Property Summits Online - Episode 1 - Nova

Property Summits Online – Episode 1

Our M.D. Paul Mahoney joins the “Property Summits” team for an on-line version of this popular discussion panel.

 

Marie Parris:

Hello, my name is Marie Parris and welcome to Property Summits, the team that connects, guides and educates you authentically throughout your property journey. So whether you’re starting out for the first time, or you wish to reset and broaden your experience, this is the team that you need to connect with. On my left we have Richard Bush, John Howard, and on my right we have Tony Gimple, Nicholas Wallwork, and Paul Mahoney on live link from Australia.

Marie Parris:

So guys, I want to kick off with the first question, and that’s really about who do you think has suffered the most in the property market, and will they recover. Nicholas, we’ll go to you.

Nicholas Wallwork:

There’s been a few casualties I’d say. It’s been quite a polarizing market, hasn’t it this year? It’s something that I’ve never experienced in my time, although John might say I’m not old enough to have experienced many things, but I’ve seen a recession or two. Well, I’ve seen one recession and I’ve seen a COVID.

Nicholas Wallwork:

To answer the question, I would say, the student market, investment market has been hit pretty bad, a lot of uncertainty there. Home courses coming up, and I’m not quite sure what the state of it is at the moment with this second lockdown. I think people are going back next year, are they? Does anyone-

Richard Bush:

Yeah, I think so.

Nicholas Wallwork:

So hopefully it’s kind of recovering next year. That obviously has a a knock-on effect with stock into sort of HMO professional markets, so we’ve seen more competition in that market in our areas. So it’s even more important to be the best, be the best you can be. Yeah, I’d say-

Marie Parris:

How do you be the best that you can be in this sort of market?

Nicholas Wallwork:

I think it’s everything in the whole life cycle of the deal and the lets. We’re fortunate enough to have owned and operated our own letting and management agency from day one. We always had that in-house, so in the lockdowns when other agents were shut, landlords were left stranded with voids and no agents open. Obviously, agents were able to stay open in the second lockdown, but ultimately we were able to operate under safe conditions and fill voids where others weren’t able to. So that’s one example where we were able to be better and to be more risk adverse by having different tools in our toolkit.

Marie Parris:

Good.

Nicholas Wallwork:

But yeah, I think it ripples through the whole life cycle really. You’ve got to be best right down to the furnishings and the look of the place, make it as best, and clean and immaculate as it can be.

Marie Parris:

Right. And John, what would you say, what would you add to that?

John Howard:

Residentially, the residential property market has bounced back unbelievably well. We’ve got five estate agencies obviously in Norfolk, and we’re going to have a record year, which who would’ve thought that in lockdown. We made cash available to the business in case it needed it, and it just hasn’t needed it. It’s been remarkable. Whether we’ll need it next year, that’s another matter, but at the moment everything is very, very rosy. There’s been a big pent up demand, so residentially no real problems at the moment.

John Howard:

Commercially, my goodness, totally different setup. I’ve got four shops in Norwich, and not one landlord has gone back and opened up yet. I can’t get hold of them. So that’s an example. Luckily, they’re only small shops and we can weather the storm on those, but it’s remarkable. We can’t get hold of the tenants at all, and it’s just quite remarkable. So I think commercially, big, big problems. London, massive problems going forward. So commercially for me is where it’s really, really been difficult.

Marie Parris:

So what have you been doing as a commercial landlord? Have you been offering sort of rent payment holidays?

John Howard:

Well, I would if I could get hold of them. I’m really struggling on the ones in Norwich. But on the whole, what we’ve found is, the bigger commercial tenants we’ve got, we’ve got some quite big tenants, well-known tenants, and they tried it on to start with and said, wrote to all their landlords and said, “Oh, we can’t pay, we’re not paying.” And my advise has always been, ignore that because they’re bigger than you are. I ignored that and let all the other landlords panic and take discounts on rents and so on. I held my ground and said, “No, you pay,” and they have paid.

John Howard:

They’ve maybe because some other landlords are not as hard as me, and they’re a bit softer and kinder and helped them. The smaller tenants we’ve helped. We’ve helped smaller tenants, but the big tenants, why should we, they’re bigger than we are so why should we. So we haven’t done so.

Richard Bush:

Yeah, it’s a good gauge.

Marie Parris:

Richard, what would you add? Whose suffered? Whose suffered the most? So we’ve got students, commercial market-

Richard Bush:

I agree with John. I think the commercial market is probably what we’re avoiding most now, and I think it’s probably been hit the hardest and it’s uncertain what will happen in the future. There’s two other sectors as well I think, short term lets, has been quite badly damaged by the lack of movement around lack of travel. And also holiday lets. People that have holiday lets. But commercial I think is probably the area that’s going to be hardest to recover.

