trust CEBR and Capital Economics. Actually their economic forecast haven’t been bang pretty good on inflation, et cetera. And then I did turn to the likes of Savills, like Frank Moore if you like, for the property price side of things. PWC actually are pretty good. They should be due to come out with their price report shortly. So it is about finding who you like and who you trust. And then as I say, again, making sure that you’ve talked to these guys. So just back to my previous question, Nicholas. So are we okay to go into some questions?

Nicholas Wallwork:

Yeah, absolutely. Let’s go on with it. Crack on. I’ll try and pull some up on screen as we’re going through it.

Kate Faulkner:

Should I just read out what I’ve got, or how are you going to do it? Should I read out what I’ve got come in, or do you want to, are you going to put them up, or…?

Nicholas Wallwork:

Yeah, if you can read out the name and the question, and I’ll just try and find it and put it on screen. But if you can literate it anyway, I’ll try and get it on screen if possible.

Kate Faulkner:

I was okay up until that point because I’m just going to put my hand up. I think it’s Xuan Mang, but it’s X-U-A-N is the name and I don’t know how to pronounce that properly?

John Howard:

I can’t believe that Kate.

Kate Faulkner:

I apologize. But it’s a great question. So I do want to ask it. It’s, would it be a good time, and we haven’t really discussed commercial and I’m fascinated to hear what you’re going to say, would it be a good time to buy commercial properties? And if so, how do we source them? I don’t think anybody wants to go back to an office. So I think everybody’s going to stay at home and refuse to commute now.

Tony Gimple:

It depends where the office is. [crosstalk 01:38:17].

Kate Faulkner:

Mine’s [crosstalk 01:38:20]. I love it.

John Howard:

Who do you want to answer that one first?

Kate Faulkner:

Who wants to go first? John, while you’re here, do you want to?

John Howard:

Yeah. I’m happy to go first. Okay, so commercial is much, much riskier than residential. A few reasons for that. One is that obviously if the property, if you’re buying a vacant shop and in auction there’s been great bargains out there, even now on auction on vacant commercial. There was before this has happened and there’ll be a lot more after.

John Howard:

But what you got to remember commercial is that if it’s empty you are paying the rates. Even under the new rules that the councils are covering the rates for all these businesses, they’re not covering it for property developers and investors. So you will be paying the rate. So that’s a thing you’ve got to remember. If you’re looking at commercial, I would always, at the moment, look for an alternative use for some or parts of the building. That way, if you are left with two shops empty for a little while and you developed the upstairs, you can probably live with that.

John Howard:

And if you’re going to try and rent the shops downstairs, be very aggressive on that. In other words, ask for a quarter’s rent up front and then give them six months’ rent free, nine months’ rent free, get them in, make it happen for yourself. Don’t just sit there with it hoping you’re going to get lucky. You can get lucky sometimes of course, and a tenant comes along, but on the whole try and make it happen for yourself.

John Howard:

And one quick tip on that is if you’re looking at a shop in a town, find out if there’s a Costa there, a Starbucks there, or Specsavers, or whoever. and if they’re not in that town, get on the phone to them and find out whether they want to be in that town. And if they do just put two bits and pieces together. You’ve got the vacant shop they might want, you’ve got a tenant, put them together. You make yourself fortune.

Kate Faulkner:

There you go.

Nicholas Wallwork:

Can I jump on, Kate?

Kate Faulkner:

[inaudible 01:40:17].

Nicholas Wallwork:

Yeah, I think, on this question, I guess John’s pitched that answer really, that if you sort of have to buy commercial property now, as in what’s the best way to buy it if you are going to buy now. I don’t think it’s the best time to buy it now. If you’re buying it to retain a commercial investment, I think you might be best off waiting another couple of months. Trying to pitch to the bottom of the market there, see how many people are-

John Howard:

Oh yeah, yeah, I agree. I mean Nic, I would agree entirely with that. There’s no rush. No rush.

Nicholas Wallwork:

… No, exactly. And like you said, when you do end up buying it, do those things to protect yourself and try and get a pre lease, try and negotiate with the current owner on securing it with some favorable delayed terms. Perhaps to give you a few months to secure a tenant, for example. The other opportunity which-

John Howard:

Nick, something I didn’t mentioned of course is funding. It’s very hard to fund. Very hard to fund empty vacant commercial property. Very hard to fund.

Nicholas Wallwork:

… Very true. Yeah.

Paul Mahoney:

Yeah.

Nicholas Wallwork:

And I think I didn’t touch upon some of the bigger opportunities. Some of the bigger opportunities actually here that I wanted to touch on as a developer was buying offices now as commercial-to-residential conversions is potentially a great time or in the next couple of months going to be a great time. So buying it to convert almost couldn’t be a better time because you want to buy it now. If you’ve got the funds to do so, and plenty of buffer, and caveat, all that kind of stuff and you’ve got some funding agreed or you’ve got the cash, buy it now, develop it for the next 12 months or how big the site is and then you’ve got a site when everything’s coming back, hopefully residential lets will be on the up.

Nicholas Wallwork:

So I think it’s going to, some of the great opportunities that are going to come out of this for conversion developers like ourself is, is buying these vacant offices where people have gone bust, picking up fringe offices in retail that, you know, pubs that have gone bust, restaurants that are in suitable buildings, all this kind of stuff.

Nicholas Wallwork:

Unfortunately, it’s sad to see these things go wrong, but what are those buildings going to turn into afterwards? It’s unlikely they will go immediately back to offices. Working from home is going to change the way people have worked for forever potentially. So I think there’s opportunities there in the office markets for conversions. I think it’s, for the next two or three months and beyond, I think it’s probably a terrible time to be buying it as an office investment. I’d certainly be holding off for a fair few months until you see significant office demand again and see if there is going to be a significant office demand.

Nicholas Wallwork:

The smaller offices will be the worst affected where all the smaller fringe businesses that, as we said earlier, were on the edge anyway. I think Tony mentioned it. Those will go bust. So the smaller offices, great for developers to convert like us. A grade, town center offices wait two or three months. If you’re looking at bigger scale stuff then there will no doubt be a demand from that still from bigger companies, but wait and see the right time to buy those.

Kate Faulkner:

Tony, did you want to come in there?

Tony Gimple:

Yeah, just look whatever it is; commercial, residential, manufacturing. If you’ve got your tenant beforehand. Well yeah, go ahead and do it. Do your referencing. Don’t do things on spec, unless you’ve got the cash to hold stock for the future.

Nicholas Wallwork:

Very sensible.

Kate Faulkner:

Yeah. This is a good question. Richard, I don’t if you can help me out with this, but it’s from Joanna B. Do you think that mortgage holidays will be extended for another three months by the banks?

Richard Bush:

Well, I think it’s going to be decided by the government as opposed to by the banks. Over three months? I mean who knows? I suspect they will extend it for as long as it’s required because it has a big impact in supporting the economy as a whole. So at relatively low cost, so along with furloughing, I expect those two things to be extended until we’re back to some degree of movement and normality. Although whether there’ll ever be in normality again, who knows? But so yeah, I do expect that it will be extended along with the furloughing support [inaudible 01:44:27].

Kate Faulkner:

I’ve mentioned early that I didn’t think that lenders would be given much option and at the moment they have a three month, they can’t repossess anybody for three months, can they? And I think that the government, the way I’ve felt they are acting is saying, “Look banks, people are in trouble now. They all bailed you out before, and now is your turn to kind of step in.” I don’t if everybody agrees? But I think that’s the leverage that’s been over them, whether they like it or not.

Tony Gimple:

That’s exactly the right thing to do.

Kate Faulkner:

Yeah, keep people in their homes. Okay, so that’s good news. So we’ve got different questions for different sections. So I’m going to run through and see if we can pick one from each. So we’ve got Rajesh asked Nicholas, will HMO still be an effective property strategy in the current climate and going forward?

Nicholas Wallwork:

I personally believe, absolutely. I’ve got a big element of my portfolio is that. I’m seeing good rent levels being paid. We’re in the professional end of HMOs. I don’t remember HMO as the asset class, but it’s not necessarily the exact use. You’ll have the housing benefit, housing association end. You can have the student market, which is HMOs. You’ve got housing associations, you’ve got emergency accommodation. You’ve got home office contracts that deal with asylum seekers, they use HMOs.

Nicholas Wallwork:

So there’s quite a few uses actually within the HMO use class. In the professional end, which I can speak for specifically, we’re seeing good rents paid less people handing in their notice as they stay put. In terms of, I think I saw a question ping up, whether we get through it or not, about how do HMOs isolate? Our HMOs have essentially been self-isolating as whole households. And certainly the smaller HMOs, that’s a lot easier to do.