Marie Parris:

Okay. And Paul, do you have anything that you’d want to add to that?

Paul Mahoney:

Yeah, I suppose just to reiterate some of the points that were said there by others. From my own experience, we in all of our wisdom, launched a short term let business at the start of this year. Obviously, not seeing COVID coming. And it’s been difficult, because the central city sort of short term lets, where previously you had so many reasons for people to be traveling there, those reasons no longer existed. But that seems to be coming back a bit strangely, for whatever reason. We’ve got 15 units in central Birmingham that we’ve taken on, and we had 10 bookings over the weekend, which was the best we’ve had so far since we’ve taken on those units.

Paul Mahoney:

So yeah, short term lets been tough, that’s resulted in a lot of people going back taking stock that was being used as short term les, and going back to ASTs. And speaking with a few agents in central London, that’s certainly been the case. The rents have certainly come down in some areas, because there’s more stock available for rent. I think that there are certain areas that perhaps might struggle more sort of as we see the repercussions of what’s happening at the moment, such as locations that might be hit by further job loss and things like that. But yeah, certainly the commercial market as well, with more and more people working from home and that likely to continue.

Paul Mahoney:

More businesses considering more flexible working options now, because it kind of makes sense financially pretty much for anyone. Why send thousands of people back to central London five or six days a week, when they can work from home two or three days a week, and probably do just as good of a job? So the commercial operators are going to have to rethink their business models I think.

John Howard:

Definitely.

Tony Gimple:

I suppose the one abiding sector that suffered, is any landlord be it commercial, residential who are over-extended, over-geared. If you’re 75, 80, 90% on resi buy-to-lets, or student lets, or HMOs, and you’ve got unattractive deals, you’ve really, really suffered. All right, there haven’t been huge amounts of repossessions yet, there have still been some arrears, and although the tenants in some cases have received help, the landlord sector as a whole has not. Now whether that’s political, or whether it’s because governments of all persuasion don’t see the private rented sector as a legitimate business, is another matter.

John Howard:

Well, they need to, because it’s-

Tony Gimple:

Absolutely, they need to.

John Howard:

I mean, it’s a massive, massive part of the market private renter sector.

Richard Bush:

Yeah, there has been help though Tony, because if you’re running a small rental business, you would have had access to the bounce back loan, you would be able to. A lot of landlords and developers have made use of that support.

Tony Gimple:

Yeah, it’s not as easy, particularly for property businesses in the buy-to-let. On the commercial side a little bit easier.

John Howard:

Yeah, if you’ve got a limited company it’s a lot easier.

Tony Gimple:

It’s a lot easier, yeah.

John Howard:

But don’t think they’re masking really… A lot of this has just been papering over the cracks. If there’s a weakness in your chain, a recession will find it and will punish you for it.

Tony Gimple:

Yeah.

John Howard:

And of course, over-leverage is the one thing that everyone gets tempted into in a relatively strong market. And there’s been banks lending 80, 90% on commercial, which is totally bonkers in my view.

Richard Bush:

Yeah.

Marie Parris:

I’m jumping the gun a bit, but you’re raising a point that is going to be very useful for anyone whose thinking about coming into the market. But if you need to leverage up to that amount, and the banks are lending on that, what would you advise people to do otherwise? I mean,-

Nicholas Wallwork:

Do a different deal.

Richard Bush:

Do a different deal, yeah absolutely.

Tony Gimple:

Do a different deal, yeah. I understand that tenants and toilets really are hard work, it’s not a get-rich-quick, it’s not a panacea for one’s financial ills. There are a lot of people out there who see it as an answer to all of their problems, getting into property, and it’s not. If you over saturate the market very, very quickly, and if people are borrowing with no previous experience, 85, 90, 95% for rentals as opposed to development where you know you’ve got a relatively quick in and out, you can end up in trouble very quickly.

Marie Parris:

How can you saturate a market when there’s the demand for it?

Tony Gimple:

Well, okay there’s a demand for the properties, but not necessarily the demand for people who are looking to get into it as landlords, either as rent-to-own, or property sources. If you like, looking at the marginal plays, the gaps, and there are a lot trying to come in who have got no previous experience, and you get… I mean, I see almost every day, the same property is being offered by three or four different people.

Marie Parris:

But you’ve got to start somewhere though, haven’t you? I mean, we all started with no experience, so where do you go from there? You’ve got to start somewhere, so-

Tony Gimple:

Yeah, you have, but-

Nicholas Wallwork:

I think one of the things we like to stress with Property Summits is that, you treat your property portfolio like a business.

Tony Gimple:

Yes, yes.

Nicholas Wallwork:

So coming in from the start, it’s a different game to 15 years ago. You go and buy a few buy-to-lets and make a load of money, paint the walls, let it out and make a good return. Now you’ve got to really get your tax planning, your structure right, you’ve got to get the right mortgage advise. The devil’s in the detail now, you’ve got to get all those foundations far better, to-

John Howard:

Toasty.

Nicholas Wallwork:

… be able to succeed.

John Howard:

As I always say, there’s lots of ways in making money out of property.

Marie Parris:

Yes.

John Howard:

I’ve got friends who do lockup garages, make an absolute fortune out of lockup garages. There’s lots of different ways, you don’t want to be tunnel visioned. To start with, you want to look at the whole market and see what suits you. For some people, it’s buy-to-lets, and they buy so many a year and your pretty passive. Other people want to lend money to people via crowd funding, Richard does, or investment Nicholas, or whatever, but they all need Tony for tax advice.

Marie Parris:

Yes. Yeah.

John Howard:

So properties are like a big boat, if something goes wrong like it is in London now, just slow down, turn around, come the other way. There’s no massive rush. And the one thing I’ve found this year with people, advising people, is that they’ve all rushed to buy at auction, that’s why the auction market is so hot at the moment. It’s crazy. Everyone’s rushed in, and I’ve sent to everyone I’m helping, I said, “Just sit back, relax. This is a long job, this isn’t a short in and out. Take your time. Still do your research, still get to know what’s going on, but you don’t need to jump in with everyone else.”

Marie Parris:

You guys did your first live summit in February, I remember, I was there. Did any of you see this coming?

Nicholas Wallwork:

There was news out, wasn’t there? We heard about over in China cases, but we had no clue it was coming-

John Howard:

China weren’t telling-

Nicholas Wallwork:

… so quickly.

John Howard:

… the truth then of course.

Marie Parris:

So there wasn’t anything really that we could’ve done as investors, developers, to sort of mitigate any loss?

Paul Mahoney:

So there are some things that you can do to mitigate the risks of any potential negative impact on the market. We’re talking about 2020 here and COVID and the impacts that that’s had, but in a lot of ways it’s quite similar to the credit crunch, and the dot.com bubble, and things that have happened in the past and you had that flow through to the property market. I think sort of tried and true fundamentals of what drives property and what gives us confidence of sustainability in demand, holds true throughout the current situation as much as it has in the past.

Paul Mahoney:

And I think a great example of that is, for example, buy-to-let landlords some have struggled to collect rent over this year, given that there’s been a ban on evictions and the government almost seeming to encourage people not to pay rent in some cases. Whereas, for example, my properties and the properties our clients generally invest in, being city center centrally located properties targeting young professionals, have from what I’ve seen, been the ones that have performed the best from a rental perspective, because that type of tenant seems to be a bit more financially aware. And we haven’t had issues collecting rent because of that.

Paul Mahoney:

So I think certain things like that, understanding what drives to rent, what drives supply and demand in property, and ticking all the right boxes, gives you more confidence in performing well not just in good times, but also surviving or even thriving through bad times.

Marie Parris:

But do you think thought that the city tenants are going to want to come back and live in the city? A lot of people are thinking about, they don’t want to do the city, they want to get out in the suburbs, have a garden-

Paul Mahoney:

I don’t know Marie, I don’t necessarily agree with that. Coming from the perspective of I suppose my preference, I live in Zone two, London, I’m obviously in Australia at the moment, but I live in Zone two, London, and one of the reasons I live there is it’s 10 minutes to my office in the city. But that’s only one of the reasons. I could move to Zone four or five London, and probably get a property twice the size for the same price, but I like having bars, restaurants, gyms, cafes, all the other things that living in that central location offer me. And I think in a way, that’s a bit of a… Well, certainly, it’s something that I’ve been talking about for a number of years, is that generational shift in preferences.

Paul Mahoney:

People in the past who were more family-focused had children earlier, got married earlier, wanted the bigger family home and were willing to commute to work for that. Young professionals want all those things on their doorstep, so there’s a big shift in preference there. And I don’t think that COVIDs going to reverse that preference shift.

Marie Parris:

Do you… Anybody disagree?

John Howard:

Yeah, I don’t like agreeing with Paul too often, although he’s normally right because he’s pretty bright. I said pretty bright, by the way. So I think in principle I agree with that, the younger people are going to want to be in the city centers where everything is happening and so on, and there’s a lot of them, but they want quality accommodation. And this is where quality comes to a front. Okay, you may have got slightly less rent than you thought, but if it’s quality you’re set, you’re letting. If it’s quality, you’ll sell it. If you’re in a good area, you’ll sell it.