Nicholas Wallwork:

So it is tricky. They’ve got to use their common sense. We’re putting out all the government guidance on that kind of stuff to say, make sure you be careful, make sure you respect the social distancing, try and stay in your rooms a little bit more. Go out for plenty of walks, don’t all be sat in the lounge together all the time. If you go out, be respectful of where you go and make sure you, even more so, respect social distancing rules because you could be bringing that virus back into a house of five or six people or 10 people. So it is particularly important to be more cautious in HMOs.

Nicholas Wallwork:

But I personally still believe it is a very strong strategy. I think if anything comes out of this market it will hit rents. What will happen if rents are hit? People are going to want to rent HMOs because they’re cheaper than studios and one and two bed flats they maybe had the luxury of renting before. I mean this is just speculation, but for me HMOs and micro studios has always been at the affordable end of the professional market, or any other market. And if things do get hit in a big way, people might be, you know, if people are made homeless, losing their jobs, losing their houses, kicked out of their larger rental properties, these kinds of places might be the ones that actually boom.

Nicholas Wallwork:

I mean touch wood. But who knows? Is the answer to that. All I can say is at the moment we’re quietly confident and positively surprised at the amount of voids and the percentage of people not paying their rents. And hopefully that will continue because it remains an affordable option for people.

Kate Faulkner:

Yep. No, that’s good. And one for you John, they’re asking about students market, which is quite interesting.

John Howard:

Student market?

Kate Faulkner:

Yeah. So this is from Nora Yung, how do you see the student market in view that universities themselves are fearing that they will see a drop from international students in the future? And of course, [crosstalk 01:48:13] aren’t they? So there’s been a bit of a wrangle on whether students should pay rent or not.

John Howard:

Well, I’ve got no sympathy for these universities. They’ve been raking in an absolute fortune from the government. One tutor for three years studying or whatever. It’s absolutely appalling in my view. And by the way, my stepdaughter last year was studying legal, and there were tutors on strike for some of the year. I mean it’s disgraceful, but anyway. In terms of accommodation, it’s being seen, it’s become much more professional over the last few years with insurance companies investing into this type of accommodation, purpose-built blocks. It’s very slick. It’s very professional now.

John Howard:

A friend of mine built 3,000 rooms for Lincoln University a while ago. It’s very slick. It’s very professional. And most of the big players in the student market have got fairly deep pockets. And although they’ll lose, I honestly do believe, they’ll lose some of the foreign students who, by the way, get charged a lot more money by the universities. I think on the whole it’s still pretty solid.

John Howard:

I would be cautious of investing in UTEC Sheffield. 70,000 students in Sheffield. Well, always check, when you’re checking, when you’re buying a property to let to students that they’re not just about open a brand new spanking new, all singing, all dancing accommodation closer to the university than where you are, because that can really affect the rates you get and who you’re going to rent it to.

Kate Faulkner:

Yeah. Anybody else want to comment on the student market? Thoughts?

Paul Mahoney:

Yeah, I’ve got a thought. So it’s another question that we get asked a lot about because obviously the yields are generally quite attractive with student-let properties. And there is a big difference between a residential property let to students, and a purpose built student accommodation unit. Purpose built student accommodation units are commercial properties, they’re not residential. In my view they’re more serviced accommodation and there’s a limited resale market for them. Quite often because they come with long rental guarantees and their value is strongly linked to the yield.

Paul Mahoney:

So if that guarantee runs out and the yield isn’t kept up, the value will quite often drop. So you need to be a bit careful about, again, what’s right for you in that scenario. Because if you’re buying a student pod with a five or 10 year rental guarantee, is that actually the right thing for you? If you’re still looking to build a portfolio, probably not, because that’s not going to help you build a portfolio, it’s just going to give you a decent yield. But if you’re retired and income’s your main focus, maybe it is.

Kate Faulkner:

Yeah. Okay. And another question we’ve got from that [inaudible 01:51:09] Lonnie, many people who converted houses into HMOs with six-plus rooms got commercial valuations and these have been pulled back. What do you think will happen if the commercial loans market crashes? So I suppose the first question is, will that commercial loan market crash? And if so, how do you think things will pan out? Richard, I wonder if you can give us a view on the lending side?

Richard Bush:

Well, I think for HMOs in particular, I think from a lender’s point of view, it’s probably a safer bet than a buy-to-let because you have, you don’t necessarily have a complete void, you have one or two rooms empty, but you still got money coming in. So the likely it is the interest is being serviced. From a lender’s point of view, I think a HMO is a safer bet than a buy-to-let. Even though it’s lent as a commercial mortgage as opposed to a buy-to-let mortgage. So I personally don’t think that is going to happen. If anything I think the HMO mortgage market, and even for crowdfunded and peer-to-peer lenders is a good market. And we do a lot in that area and we’re looking to do more in that area. So I don’t believe it’s going to be a problem personally.

Kate Faulkner:

Okay. Next one for Tony, we understand that Paragon have… I think they haven’t left their name. We understand that Paragon have stopped lending to LLP structures believing that their beneficial interest assignment is not valid. Is this true? And how would it be mitigated?

Tony Gimple:

Well id Paragon want to contact us directly and make the statement of facts, then we can answer the question. But as far as we’re concerned, every lender on the market is happy with what we do. [inaudible 01:52:55] remains unaffected. So I’ll say trying to answer an anonymous question speaking on behalf of a lender who hasn’t contacted us directly and so far we don’t have any problems with is a bit of a spoiler.

Kate Faulkner:

News to you as far as you’re concerned.

Tony Gimple:

Fine. And ultimately they’re lending to the individual and the lender’s security is not affected in any way.

Kate Faulkner:

Okay. And do you think, I’ve had a few questions on the section 24. I’m guessing they’re not going to reverse that, are you thinking that they [crosstalk 01:53:31]?

Tony Gimple:

No. No. Whether that’s an educated guess, uneducated guess, wet finger in the air. The answer is, correct. There’s no way on earth that any government is going to reverse it until such time as they have extracted the maximum squeak from the pip.

Kate Faulkner:

Okay. And we’ve got half the questions and I’m going to merge two of these questions for Nicholas. Asking what’s your exit strategy from a development perspective? Are you going to rent and remortgaged to pay off the development finance? That’s their question as multiple questions that we’ve had here.

Nicholas Wallwork:

Yeah, absolutely. From our perspective, we’re investors almost more than developers. We develop to add the value, and to be able to pull a lot of our money back out of deals. So we became developers after we used up our own money in the initial days, wanted to buy more, starting, working with private investors who wanted hands-free investment working with a developer who was hands on.

Nicholas Wallwork:

So we work with loan notes and private investors who lend us money. We give them up to a double digit return to use that money to go and buy and develop properties. We then let them out and refinance with a term loan with a larger commercial bank, likes of all the main high street bank Shawbrooks, West Ones, all these kinds of people. So ultimately, the refi is the exit. We can cover our rents because we build really strong asset classes that really sweat the asset, is what I’d describe it as.

Nicholas Wallwork:

Ultimately, micro studio box, HMOs, that kind of thing. And ultimately, we get a lot of yield. So even if I rented down we’ll be able to cover those loans, high interest loans, even if it took a bit of time to refinance. So we’re going to refinance as soon as possible because we don’t want to be stuck on the high rate lending with private investors, or bridge loans, or development loans. We want to be off those as soon as it’s finished and as soon as possible. We’re also not going to jump in a month or two early if we can see the LTVs creeping up and the interest rates getting better. We’re not going to jump in and take a 20 year term loan now just in case we do get the LTVs back in a few months.

Nicholas Wallwork:

So we’re going to wait and take a cautious view. We’ll get offers on the table from one or two lenders, and then get that refi done at the right time. But we’re secure in that renting it even at a reduced level we’ll be covering the existing lines. We won’t be making any money, so it’s a time to batten down the hatches. Our profit, our equity will be tied up in there as well. Our profit levels on the rent equity minus the mortgage and all the costs.

Nicholas Wallwork:

So yes, it’s a tricky time. We’re not going to be making a huge amount of money for a few months. But yeah, we’ve got refi plans and it’s just about timing that really and renting out in interim. And I’d say any other developers that are build-to-sell developers, you want to seriously consider trying to let those properties if they’re not going to sell right now. Absolutely critical to get some income in. Don’t think you’re going to sit in there for six to nine months waiting for the market to change and you’ll sell them, because likely are the value is going to be hit for a good six months. And I would seriously consider renting those and that might give you a refinance option as well rather than being stuck on a high rate loan. I wonder if Richard’s got anything to add to that comment? That’d be my approach.