John Howard:

And the one thing to do when the market is maybe difficult in the future, is always buy in the best areas you can afford, because you know then if there is a drop or a downturn, the area will save you. The area you’re investing in will save you.

Nicholas Wallwork:

And it’ll be the first to bounce back.

John Howard:

And the first to bounce back, absolutely.

Richard Bush:

Well, it depends how you define best though.

John Howard:

The best area you can afford.

Richard Bush:

[crosstalk 00:17:32].

John Howard:

Best area you can afford Richard.

Richard Bush:

But defining best as in what way?

John Howard:

In your case, Mayfair.

Richard Bush:

John, you really need to define what you mean by the best area.

John Howard:

The best in terms of residentially the best. The best roads, the best area of a town.

Nicholas Wallwork:

So the-

John Howard:

Don’t pick the worst.

Nicholas Wallwork:

That’s Charles Boughtlinks.

John Howard:

Yeah, don’t pick the worst area, pick the best area because you’ll let it sooner. You might let it a bit less. You’ll sell it easier, you’ll sell it [crosstalk 00:17:54]-

Paul Mahoney:

Richard, I agree with your point there. But again, another thing I quite often talk about is, not investing in locations that are heavily driven by one company or one industry, because that one company or one industry, can very easily move away. They don’t care about your rental property that you do, and therefore you want there to be multiple driving factors in that location because that obviously provides more sustainability.

Richard Bush:

So you would define best Paul, there, by the sustainability of the local employment, whereas what I think what John was defining as best, which is what I’m trying to understand, was really more-

John Howard:

Best place residential area.

Richard Bush:

Yes, but define best John. I understand residential area, but-

John Howard:

Most expensive area.

Richard Bush:

The most expensive. See I didn’t-

John Howard:

Yeah, the most expensive you can afford.

Marie Parris:

Yeah, but that’s-

Richard Bush:

But that isn’t necessarily the right [crosstalk 00:18:41]-

John Howard:

Because it’s safety. You don’t need to be brave in a market that’s difficult, which I believe we’ll talk about that later, probably not this series or whatever, but about the market being more difficult next year and the year after, you need to go for safety.

Nicholas Wallwork:

But is the most expensive-

John Howard:

You don’t want to go for risk, you want to go for safety.

Nicholas Wallwork:

Is the most expensive, you said it, you joked with Richard about Mayfair, that’s got to be one of the worst locations for investing-

John Howard:

Yeah, that’s a bad in example in London maybe, but outside-

Richard Bush:

But it’s the best-

Nicholas Wallwork:

But if I’m in Redding and I pick the best area in Redding, that’s going to be hit the worst as well.

John Howard:

Why?

Nicholas Wallwork:

Because the-

John Howard:

I don’t think so.

Nicholas Wallwork:

Well, London maybe is it’s own market, it tends to fall quicker-

John Howard:

You can’t really-

Nicholas Wallwork:

… but it-

Marie Parris:

Judge markets. You can’t judge markets-

John Howard:

You can’t judge markets in London.

Marie Parris:

… against others.

Nicholas Wallwork:

No.

John Howard:

Anywhere… Any small town, pick the best area that’s-

Nicholas Wallwork:

I think we’re talking about small towns not London.

John Howard:

Yeah, pick the best area of those towns.

Tony Gimple:

Yeah, I agree with that.

Marie Parris:

What… Sorry, Tony, do go on.

Tony Gimple:

The hard part is not the top end of the market or the bottom end of the market, it’s the part in the middle. That’s where it’s hardest to make the right choices. On the one hand, at the very top end of the market, Mayfair, you’ve got a class of people who will never run out of money. Rich beyond the dreams of Averis. At the complete opposite of that, you’ve got people who are on universal credit, low paid, in some kind of supported housing, and they’re always going to need good quality accommodation, which in essence the state is subsidizing.

John Howard:

Absolutely, totally.

Tony Gimple:

And that’s just as successful as with the very wealthy, and in many ways a lot less aggravation.

Marie Parris:

And that type of landlord would not be suffering in this marketplace.

Tony Gimple:

No.

Nicholas Wallwork:

They’re surely booming, because-

Tony Gimple:

They are.

Nicholas Wallwork:

… with people going unemployed, more people moving to benefits, that’s a booming sector.

John Howard:

But it’s very different.

Nicholas Wallwork:

It could be the worst area, couldn’t it, John.