Richard Bush:

Yeah, Nick, I completely agree. And it is something that we’re talking to a lot of our developers about using rental as an [inaudible 01:56:53]. The challenge really is that the lenders are known [inaudible 01:56:57] to value. So if a developer has completed the project on a 25% margin even, then they’re looking to try and get 75% mortgage and that’s not available.

Richard Bush:

However, they can top up what they can get, say 65% from a typical lender with additional finance that’s based on a five year term or longer from platforms like ours. So I think-

Nicholas Wallwork:

That’s fair enough.

Richard Bush:

… that they’ll take [crosstalk 01:57:21] option is a good route, but sometimes you need support. Maybe some equity investment or some Mezzanine money to mean that you can exit by a rental strategy as opposed to a sales strategy.

Nicholas Wallwork:

Okay.

Kate Faulkner:

And I think this next question is one for everybody really. I’ll perhaps start with you though Paul, just to give you a heads up. It’s a big question because it’s, how are valuers going to start valuing property post the lockdown? Now how does a [inaudible 01:57:52] value approach this because of course, can they sit there and go, “Well, I did the valuation in March, and no, it hasn’t changed.” Or are they obliged with everything that’s going on to say, “I’ll knock off 10%,” when there’s actually no evidence of what the value is? It’s quite a tough. You know, [inaudible 01:58:11] value and that’s quite tough. But it’s also something that investors and the buy-to-let that people need to understand the process [crosstalk 01:58:17].

Paul Mahoney:

Yeah, yeah. I expect it probably will be a rather painful process. Value is a bit of a law unto themselves in the best of times and can cause issues in the best of times that there shouldn’t be an issue. So I think it is something that we’ll need to try to navigate. Keeping in mind that you don’t have to take on board a valuer’s opinion. You can always apply for a revaluation or switch lenders to get around such things. But yeah, the problem is I think a lot of it often does come down to the personal opinion of that valuer, which shouldn’t be the case. But we’ve-

Kate Faulkner:

They do have to abide by all their… they have quite strict criteria, don’t they?

Paul Mahoney:

… Yeah. They do, and they do. But some valuations that I’ve seen have been absolutely ridiculous. For example, we were seeing under-valuations due to Brexit when the market was going up. Because of the referendum we were getting under-valuations and the reason was Brexit. And how does that make sense when the market is still increasing in value?

John Howard:

Total utter madness. Yeah.

Kate Faulkner:

Go on then John, come on chime in on this, your thoughts. [crosstalk 00:29:40].

John Howard:

Well it’s a challenge. Valuers, we’re all holding our breath when a valuer goes around anyway to any development because they are, you know, it’s a difficult job, put it like that. However, going forward, goodness knows what, there’ll be so many caveats in every valuation that these building societies…

PART 4 OF 6 ENDS [02:00:04]

John Howard:

… caveats in every valuation, that these building societies and banks are going to have to take a view. Now I’m sure the government will be pushing them to take a sensible view.

John Howard:

But turning that round, of course, a valuer, if you’re buying a property as a deal, of course you can use the valuation as a great tool to reduce the asking price. So, actually, for me, we’ve got something we’re looking at in Bristol at the moment, and I’ve just got hold of a chartered surveyor in Bristol, and said, “Get down there. Please can you down value it for me?” So I’ve got information, I can then go back to the owner and say, “Look, I’ve had it down valued.” So it can work both ways. You have to use it to your advantage. Every situation, every property situation, Kate, we have to use to our advantage, and not just sit there and take it. You can use that situation to your advantage.

Kate Faulkner:

Yeah, okay. Anybody else want to come in on the valuation side?

Paul Mahoney:

I suppose just one more point there, Kate, so far as why I don’t have a lot of faith in valuers. I’ll give you an example. We’ve seen identical units next to each other, of the same value. A valuer will go in one day and value it at the right price, another will go in the next day and undervalue it by 10% to 15%, which shouldn’t happen, but it does.

Kate Faulkner:

Yeah. They won’t like me saying this, but I find it fascinating that if you look at… people think that the Zoopla estimates are accurate, valuations. I’ve had people say, “I know how much to offer because I saw what it was worth on Zoopla.”

John Howard:

Oh, for goodness sake! Crazy, crazy!

Kate Faulkner:

It was a crazy world out here even before lockdown. What I used to show them was like I know, just as Paul was saying, on a block of flats, how different those estimates were and the valuations, but it’s-

John Howard:

Crazy.

Kate Faulkner:

Yeah, it absolutely is. So another question that’s come in that’s quite a general one that I like, is what will… from Russell Edwards. Thank you, Russell. What will happen to interest rates after COVID? I’ve heard that they’ll shoot up, as inflation must, but we did cover that earlier on. Others say interest rates will be kept low. So let’s start with Tony. What’s your thoughts?

Tony Gimple:

Low interest rates, high interest rates, frankly, there’s not a lot you can do to control it. If you’ve got the yields, if you’ve got the right loan to values, you’ll ride whatever storm that comes. Inflation, rampant inflation erodes the value of debt. It’s wonderful from a borrower’s perspective. It ultimately catches up with itself.

Tony Gimple:

Will interest rates rise as a result of COVID? I actually don’t think so because the world will need to kickstart the economies and by having interest rate inflation will harm growth. So they’ll stay fairly low for the foreseeable future.

Kate Faulkner:

Nicholas, your ideal scenario, what happens to interest rates and what you think might happen?

Nicholas Wallwork:

I think they’re likely to stay stable. They’ve gone down obviously recently from COVID, there was a quick drop quite early on. I think it’s going to remain like that. I think we’re going to be potentially coming into a recession or a very difficult period in the market, and I think the last thing the Bank of England’s going to want to do is to whack up rates. So, for me, I think they’ll stay stable for quite a while still. I hope, anyway. We don’t need another variable in the mix, do we?

John Howard:

My biggest worry, Kate, is that they’ve got nowhere to go, they can’t drop them anymore. But I’d like to hear, if you don’t mind… I’d really value Richard’s opinion.

Kate Faulkner:

I have a slightly different question for Richard which is on the interest rate side, as to what’s happened there, but my understanding is, even though interest rates have dropped, unless you’re lucky enough to be on a tracker, before we all went into lockdown, mortgage lenders were actually looking at increasing rates even though the interest rates were dropping and, of course, that’s why we’re really interested in the interest rate side. So I wondered if you could tackle those two questions.

Richard Bush:

I was going to try and pick the easier question, if that was all right, Kate, but if you insist!

Kate Faulkner:

No easy questions on this show, Richard!

Richard Bush:

I’ll pretend it’s one question. I can’t comment on the regulated residential market but in buy-to-let and in developments, there was a big difference between the Bank of England rate and the rate of the cost of borrowing, and at the end of the day, lenders will price their lending based on the risk that they perceive.

Richard Bush:

So for developers and for commercial mortgages, and I think for many buy-to-let mortgages, I can’t see the rates coming down and I can see them going up because… or at least for a given loan to value, the rate will go up because the risk is perceived to be higher [inaudible 02:05:18] the visibility of the future is not that. So when lenders are feeling nervous, then they will increase their revenue, and they have to because they have to cover their losses because they expect to have more loans [inaudible 02:05:34].

Richard Bush:

So there is a separation between the Bank of England rate, which is economically driven, and then there’s the lending rate that we’re talking about which is driven by one, supply and demand, but two, by [inaudible 02:05:45].

Kate Faulkner:

Yeah, okay.

Paul Mahoney:

If I can just throw in my two cents there. So [inaudible 02:05:50] mortgage broker [inaudible 02:05:52] whatever you like, and so I can comment on both the regulated and unregulated side of resi and buy-to-let. We’ve obviously just had a pretty significant interest rate drop from the Bank of England, most of which wasn’t passed on by buy-to-let or resi lenders. So they’ve already gathered themselves a larger buffer through that.

Paul Mahoney:

Some people would say they do expect rates to come down slightly after this but even if they don’t come down, I wouldn’t think they’re going to rise in the short term because lenders have already… they’ve come down from 0.75% to 0.1%. So that’s a 0.65% buffer that lenders now have that they didn’t have a few weeks ago.

Kate Faulkner:

Yeah. No, that’s a really good point. I’ve got a very specific question which will be aimed at John. It’s from Joanna B. again: Which department should we call of Specsavers, Costa, Superdrug, et cetera, to ask if they would be interested in leasing the property office? Can we find out upfront their criteria for a place to rent?