John Howard:

Yeah, but it’s very different. If you’re talking about buying, refurbishing and selling a property, or buying your own property, that’s what I’m talking about.

Nicholas Wallwork:

Yeah, so homeowners more so.

John Howard:

Yeah, if you want to buy your own property, or invest in two or three individual houses or properties, then you want to pick the best areas you can afford to, because they will go up best of all.

Nicholas Wallwork:

Yeah.

John Howard:

The very poor areas, if you’re doing… if you’re going multiple, then that may be the case. But what you must remember, those capital growths in those poor areas, will remain poor.

Nicholas Wallwork:

True, yeah.

John Howard:

You’ll get-

Nicholas Wallwork:

It’s [inaudible 00:21:02] phased only.

John Howard:

There’s a trade off between income and capital growth-

Nicholas Wallwork:

Yeah.

John Howard:

… in those areas. The perfect deal would be both, and that’s very hard to find.

Nicholas Wallwork:

Yeah.

Marie Parris:

Okay. Paul, did you want to add something there, did I hear you say something?

Paul Mahoney:

Yeah, but just one little comment. I just wanted to add to that a little bit. I suppose from an investment perspective just to add to what you were saying there John, we tend to look at the slightly cheaper location next to the best location, because it offers a very similar amount of amenities, but it’s cheaper and therefore the yields are better, and tends to increase in value, depending on the location obviously, a bit better than the area that already has.

Marie Parris:

Yeah.

Richard Bush:

Yeah.

John Howard:

But slightly riskier.

Paul Mahoney:

Potentially slightly riskier, yeah.

Marie Parris:

So do you think that anybody in property is going to look back on this year and say, “Yeah, I had a great year?” I mean, you’ve just alluded to that in some of your businesses, what about-

Nicholas Wallwork:

For me it’s the year of opportunity.

Tony Gimple:

It’s the year of opportunity, yeah. I’m getting calls pretty much every day, leads coming in every day, and a lot of people despite what has happened, have had really good years. Capital growth hasn’t been spectacular, but in certain markets, particularly in the lower end of the market in places like Stow, Nottingham, North East, rents yields have been absolutely fantastic. They’ve had good years. I’ve had a good year, but the year of opportunity coming up, yeah, it’s going to be fantastic.

Marie Parris:

So would you actually then be saying to investors, “Hold on, don’t sell your properties,” because there a lot of the smaller landlords who have three or four properties that are panicking, and they’re thinking, “I want to get out. The prices are going to really crash.”

Tony Gimple:

Don’t panic, don’t panic.

John Howard:

I don’t think they’re going to crash, but I mean, we had £35 million worth of property to sell at the start of the year, COVID came and I thought, “This could be a bit tricky.”

Marie Parris:

How much of that have you sold?

John Howard:

But we’ve sold probably over half of that I’d say, and I would’ve taken that at the start of the year before COVID, and I want to keep selling some of the stock, because it gives me capital to then reinvest when blood is on the street.

Marie Parris:

So you’re waiting?

John Howard:

When blood is on the street, and it will happen in certain areas. Not all areas, and I always take what Paul says, I’ve learned from Paul, micro market, some in the areas in the U.K. next year will go up, some will stay the same. And Richard and I discussed earlier having a coffee which I didn’t have to pay for, which was nice for a change Richard, they’re going to go down. So-

Marie Parris:

Let me put it to you, put it on the line, what areas would you say that are going to be hardest hit?

Richard Bush:

Geographic you mean?

Marie Parris:

Yeah.

John Howard:

Well, you’ve got to look at the areas where unemployment’s going to be difficult, that’s the first thing. So that’s the basics, isn’t it. If anyone says that this year COVID has cost this country 300 billion, if anybody thinks that won’t have an effect on the economy, on unemployment, they’ve got to be bonkers. And they surely, goodness, okay some businesses will thrive in an environment like that, and the property industry up till now has got away with it. If you’re not commercial, you’ve got away with it. But you have to wonder going forward, and I said all along, the domestic market and the trading dealing market, are two very different things.

John Howard:

Domestic market, I think next year, certainly in the county towns and things like that, I think will be okay. But I’ve already picked up a distress site in Birmingham, I’ve got two or three others I’m looking at, and I believe that next year, like I think most of us around this table, there will be opportunities.

John Howard:

Now, the key is not to jump in too soon, remember it’s a boat, it takes a long time to stop and turn, and come the other way, property. So you don’t need to be in a super rush.

Marie Parris:

So what’s that timing for the boat to be turning back the other way?

John Howard:

Well, I think the timing naturally, has gone back six or nine months, because what’s happened is, the COVID, the loans and all this sort of thing, have masked the problem, and the developers that were in trouble have got out of jail, because the market’s been so good.

Marie Parris:

Yes.

John Howard:

Now next year, don’t forget-

Marie Parris:

Temporary get out of jail card.

John Howard:

Temporary, exactly. But next year, don’t forget, the other thing they’ve got in their favor next year, is we haven’t built as many houses this year as we should’ve done because of COVID. So there will be a pent up demand and supply going forward, so it’s difficult. I think towards the end of next year now, will be the time to really make hay while the sun shines. And the one way to know when, is when the auction market starts to decline.

John Howard:

Averagely, 73% of properties sold at auction, get sold hammer comes down on them. In a recession, that comes down to 50%.

Marie Parris:

Right.

John Howard:

So the barometer… The auction is the best barometer, because it happens quickly and instantly, whereas the residential market takes time to-

Paul Mahoney:

Just to relate back to what you said Marie, pick smaller landlords thinking about getting out, don’t. Just because you’re reading in the news there might be a crash in property prices, property isn’t about the short term. In my mind, that’s one of the beauties of property is that, in a lot of ways and a lot of cases, it saves us from ourselves. If people invest in stocks and shares, they see the value of their portfolio halves by 50%, they sell at the worst possible time. If the market starts to do well again then they start buying again.

Paul Mahoney:

So they’re buying and selling at the worst possible time, whereas property’s a long term thing. It’s hard to buy… It’s hard and expensive to buy, it’s hard and expensive to sell, and therefore it should… So long as your confident in the property and the location you invest in, and all the reasons you’ve done that, you should just be holding on. Don’t be thinking of selling, because you’re reading negative things in the media, because the media is often wrong as well. In fact, they’re usually wrong when it comes to predicting things about the direction of the market.

Marie Parris:

Tony, I want to bring it onto you, and then I want the panel to sort of tell me what they think. We all agree that the chancellor has got a real dilemma on his hands, because he’s got to be able to keep the businesses and the jobs there, but he needs to make back this money. So do you think that he’s going to clobber us second property owners with heavy C capital gains tax in line with income tax rates?

Tony Gimple:

There’s a difference between second property owners, and being a landlord. A classic second property owner is somebody who has a hold on their home, or a home in the country. That’s not the market we’re talking to, we’re talking about the private rental sector as a whole, all the way through from small scale social housing all the way up to maybe build-to-rent. So as I’m fond of saying, the state protection racquet has done its job, it’s put its hand in its pocket, it’s kept the economy going, and at some point it has to balance the books.

Marie Parris:

What do you think he’s going to do? Are you a betting man?

Tony Gimple:

Sadly, yes I am. And anybody who actually knows what the chancellor’s going to do, is almost certainly going to take a hiding at the bookies. That said, there are certain things that were on the cards a long time before COVID, things like dividend tax. Almost certainly that will come into line with income tax, because it is an income. The fact that one was taking the risk before, is neither here nor there.

Nicholas Wallwork:

And if the Brexit pushes us all into limited companies, that’s what they want to do-

Tony Gimple:

That’s what they want to do anyway, yeah. The bear trap. The George Osborne bear trap, want to incorporate. Capital gains tax, that does need a bit of a review, certainly. There have been abuses. Whether it should come in line with income tax, I don’t know.

Marie Parris:

What would you suggest, what do you…

John Howard:

Brexit’s not something you [crosstalk 00:29:58]-

Marie Parris:

What would be fair?

Tony Gimple:

Yeah, I’ll come onto that for my… It’s the higher rates for treating long term property investment as suddenly being subject to 28% as opposed to 18. That would be crazy. The state has to balance the books in due course. Will all of the taxes rise? That depends how well the economy does. John mentioned Brexit, it’s probably the best thing that could happen for the U.K. economy in a lifetime or two.

Marie Parris:

Why?

Tony Gimple:

Why? It will drive inward investment, it would drive outward investment. The U.K. is a maritime trading nation, it has been forever. Yes it’s got a checkered past. We were better at certain unpalatable things than anybody else, but the U.K… Well, it’s true.

Marie Parris:

Yeah, okay. Tony, I’m just waiting for you to get to the point, yeah.

Nicholas Wallwork:

I would love for that to happen.

John Howard:

In your own time Tony.

Tony Gimple:

She’s doing the [inaudible 00:31:16], yes. Is there an answer to the question in there? Yes, okay. People want to do business here. Why? Because effectively, we’ll have more free ports, it’s going to almost be a free-trade zone, always be more competitive. And as more money flows into U.K. coffers, then taxes won’t have to rise as much. Whether it will be on CGC, whether it will be income tax, whether there’ll be inflation, who really knows. But I suspect, looking at all of the chancellors we’ve seen in recent years, whatever persuasion even if they can’t make their minds up which side of divide they’re on, this particular one will balance the books and will balance the economy. How he does that, remains to be seen.