John Howard:

Of course you can, Joanna. Go on the website and if they’ve got a property section, if they’ve got a property department, go to that property department. If they don’t, they will likely put you onto their property advisors. It might be [Savills 02:07:16], it might be one of the big boys. They will give you a list of where they want to have premises, all the towns in the country where they’re looking. Get hold of that, and good luck.

Kate Faulkner:

Brilliant. Thank you. This one is from Theintrepid121, a fabulous name: What is the view on rent default and payment plans once the furlough ends? So I guess that’s really asking how do you follow up on those? Nicholas, is that one for you?

Nicholas Wallwork:

Yeah, okay. I guess the view on it is, like any default, when you’re trying to work with tenants, you’ve got to look at their personal circumstances. The best way of doing it is doing it before they rent from you. So it’s good ID checks, good referencing. If you can take a guarantor in this current time, all the better. Don’t be shy of asking for a guarantor from anyone right now. We’re going to ask for it. Some might say no. They might be foreigners living here, a guarantor might be useless because they’re living elsewhere. But I’d be doing all your upfront checks to try and avoid those kind of default issues in the first place.

Nicholas Wallwork:

If they do come up, you’ve got to take a pragmatic view on it and look at that tenant and look at their ability to pay going forward, and listening to what they say. It’s all about what I said earlier, communicating with the tenants, understanding their situation. If they’re communicating with me, I’m far more flexible than if they’re not. If they’re blanking me, I’m just going to whack in a money claim online, or my team will, and we’ll go after them for the full amount of the debt with the bailiffs.

Nicholas Wallwork:

If they’re communicating with me, and say, “Look, I’m in hardship. I’ve got these issues. Here’s the evidence of those. Can you help me out with a payment plan? Here’s what I can afford to pay,” we’ll probably work with them and we’ll certainly… There might be a bit of negotiation there, whether we fully believe them or not, but we’ll certainly work with tenants that are under genuine difficulty and affects from this situation, or any situation in normal rentals.

Nicholas Wallwork:

So I guess the answer to that is just try and avoid it in the first place. So any new tenants that you’re taking on, be extra cautious on your checks. There are less tenants about so that the temptation is to do less checks and just grab them in but actually there will be some bad tenants out there, professional bad tenants taking advantage of this situation, hammering your rents down, and then not paying, knowing that they’re not being evicted. So don’t fall to that temptation.

Nicholas Wallwork:

Once you’ve got someone interested, if they’re genuinely interested they won’t have any issues going through the normal rent checks, they won’t have any issues answering questions to you. So definitely do more than normal checks, try and get a guarantor, try and avoid it going forward.

Kate Faulkner:

Fantastic advice there. A really good question actually from Royal Berkshire Developments: If the job market suffers during the recession, do you think the government will [crosstalk 02:10:06]-

John Howard:

… than any past Tory government, and knowing one or two of the characters in the cabinet, not well but I know them a little bit, they are… The one thing about Boris is that he tells people to get on with it, he doesn’t interfere. He’s not Theresa May. He’s not a control freak, he lets them get on with it, and he gives them confidence to go out there and come up with ideas outside the box. I think that’s clearly what they’re going to have to do anyway and actually, probably, I’m not saying Boris hasn’t got his faults, which I’m sure he has, like everyone, but actually, to have someone like him at the helm at this time is probably… it’s the right time for him. It’s almost like a wartime, bit like a Churchill, almost like a wartime… Churchill was a very poor Prime Minister in peacetime but an excellent Prime Minister in wartime, and I think with Boris that’s probably what we’ve got.

Kate Faulkner:

Tony, any thoughts?

Tony Gimple:

I’d agree exactly with John on this one.

John Howard:

That will be a first.

Tony Gimple:

It’s not a left or right issue. Students having to pay, to get heavily into debt for degrees that they can’t use, frankly is a waste of time. Far better to have some out of the box thinking. If you can pay, you should pay. If you’ve already paid into the system, look at ways of making education for people more accessible, more affordable, and going to uni, frankly, is not the answer or the right choice for everybody. Far better to go back to some of the technical colleges, secretarial colleges, real life skills where people can earn a living from the get-go, as opposed to getting in debt and finding they’ve got a degree that they can’t use and nobody wants to hire them with.

Kate Faulkner:

I think apprenticeships, people often don’t realize how vast they are. I know agents, agents do them now. I believe there’s even some legal stuff out there from [inaudible 02:12:20]

John Howard:

There is, yeah.

Paul Mahoney:

We have four apprentices.

Kate Faulkner:

Yeah? You’ve got four on your side as well?

Paul Mahoney:

Admin and marketing support.

Kate Faulkner:

Yeah. Really, really worth looking at that.

Tony Gimple:

Absolutely.

Kate Faulkner:

We’ve got quite a good one from… oh, it’s just disappeared. I had a good one. This is from Chris Groves. If you’ve got a 75% [inaudible 02:12:42] if prices fall by 10%, then the mortgage company, what if they demand the 10% extra deposit? I guess this is one for you, Paul. Do you think the LTV clawback clauses are going to be called in at all?

Paul Mahoney:

Sorry, Kate, can you just repeat the start of that question?

Kate Faulkner:

Yeah. So, for example, [inaudible 02:13:05] 75% loan to value mortgage, prices fall by 10%, I’ve got now 75%. So there is a clawback isn’t there with the [inaudible 02:13:18]-

Paul Mahoney:

No.

Kate Faulkner:

No?

Paul Mahoney:

No, there’s not, no. The vast majority, if not all mainstream buy-to-let lenders don’t have the ability to claw back the mortgage until there is a change of terms, which would be a remortgage or the end of your term.

Kate Faulkner:

Okay. [crosstalk 02:13:36]

John Howard:

Or [crosstalk 02:13:36]

Kate Faulkner:

So say, for example, they’re coming up to that stage though, what’s your-

Paul Mahoney:

Oh, right, sorry. So, yes, if they need to-

Kate Faulkner:

[inaudible 02:13:42]

Paul Mahoney:

Sorry. If they need to exit that current product, then yes, there would likely need to be a revaluation perhaps. If they were to stay with the same lender, they may not need one, but if they were to switch to a different lender, they likely would. If they’ve gone, therefore, above the 75% range, their options, I suppose, are to look at some of the lenders who are doing higher loan to values. So there are lenders that will lend up to 85% for buy-to-let but the costs will be higher, or to inject a bit more cash into the property.

Paul Mahoney:

But I would have thought that hopefully, if they’ve bought well and they’ve gone through the entire mortgage term for buy-to-let, which is usually a minimum of 10 years, unless they’re talking about the initial period running out, and if that’s the case, I’d say probably, if you are in that sort of difficult equity position, probably just hold on and pay the slightly higher rate-

John Howard:

Yeah, definitely.

Paul Mahoney:

… until your property recovers in value. I suppose it depends on the scenario. If we’re talking initial period, probably hold on, if you’re in a bad equity position. If it’s gone the full length of the mortgage term and you’re still at 75%, I’d be asking why. That would mean the value of your property hasn’t increased at all or maybe has even gone backwards. That just might have been a poor investment. If that’s the case, then you probably need to be looking at high loan to value mortgages or injecting some cash into it, or just selling the property.

Kate Faulkner:

So pick up the phone to a broker basically, that’s the first-

Paul Mahoney:

Yeah. Speak with a broker. You don’t want to be calling around lenders yourself.

Kate Faulkner:

Absolutely.

Paul Mahoney:

The worst thing you can do is go down and speak with your local bank. They likely won’t help you and if they do, they likely won’t have the right product for you. Speak with a specialist buy-to-let broker. The key word there is specialist. A lot of brokers specialize in resi mortgages. They won’t know buy-to-let as well as a specialist buy-to-let broker does.

Kate Faulkner:

Yeah. One for all of you actually, so this is a good generic one. Say, for example, you’re sitting on a lot of equity at the moment and you’re looking to invest, start a career in property, what would you suggest is the best strategy? I’m partly going to answer this, so I’m going to take the answer first because I get asked this a lot. One of the things that I always suggest to people is, if you aren’t in property currently, just go and get paid to learn about it as best you can. So, for example, just go, if you can… obviously not a great time at the moment to be doing it, but prior to this, I would say go and work for an agent.

John Howard:

Definitely.

Kate Faulkner:

Just really get paid to go and learn your market and learn the ropes and see other people’s mistakes. That’s always my first thing.

Kate Faulkner:

The second thing you can do is actually then look at… don’t forget franchising. So I could own lots of properties and earn my money that way but actually my love is business, and my love is analysis and that’s what I enjoy, and I enjoy doing all the national down to micro stuff. So I earn money from property but I earn it as a business as opposed to… obviously done it in the past, but as opposed to having lots of buy-to-lets because I can’t cope with the hassle, I couldn’t be bothered with the hassle of tenants, to be honest. So don’t just think you’ve got that money, put it into property and that’s going to deliver.