Marie Parris:

Richard, add anything to that?

Richard Bush:

To tax, I don’t have a view on tax to be perfectly frank. I think it is something that we can’t predict, and so whatever the rules are then you get advise from someone like Tony on how best to work within those rules. But I have no idea what’s going to happen with capital gains tax, or any other tax for that matter.

Marie Parris:

Okay.

Nicholas Wallwork:

I think from a Property Summits point of view, from a collective point of view, we would say to people, make sure you’re taking the best advise at the current time.

Richard Bush:

Yeah.

Tony Gimple:

Yeah.

Nicholas Wallwork:

And that is all you can really do.

Paul Mahoney:

I’ve been getting asked a lot about the potential capital gains tax change, and I think this happens a lot with any type of investment when people are thinking about their money. They can kind of jump at shadows a little bit, and then they start thinking about making decisions based upon things that haven’t even happened yet. So there’s been mention of capital gains tax increasing, and whether that will apply to property. No-one knows at this stage, so there’s no need to start thinking about changing your strategy based upon what we don’t know.

Marie Parris:

Let me come onto something else. Someone wants to start in property, they have some money, they may have some limited money but they need some advise, what would you recommend?

Nicholas Wallwork:

Well, I think first and foremost, it’s important to get all the low hanging fruit of property education, and that’s jumping onto all the online websites, forums, chat forums, Facebook groups, listen to every webinar, jump on YouTube, there’s a lot of good content on YouTube at the moment.

Marie Parris:

There’s a lot of rubbish as well, isn’t there?

Nicholas Wallwork:

There’s a lot of rubbish, but it is tricky when you’re starting out, to work out what’s real and what’s not.

Marie Parris:

How does one navigate themselves through that then.

Nicholas Wallwork:

Who are the fake gurus in this world, and who are the genuine people who’ve got a track record and experience. I think if you’ve got a sensible head on you, you’ll figure that out by watching everything, and absorbing everything like a sponge. Certainly don’t act until you feel you’ve got the right advice, and you’ve got all that kind of low hanging fruit. Read everyone’s books that are out there, anyone that’s written a book in property read it. It might not be gospel, don’t get me wrong, but read it. Learn the industry, learn the ins and outs, and you’ll soon be able to spot who are the sources to trust.

Marie Parris:

A newbie, how am I going to spot that? Break it down for me.

Nicholas Wallwork:

Well, you won’t spot it immediately, will you?

Marie Parris:

Don’t give me sound bites. So how are we going to differentiate between you guys that are true authentic and the professionals, to somebody who isn’t? What does that look like to that person whose got the aspiration, they have a bit of money-

John Howard:

Experience.

Marie Parris:

… and they feel, “I want to go into this, because I do think things are different now than what they were 20 years ago.” So how do we spot them?

John Howard:

Experience is the first thing. If you’re taking advise from someone whose done one deal, or two deals, or three, it’s ridiculous.

Marie Parris:

Does it matter about the-

John Howard:

Absolutely ridiculous.

Marie Parris:

… amount of deals that you’ve done?

Nicholas Wallwork:

It does. Of course it does.

John Howard:

It’s hugely important.

Nicholas Wallwork:

Hugely, hugely important.

John Howard:

Hugely important. The more experienced you are, the more you’ve seen recessions, you’ve seen what can-

Nicholas Wallwork:

The more mistakes you’ve made.

John Howard:

… go wrong, what to do right, what to do wrong. And someone who can advise you correctly, should be able to stop you getting into the same problems and pitfalls they did probably themselves.

Nicholas Wallwork:

They made the mistakes over time.

John Howard:

Made the mistakes for you, so you don’t need to make those mistakes. And by the way, you show me a property developer investor that’s never lost any money in property, and I’ll show you a liar. Everybody has had a problem, but it’s how you get out of those problems, how you deal with those problems, how you identify those problems before they happen even, is the difference. And what really, I’m very passionate about this because I see so many people, I speak to so many people who have had some dreadful advise from someone whose been in the business five minutes, and thinks they’re the experts because they’ve just done it.

John Howard:

So people think just because someone’s just done something and it’s been a success, or may not have been but they make out it is, they’re the people to go to.

Marie Parris:

Well, that’s fraud, isn’t it? That’s the [crosstalk 00:36:14]-

John Howard:

Absolutely. They are the last people to go to, because they’ve never experienced any downturns.