Kate Faulkner:

Tony, just coming to you, I think the other thing is that probably one of the first things you should do is have a chat to a tax person so that they can understand and make sure you release that equity in the best way and understand how much it’s going to cost you to invest. Is that a [crosstalk 02:17:20]

Tony Gimple:

I’d probably say the first thing you want to do is ask yourself why the hell do you want to get into property in the first place. It’s a sector. As you rightly say, Kate, tenants and toilets are hard work. You’ve got to understand why you want to be in there in the first place, what you’re trying to achieve, how much, of what, by when and by whom, and why. Then test your assumptions.

Tony Gimple:

Yeah, absolutely. Roll your sleeves up, get some dirt under your fingernails, go and do it, and if you actually can afford to be a tenant for a while, and then speak to landlords. Maybe go and work in a lettings agency. Or if you want to do a bit of development, go and learn how to be a brickie or a plumber. Find out what the nuts and bolts are.

Tony Gimple:

If you’re still crazy enough to want to be a landlord, then make sure you speak to the right panel of advisors and understand that the only thing that they will be telling you, or should be telling you, is what they know and you don’t, not there to simply reinforce what you want to do just to earn a few quid.

Kate Faulkner:

John, what’s your guidance?

John Howard:

I think what’s been said is very, very sensible so far. There’s lots of different ways of skinning a cat, as the old-fashioned saying is. Just because you’ve got some capital, you could invest in lots of different ways. You don’t have to be hands-on. You could invest it in a crowdfunding, peer-to-peer. There’s lots of other ways you can invest the money.

John Howard:

I think that it all depends what you’re interested in because if you’re not interested in investing, then you’re not going to do a good job. If you like refurbishing listed buildings, then you should go and do that and make money that way because if you’re talented and you’re interested in it, you’ll be good at it.

John Howard:

So there’s no point just saying, “Oh, I’m going to do HMOs. I hate them but I’m going to do HMOs,” because you won’t do a good job, and that’s why, funnily enough, I don’t do any HMOs anymore. Or in my day, bedsits as they were called. Now, of course, it’s HMOs.

Kate Faulkner:

Cool. Richard, obviously you’ve got the crowdfunding side. What’s your thoughts?

Richard Bush:

First of all, I’m surprised that I agree with John for the first time in that crowdfunding is a good-

Kate Faulkner:

[inaudible 02:19:47]

Richard Bush:

Yeah… in that crowdfunding is a good place to start. Also, I was one of those people that wasn’t allowed to rent one of John’s bedsits, when they were bedsits! But I actually do agree with John. I think at the end of day, passion delivers profit, so you should do what you are most passionate about. So if you are passionate about refurbishing old buildings, then do that. If you’re passionate about dealing with people, then run an HMO. It depends what drives you and what you’re passionate about. Don’t think about the money first, think about what’s important to you and what you’re interested in, and that will result in a positive business, which is what it is.

Kate Faulkner:

Yeah. Paul?

Paul Mahoney:

Look, I do agree with most of what’s been said there. I think that if you’re a beginner, you should start simple. I think far too many people come into some funds, probably watch too much telly, the likes of Homes Under The Hammer and those sorts of shows, and think that property development or your heavy refurbishments is a surefire way to make money from property, and that’s the path they go down immediately. Obviously with the right guidance you can do that but that is a profession in itself and if you’ve got a full-time job and you’re a dentist, then you’re probably not going to know an awful lot about property development and you’re probably not going to have the time to do it either.

Paul Mahoney:

So I’d say, start simple. Start with what John would say is boring buy-to-let. Make a positive first step in the right direction. I’m a strong believer that investing is also about confidence. If you lose money the first time, you’re probably going to be once bitten, twice shy the second time. So progress in how complex your investments are and build in that way.

Kate Faulkner:

I guess I actually did that really. I’ve mostly done my own residential stuff but I think the first place I did it needed a little bit of plastering, painting, decorating, and then the last place that I was in, I did ask the… the owner was actually redeveloping it and they were doing such a bad job, I said, “Can you just stop?” and I bought it as a complete shell. My next job that I want to do is actually go and build. So I think you’re right, Paul. You kind of go through that… going through that process is good.

Kate Faulkner:

Nicholas, any thoughts, other thoughts?

Nicholas Wallwork:

Yeah. For me, success in property is a number of things, and I’ve always come from the mindset background. I started off in my career reading a lot of books, reading a lot of entrepreneurs’ books, reading a lot of successful people’s works, at our time, our peers, people that are in the industry and also everyone else, the Bill Gates and these kind of people, and I’ve read a lot of books going.

Nicholas Wallwork:

So, for me, success in property and all this kind of stuff is passion, as Richard touches upon. It’s education, and I’ll mention a little bit on that in a second. But all of that, for me, is driven by mindset, and passion is part of that mindset, and finding your passion.

Nicholas Wallwork:

It’s not just finding your passion in property, it’s then finding your niche within property that’s your passion. There’s so many different facets of property and people that aren’t in property say, “I want to get into property.” Well, what do you mean? What do you want to get into? Do you know what you’re getting into? Then that feeds into, actually, go off and go on the likes of Property Forum and Property Tribes and people that are on this panel, read their books. We’ve all got books out there as experts that have learnt the hard way, and we’ve all got our niches, so go and find what works for you.

Nicholas Wallwork:

But the reason we out together Property Summits, it’s a poignant moment to mention it, is just because we’ve seen too many inexperienced people in the market offering education, too many power sells, salesmen-type people that maybe great sales people that can influence little old ladies to part with their pensions, and quite innocent people that are not in property to part with their pensions because they come across as this incredibly knowledgeable guru, but actually, we put Property Summits together because we didn’t like seeing that happening.

Nicholas Wallwork:

We don’t like people getting screwed over, for want of a better phrase. I don’t like to mince my words, as most of those people that know me know. That’s what you get from us, from Property Summits. You get honest people that have got an honest track record, a good reputation, and we’re here to help you, whether it’s from free resources, whether it’s from eBooks, or slightly cheap paid books.

Nicholas Wallwork:

But ultimately we want to educate people up to a certain point and then we’d like to work with you on other levels and we’d like to work with you with… maybe it’s mentoring, maybe it’s working with you on a business level. Maybe we’ll lend from you or lend to you. Maybe we’ll do your tax, or maybe we’ll source your buy-to-let for you or help you with your mortgages. But we only really want to do that when we’re confident that your education is at a certain point and that you’ve got all the free and cheap education that’s out there, and the honest education.

Nicholas Wallwork:

We want to avoid people losing tens of thousands of pounds, salesmen-like property courses, and they’ve been around for years. We had the likes of Inside Track that went bust in 2008. They were the first heavy-hitting property education company that went pop. They were selling overpriced properties, hoping the market would creep up, and doing self-certified mortgages with no deposits. That fueled the years leading up to 2008. Those people still exist today. They’re the greedy people that come in with a bit of knowledge and want to take other people’s money for spouting their experience about having done two HMOs and one little rent to rent.

Nicholas Wallwork:

So we want to help people, that’s why we’re here. I think fundamentally it’s about passion, mindsets and education before you start spending any money or risk losing any money.

Kate Faulkner:

Yeah. Good stuff.

John Howard:

Well said.

Kate Faulkner:

Yeah. Nice one. That was nicely put. Thank you. So we’ve got a question from Melanie. It’s quite a specific one but one that I think will be relevant to lots of others: We’ve bought our first buy to let apartment in Bristol a few days before the lockdown… which is unfortunate, I’m sorry about that. No tenant lined up yet. No prospect of showing them around. Letting agent’s been furloughed. How would you recommend we get ready for opening up the market and is there any financial help we can get in the meantime? So three month mortgage break potentially from the lender, if they’ve got that. I don’t think there’s other help is there, Tony?

Tony Gimple:

I don’t think so. They need to make sure that the property is secured. Thankfully, it’s coming out to spring, summer so there shouldn’t be any burst pipes. Nonetheless, check with their insurers to make sure there are any special conditions pertaining. But other than that, as soon as they-

Kate Faulkner:

Yeah. Because often there’s an empty property time limit, isn’t there? I think it’s normally… I know resi’s 30 to 60 days. I think it’s pretty similar on buy-to-let, isn’t it?

Tony Gimple:

It could be shorter, could be longer. Depends who the insurer is. But they really do need to make sure that if for any reason the property suffers fire, flood, is broken into, other damage, that they’ve at least got it reinstated. Talk to the insurer. Other than that, keep it secured, keep a watching brief, and as soon as the market is ready, understand what’s going on and get the right kind of tenant in there, well-referenced, and get back to something passing for normality, whatever the hell that is.

John Howard:

Kate-

Kate Faulkner:

Couple of things-

John Howard:

Sorry, Kate?

Kate Faulkner:

Yeah.

John Howard:

I think this poor person needs cheering up a bit after Tony’s-

Tony Gimple:

[inaudible 02:27:33]

John Howard:

… Tony’s appraisal of the situation. Can I just say, the first thing I’d say, Bristol’s a great place to invest in. Loads and loads of people. Very vibrant city. One of the fourth or fifth, sixth biggest cities in the country. So they’ve got that right. As soon as lockdown is over, I’d offer them a month’s rent free, to get them in yours before someone else’s.

Tony Gimple:

Yeah. Good idea.

John Howard:

So I would go pay the first month’s rent. Second month you can have rent free, and then on you go on. Because the sooner you get it let, the better. There’s no point waiting six, eight weeks to get it let once we’re out of lockdown because there’s loads of competition. You’ve got to beat that competition and you need to be aggressive, you need to make it happen for yourself. No-one else is going to help them but themselves. They need to be aggressive about it and get on with it as soon as lockdown’s over.

Kate Faulkner:

I think, for me, I’d just double check on that letting agent that you’re using currently because-

John Howard:

Yeah, I agree.

Kate Faulkner:

… I’d be very surprised… they shouldn’t all be furloughed. So there should still be somebody there working on your behalf. Repairs have to be done, maintenance, et cetera. What I spend a lot of time doing is, I would pretend you’re a tenant at the moment looking at your flat. What else can you get cheaper? What else is better than yours? Is there anything you could do to that flat that would make it stand out more? What are the deals that are being offered? As everybody has said here, it’s better to knock off 50 quid rent a month and lose 600 quid than lose 600 quid a month rent.

John Howard:

Exactly. The other thing, Kate, I would say, if it’s empty, there’s no reason why it can’t be let now anyway.

Kate Faulkner:

Yeah.

John Howard:

No reason, no reason at all. So they need to get on with it.

Kate Faulkner:

Yeah. So just double check that. Hopefully that’s a little bit of help. Got another one from SS: Is it a good idea to buy new builds off-plan in this situation where the economic forecast is very bleak? Paul, you’re the expert on this one.

Paul Mahoney:

Look, I think it depends on the individual opportunity. For example, there’s a couple of different things to consider if you’re buying… well, new build and off-plan are two very different things, in that if you’re buying off-plan, there’s more to consider. First off, you want to make sure you’re dealing with an experienced developer with a long track record and strong financials. You want to make sure your deposit is

PART 5 OF 6 ENDS [02:30:04]

Paul Mahoney:

Strong track record and strong financials. You want to make sure your deposit is protected in some way, so if they were to go bust, you get your money back. You’d want to see a strong sales track record on the development. If the development’s fully funded, that’s even better. Or if you’re a long way through the construction process that’s good as well. All these things mitigate risks with off plan. Which means that you can put yourself at the very low risk end of the scale. Versus, for example, I’ve seen some off plan developments where the developers are asking for up to 80% of the property purchase price over the build period. And therefore you’re effectively funding the whole thing for them. That’s very high risk. You don’t want to be doing that. You want your deposits lower, you want them protected and you want to be dealing with people with a strong track record, that you’re confident they’ll deliver on the promises. In those right circumstances, and if you’re getting it at the right price, that’s always the balancing factor when buying off plan and new build.

Paul Mahoney:

And probably the biggest thing we get when we say that’s our preference is, “Well, they’re always overpriced.” And that’s just not true. They’re not always overpriced. And especially with off plan, sometimes you can get them at a very good price.

Paul Mahoney:

So if the price is good, if it’s ticking all the boxes, the usual fundamentals that I went through before, then yes, it can work really well. And it can work really well in the current market because transactions have gone down, but developers still want to be selling stock. So there’s a bit more bargaining power at this very point in time. That’ll probably end as soon as the lock down’s over. At this very point in time, there’s more bargaining power.

Paul Mahoney:

If the property is complete, then again that’s ideal, there’s very little risk with that. And I’d say it’s better than buying a secondhand property because it comes with a whole range of warranties. So you’re going to have a much more passive and lower maintenance property for at least the first seven to 10 years because of all the warranties that come with them.

Kate Faulkner:

Yeah, that’s a good point.

John Howard:

Kate, can I just jump in there? One quick tip. If you find out when … If you go to the big house builders and you find out when their half year results are and their end year results are, work back two months, you might find yourself with a bargain. Because they’ve got to reach targets. They’ve been promising they’re going to do this, that and the other to their shareholders. If it looks like they’re not on target, they will do some deals. Let me tell you. They will do deals in order to reach those targets at half yearly and end year of results.

Kate Faulkner:

Yeah, quite a few of them are January, December. So we have got June coming up fairly sharpish. Brilliant, thanks guys. So Amir’s asked a good question. So say for example, you’ve got a property currently, is now a good time to re-mortgage it so that you can take out the equity and then start investing in something like buy to let? But any type of investment really just to open up to everyone. Who would like to go first?

John Howard:

Should I go first because literally I’ve just done it. So I’ve got a new bank manager in Mayfair who is very nice. And he’s the managing director and he emails me on a Sunday even, which is fantastic, isn’t it? And I’ve given them a first charge on a number of assets and I’m borrowing the money at 3%.

Kate Faulkner:

Wow.

John Howard:

So I’m getting a war chest together, a war chest, I call it. Yeah.

Kate Faulkner:

Yeah. Richard, what’s your thoughts?

Richard Bush:

Kate, I’m sorry I was locked out when you asked the question, sorry.

Kate Faulkner:

Okay. I apologize. So, say for example, you’ve got a property now, it’s got decent amounts of equity in it, is it a good time to re-mortgage and then invest that money in say buy to let or some other form of property, so crowd funding, whatever. What’s your thoughts?

Richard Bush:

Do you know, I don’t feel qualified to answer the question. And I would much rather Paul would answer it for me because he’s a financial advisor. I honestly, I have my own opinion, but I really am not qualified to give people that sort of advice about their personal finance.

John Howard:

Richard, I’m not qualified, but I gave a bit of advice anyway.

Richard Bush:

That says a lot then, doesn’t it, John?

Kate Faulkner:

Before Paul comes in, that’s what I do like about these guys is that actually between them, they can always answer your question. But the sign of a really, really good expert is somebody who actually puts their hand up and says, “You know, there’s some better people here to do that.” There’s not a lot you will find in the property market that will do that, so thank you, Richard, thanks for your honesty. Paul, over to you.

Paul Mahoney:

Yeah, very good point. Good point, Kate. Yeah, look, I’m a big fan of best utilizing your resources. And I think properties with low levels of debt, or no debt, is an under utilization of resources.

John Howard:

Definitely.

Paul Mahoney:

When debt is so cheap. And when we can get a 75% loan to value mortgage at 2%, and with that cash that we’re releasing, we can achieve really strong double digit returns. So the opportunity of that debt is significantly greater than the cost. And I think too many people focus on the risk of debt as opposed to the opportunity. But you need to balance those two things out.

Paul Mahoney:

So just, in a general sense, I’m not saying you leverage yourself up to the eyeballs so you can’t afford it. But have sensible levels of debt that better utilizes what you have. Because going back to one of the point I made before, most people are investing in property to build a portfolio, to build a net investible asset base and improve their financial position. And most people aren’t there yet. So to have low levels of debt, you’re not doing yourself any favors so far as having more exposure to doing well.

Kate Faulkner:

Yeah. Okay. Thank you.

Kate Faulkner:

So we’ve got another couple of quite broad questions I think. I like the one from Intrepid again, on the topic of building, will land come to market to keep companies liquid? And where do you see the level of supply and demand? So I guess we’re talking about what will happen to land prices more than anything else if I’ve understood that right. John, do you want to jump in on that first?

John Howard:

Yeah, thanks Kate. Difficult one. I mean, obviously, the obvious answer I suppose, is that people will try and hold out to start with for what they were getting pre-covid. And what I find with a lot of people who’ve got land. Most of them aren’t developers, they’ve got planning somehow. And they’ve, let’s be honest, they’ve had a result, most of them. They’ve had a touch, as we call it. Even a blind squirrel finds the odd acorn. And these people have got a bit of land, they’re suddenly allowed to get planning on by the government. They’ve been told it’s worth so much. And of course, they react very slowly to the fact it isn’t.

John Howard:

So actually it can take, especially if they own it cash which a lot of people do because it’s their gardens or it’s farm land or whatever. And it does take them time to realize, one, they don’t need the money quite often, as much as a developer would or other people. So it takes time to realize what the price should be and to sell it. And that process can take anything from six months to a year. And that’s why I’m saying, in many cases, there’s no rushing this. Because people aren’t going to suddenly drop their price by 20% to sell something, sell a property or land, if they don’t need to. These people have to swallow the pill, we call it, they have to swallow the pill. And they’re not prepared to swallow the pill to start with.

John Howard:

Eventually they swallow the pill. And most agents aren’t brave enough to tell them to swallow the pill straight away either. Because what you’ve got to remember with estate agents is every time they open their bedroom curtains, it’s a sunny day. They’ll still be telling you now, most of them, everything’s going to be fine. It’s all going to be okay. Well, it’s not Kate, is it, let’s be honest. Probably not. Probably not. It takes time.

Kate Faulkner:

Yeah. Richard, have you seen on any of the developments coming through any sort of better deals on land over the last few weeks?

Richard Bush:

Yeah. I mean, I see what John’s saying, but we have seen particularly when people are at the point where they were about to purchase and they haven’t completed the deal, where, because of the uncertainty …

Kate Faulkner:

We slightly lost you there, Richard.

Kate Faulkner:

Okay. So, oh, there we go. Richard, we’ve lost you the last few minutes.

John Howard:

We’ve missed you.

Tony Gimple:

Welcome back.

Kate Faulkner:

I don’t think he’s back. Right, there we go. We’ll move on to another.

Nicholas Wallwork:

Can I quickly answer that, Kate?

Kate Faulkner:

We do, we’ve been talking about-

Nicholas Wallwork:

Can I quickly add something to that?

Kate Faulkner:

Yeah, yeah, go for it.

Nicholas Wallwork:

On demand.

Kate Faulkner:

Thank you for bailing me out.

Nicholas Wallwork:

Just quickly building on the point I made earlier about the opportunities. I’m going to take the phrase land as sites. And that might be existing buildings for conversion. Or it might be land for your new build. Ultimately for me there will be lots of opportunities for land coming available. So I think, where for example the PD market, the permitted development market from office to residential, it’s a big area we’ve been operating in, there’ll be more offices coming available as lots of people have gone bust. Same with the high street and the fringe areas of high streets. Lots of conversion opportunities, more than ever in my opinion. So whether it be care homes, whether it be pubs, restaurants, all this kind of stuff.

Nicholas Wallwork:

I think people that have been operating serviced accommodation buildings, guest houses, hotels, there might be a number of those dropping off. Those will all be ripe for conversion back to flats, HMOs and this kind of thing.

Nicholas Wallwork:

So I think the supply of land or sites will be particularly something that I’m looking at. And I’m hoping, on the negative side of things, but as a developer I’m hoping there were some great, fairly priced opportunities out there that we can come back out and start to make some profit from the difficulty we’re going to have this year, which won’t be as profit making. So I think the answer is yes, there’ll be some more availability.

Kate Faulkner:

Yeah, I think that’s great. Thank you very much. Richard, are you back now with this? I can see you in …

Richard Bush:

I think so. I feel back.

Kate Faulkner:

We lost you, I’m afraid. Weirdly, weirdly-

John Howard:

We missed you. We missed you.

Richard Bush:

Thanks John.

Kate Faulkner:

Weirdly, somebody is trying to ring me from Bristol. Isn’t that funny? We’ve been talking about Bristol. I don’t know anybody in Bristol. But anyway, Richard, sorry, you were saying about the land and the deals and whether you were getting better values coming in.

Richard Bush:

Yeah, I mean, ultimately the value of the land is calculated by working back from the value of the end development and the cost of construction. So given that there’s uncertainty about the end value of the end development and the cost of construction, there’s a very good argument that land prices and property prices should be going down if they’re development sites.

Richard Bush:

So a lot of our developers are now renegotiating, even though they’re midway through the purchase. That they’re looking to do part payment if they don’t want to lower the price. And some of them are doing joint ventures. So what we find is when people have a sale, they don’t want to let go of it. So it’s a good time to negotiate.

Richard Bush:

I don’t suggest it’s right to try and rape them and get the price as low as possible. But you know-

John Howard:

No, that would be terrible, Richard, wouldn’t it. That would be a terrible thing to do.

Richard Bush:

It was a figure of speech, John.

Richard Bush:

But you have to think about your business and the uncertainty of the exit. So the more you can do to lower the cash out at the beginning. Yeah.

Tony Gimple:

What I would say on that, if you are going into a joint venture, make sure you understand the risks that JV partner themselves face. Because you don’t want to end up having to do business with their family. Who may not want to do business with you, they may have no idea. So when you’re going into a JV with anybody, particularly if you don’t know them, and they are highly geared to be in that investment, make sure you’ve got a get out of jail free card even if they haven’t. Because if they lose mental capacity, they’re not quite dead or they’re not quite alive or just simply fall off their perch, you can end up with all sorts of problems with people you don’t know from Adam or Eve.

Kate Faulkner:

Good advice.

Paul Mahoney:

So, a well structured shareholder agreement.

John Howard:

What a cheerful comment, yeah.

Kate Faulkner:

It is. But Tony’s right. I went to an investment event once and this lady was walking around and you know the little plastic wallets you put paper in and then you can file it from. She had written on there, I want a joint venture with you. And I’m just like, seriously, this is how you … I mean, if there was ever [crosstalk 02:43:06].

John Howard:

Kate, was she attractive? Was she attractive?

Kate Faulkner:

Well, I don’t know.

John Howard:

You might have misunderstood.

Kate Faulkner:

I’ve got it, I [crosstalk 02:43:21] pull. Not as good looking as John.

Paul Mahoney:

in fairness to Tony, I agree with him in that, I think in any business venture you need to have a well structured shareholders agreement. Because he’s right, if the person you’re doing business with dies, and people do die, you don’t want to end up in business with their family who knows nothing about the business.

Richard Bush:

No.

John Howard:

You need some sort of exit depending on the situation. Without question. I agree entirely with you. And Tony was very right to bring it up, he’s just a little bit …

Kate Faulkner:

Please don’t so the other thing that I see people post on Facebook is, has anybody got a legal agreement for a joint venture that I can borrow?

John Howard:

Unbelievable.

Kate Faulkner:

It’s just like don’t post this stuff on Facebook. Honestly I have my head in my hands when I see stuff like that. Because you’re not looking after yourself.

Kate Faulkner:

Just Paul probably one for you actually because it’s a quick question. Are buy to lets still available to allow you to Airbnb? And it would be quite good to get your views as to the future of serviced accommodation across the board as well. But Paul perhaps you can answer that question for us.

Paul Mahoney:

Yeah. So, good question. We actually launched a short term let business about two or three months ago. So probably the worst possible time to do it. But that’s life. So, we’re well across this topic.

Paul Mahoney:

So far as whether they’re still available, there are still mortgages available to allow you to do it. Yes. Unfortunately the short term let market is non-existent at the moment because we’re all locked down. The same way as hotels are struggling and some are shutting down because of it. A lot of landlords that have short term properties are struggling too because they don’t have any tenants. But obviously there is also the option for asking for mortgage holidays at the moment, which eases the pressure.

Paul Mahoney:

My view would be that it’s likely to come back very strongly once this all is done. Because I would have thought that, I know for myself, I can’t wait to pop over to Europe on a holiday or something along those lines. I’m sick of being locked up in the house. And I think a lot of people would agree with me.

Kate Faulkner:

You’re in a very small cubby hole, Paul.

Paul Mahoney:

What’s that, sorry?

Kate Faulkner:

You’re in a very small cubby hole.

Paul Mahoney:

At the moment I am, yeah.

John Howard:

Paul, I’m not being funny. Two things. One, there’s some fantastic places in the UK you haven’t been to yet. And you need to learn more about this wonderful country you’ve decided to live in. And the second thing is, I don’t know where you’re coming from, because we’re not going to be flying off on holiday and God knows what for a long, long time yet. So I don’t want to depress you, but I can’t see it. I can’t see it.

Paul Mahoney:

Yeah, I don’t think anybody can call that at this stage. But I think when it is resolved it will come back strongly. In the meantime, a lot of landlords are looking to let their properties to the usual sort of AST market.

Kate Faulkner:

Which you can do. And that’s about property being an investment box. Nicholas, what’s your thoughts?

Nicholas Wallwork:

I think, can you remind me of the question, we’ve waffled on for a bit long there, I’ve forgotten the initial question.

Kate Faulkner:

Yeah, so it was about whether you can get a mortgage for property for Airbnb? And then we kind of went on to, so Paul’s view is that the market will come back stronger. John’s view is no it won’t. I’m probably on a bit of both sides really. But it may be an age thing. So you’re look fairly younger than I am there, what’s your thoughts?

Nicholas Wallwork:

Yeah, I think that the short term market, the short term lets, hotels, Airbnb, guest houses, serviced accommodation is a particularly niche strategy and property investment that’s been pitched and touted. And there are some of these guru courses on it at the moment. And I think when you look at things like rent to rent as well, where people are renting off other landlords, then doing a serviced accommodation business and renting it out to the end tenant. Rent to rent’s a strategy that I think is going to be hit quite hard at the moment.

Nicholas Wallwork:

So in terms of mortgage-ability of those kind of units, no idea, I’m going to steer away from that topic. But certainly in terms of opportunities and how that will come back, I think like John said, I don’t think we’re going to be coming back anytime soon.

Nicholas Wallwork:

I think when we do come back, people will be cautious to integrate back into society. It’s not going to be sort of the next day, everyone locked down, everyone’s out fully interacting again. I think people will be cautious. And certainly the elderly population will be even more cautious. And they are from anything upwards on average of 60 years and older, maybe retired and doing an awful lot of traveling throughout the year. There’ll be much more cautious with that. And that will affect the short term let market and things like that.

Nicholas Wallwork:

There’s a couple of questions coming out. I don’t know if you’re seeing them, Kate, on HMOs. Rajash has asked us about HMOs and are they still profitable during the current climate. And that’s come in a couple of times. I’ll just quickly answer that whilst I’m on.

Nicholas Wallwork:

I answered it actually earlier, Rajash, if you want to go back and view this one. But absolutely I do think they’re profitable. I think the good thing about an HMO is that you can have it half empty, there are thereabouts, and still be covering mortgages and bills. So even if we come out of this rent payment holiday with mortgage lenders and we’re having to pay full mortgages, as long as you’ve got 50 to 60% of the thing let, or less depending on where you are on the rents, I think that’s a very profitable strategy. But I think yeah, pretty much answered that for you, Kate.

Kate Faulkner:

Yeah, that’s cool. So I’m conscious we’ve kind of got five minutes to go. And I’ve got five lovely fellows in front of us. Nick, should we just stay with you, do you want to just explain how people can follow up with you afterwards if they would like to?

Nicholas Wallwork:

Yeah, sure, no, absolutely. Thank you. At the bottom of the screen here, I’ve got propertyforum.com, we’re the largest international property chat forum. We’ve got lots of free resources on there. Everything from online chat where you can communicate, like you’ve been chatting with us and asking questions. I’ll be on there answering your questions. I’m sure some of my colleagues on Property Summits will jump on and answer your questions. And there’s lots of other experts out there that are on there, online peers and people experiencing similar things to you in the market. So it’s a great place to chat and share information. Lots of great free eBooks.

Nicholas Wallwork:

Also nicholaswallwork.com is my other main site and that kind of spearheads and leads you off to my various companies. So Red Brick is the brand where we’re the development arm and that’s the biggest part of our business really. That’s where we generate the most revenue and the most profit.

Nicholas Wallwork:

And the education side is really just to kind of help give back to the industry. But from the education side, I like to work with people on one-to-one mentoring. And that’s really practical stuff. That’s when you’ve done all the free and cheap education and you’ve done those kind of seminars, you’ve read all the books and you need some help practically getting going.

Nicholas Wallwork:

Maybe you’ve got a handful of properties already. You need to grow your portfolio. Those are the kind of people I like to work with on the mentoring side.

Nicholas Wallwork:

If you’re a hands off investor and you’re worried about where to invest your money at the moment, we’re a developer, we’d like to work with you on lending your money to do new developments. Lots of opportunities out there.

Nicholas Wallwork:

This week alone, I’ve offered on a building in Basingstoke with a long rent free period, it’s actually a lease option. We’ve got a lease option from years three to 10 on the lease. So we’re going to go in there, operate the business as a beauty salon. My wife runs a beauty salon business. And once we get out of lockdown, we’re going to be running that. And then we get to buy the building at the end of it.

Nicholas Wallwork:

And we’ve also asked for permission incidentally to convert the top floor to residential, so we’re going to create a little mixed use scheme. And the top floor HMO will fund the entire rent for the building, so the salon gets free rent. Loads of opportunities out there.

Kate Faulkner:

That’s time [inaudible 02:50:55] Tony.

Tony Gimple:

Oh, where to contact me. They can reach me at tony.gimple@lesstax4landlords.co.uk. You can find me on LinkedIn. Whether you’ve got a tax problem or not, always worth a chat as long as you don’t mind a direct answer to a direct question.

Kate Faulkner:

Yeah. That’s right.

John Howard:

Brilliant.

Kate Faulkner:

Richard, do you want to go next?

Richard Bush:

Sure. So if you’re an investor or you’re a developer and you want to contact me, you can do that via the platform crowdlords.com. Or just email me at richard.bush@crowdlords.com.

Kate Faulkner:

John.

Tony Gimple:

We’re waiting for you, John.

John Howard:

Oh sorry, it’s my turn, is it? Well, I’ve got an agent now, so he’s told me I’ve got to get off my backside and actually promote myself. So I’ve got to remember what he said to say. So I think he said, my website is johnhowardpropertyexpert.co.uk. I do some acquisition mentoring where you can throw as many deals at me over a 12 month period and I analyze those deals and work with you to purchase them at the right money. And I do some seminars and bits and bobs. You can always get hold of me. Anybody’s got any questions or problems, I’m happy to help if I can.

Kate Faulkner:

Brilliant. And Paul.

Paul Mahoney:

Yeah, so I run Nova Financial Group. We advise on all aspects of property investment from helping people better understand their current situation and their goals. Putting in place a suitable strategy for their situation. Implementing that strategy through the research and due diligence that goes into sourcing the right properties.

Paul Mahoney:

We also have an in-house mortgage brokerage. We do property management. And we work with people on an ongoing basis to help them review and reinvest with a focus on achieving lifestyle and financial goals.

Paul Mahoney:

On our website, which is nova.financial, you can get a free copy of my book which is an international bestseller now in the UK and Australia. And essentially expands on our approach to property investment. So either get in touch, happy to offer you a free consultation to review your current situation and see how we might be able to help. Or if you’d like to do a bit of reading or listening because there’s an audible version as well, they can get that on the website.

Kate Faulkner:

Okay, so mine is Kate Faulkner, if you want to get in touch with me for sort of general questions, these are the sort of specific experts, you can go through the contact us at propertychecklist.co.uk.

Kate Faulkner:

And if you like economic stuff I was talking about earlier, we update that and you can sign up to the newsletter. What I hope you like is the fact that we’ve been on for three hours and you’ve got a four minute sales pitch there from five people. And it was mostly if we can help you just email us rather than trying to persuade you to spend lots of money.

Kate Faulkner:

So I really hope you’ve had a fantastic three hours. Thank you for staying with us. You’ll be pleased to know that shortly after this I will be going walking Wizard so that I can hopefully get a little peace this afternoon rather than a rather large lick in my ear while I’m trying to host the conference which is certainly a first for me on air.

Nicholas Wallwork:

He’s the mascot, the Property Summit’s mascot.

Kate Faulkner:

Mascot. Absolutely. Absolutely. If he goes to a new event, he will give you a hug and a kiss every time. So when we’re all allowed out.

Kate Faulkner:

But mostly thank you for staying with us. You asked an awesome number of questions. And I really, really hope that you’ve got some fantastic answers there that will help you. But better still the guys and myself are here to help you ongoing with anything you have that’s more specific.

Kate Faulkner:

And there’s lots of people in the background, by the way, I know Kelly’s around, who’ve helped massively put this event together this morning. So thank you very much, Kelly and everybody else.

Nicholas Wallwork:

Thank you Kelly.

Kate Faulkner:

Apologies if I don’t know everyone’s names. So thanks very much. I think if Nick, Nicholas if that’s okay, I think we’ll probably wrap it up.

Nicholas Wallwork:

We’ll wrap it up. Thank you everyone. Thanks for joining.

Tony Gimple:

Yeah, great to catch up after covid.

Paul Mahoney:

Thank you.

John Howard:

Thank you.

Tony Gimple:

See you all.

Nicholas Wallwork:

Thank you, bye bye.

Richard Bush:

Bye bye.

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