Marie Parris:

I’m going to sort of push you on this, or any of you that want to come in, because a lot of people do ask me about this. They say, “Look, I want to learn, but I don’t know where to start because there is so much information.” And I want you to break it down for our viewers.

Paul Mahoney:

So I think we live in a world now where, if you go online and you do some digging, it’s not easy but if you do a little bit of digging, you can find out whose treated people well, who hasn’t. Looking at one review isn’t the right thing to be doing, because you can’t please everyone, but if you get a bit of an idea of what people are saying about different people in the industry and you watch some of that content, agreeing with Nick, you read that book, you digest what they’re putting out there and decide whose logic you most agree with, and also what works for you-

Nicholas Wallwork:

[crosstalk 00:37:06]-

Paul Mahoney:

… because I don’t think there is a one-size-fits-all for what’s right for a person. Because someone starting out in property, that could be somebody who has just sold a business for five million quid and has all the money in the… all the time and quite a bit of money to go off and do something with that money. What’s right for that person, is very different to the full-time teacher whose got 30 grand to invest but no time. So I don’t think there is one roadmap for a new property investor, but I do think that people can determine on their own or by talking with people, and through Internet research, who are the right people to deal with. And that is part of the reason we set up this panel.

Tony Gimple:

I think there is one key question that you should be looking out for if-

John Howard:

Integrity.

Tony Gimple:

… you’re a newbie. Yes, it’s integrity, and that integrity can be manifested with one simple question, why do I want to get into property in the first place. And if somebody comes to any of us, that’s the first question that we’re going to ask them, “Why? What are you trying to achieve? What do you think it’s going to do for you?” And if they can’t answer that, if they don’t know why they want to do it, then actually then maybe now is not the time for you.

Tony Gimple:

And the other thing to look out for, is that you’re not being sold to come on the next course, or the next deal. There are a lot of firms out there who simply make money by selling the next course, as opposed to the actual deals.

Richard Bush:

Besides that Marie, I think then as Paul said and as Nick said, there’s lots of information available online, and you can find lots of people to talk to. You’ll have more information than you’ll know what to do with, and this isn’t the plug for my part of the industry, but one of the things that you can do now is try it before you buy it. So you can try a property investment strategy by supporting other landlords and other developers with investment, and learn along the way before you jump in and do it yourself. And that isn’t for everybody, but it does enable… it’s a softer way in than to put up your 30K, to buy your first buy-to-let in a town that you’re not-

John Howard:

I think that’s a really good point Richard.

Marie Parris:

Yeah.

Marie Parris:

What makes a good developer then, in a nut shell, three things without stating the obvious?

John Howard:

Well, what I would say, a good developer is black or white, there’s no gray areas. That’s the first thing. So there’s no shall we shan’t we. You know you define the deal, you know what you want to do, and you do it. You do it, and you do it to the letter. You don’t start shimmy shying around and changing your mind and everything else.

Marie Parris:

Point two.

John Howard:

Point two, is finding the right deal, because finding the deal is very difficult with enough margin in it. And the other thing, and I find this is where people struggle, is putting the deal together correctly in the correct manner and timing that suits the developer best. For instance, you might decide you want a three-month delay completion to help get things in order, but to do that you need to plan that from the start, not tell the vendor at the eleventh hour, “Oh, we need three or four…” whatever it might be. So you need to be…

John Howard:

It’s a bit like a game of chess, you want to be three or four moves ahead of where you’re going to end up, and plan it. And structuring the deal to start with, is where they all go wrong, a lot of people, and then have to unravel it and everyone loses confidence in them and so on. So get it right from the start.

Tony Gimple:

Yeah, and find your customer before you even start, find your buyer before.

John Howard:

Well, that’s even better if you can do that.

Tony Gimple:

Yeah.

John Howard:

Not always easy.

Tony Gimple:

Not always easy, but-

Paul Mahoney:

I agree with agree everything you said about that, but I think there’s an important point to make so far as talking about should I be a property developer, should I be a passive investor. Would you not say that to be a property developer, you need to be entrepreneurial?

John Howard:

To be a property developer, yes, to be an investor, no.

Paul Mahoney:

And would you also agree with me that most people shouldn’t, or perhaps couldn’t be an entrepreneur or a business owner? A lot of people this just doesn’t fit their personality or their lifestyle.

John Howard:

Yeah, I agree, I agree.

Richard Bush:

But I think Paul’s point is really important, because whether you’re going to be a landlord or a developer, if you’re starting a property business, you’re running it as a business, you are being an entrepreneur. It doesn’t mean you’re doing it for the first time in the true meaning of the word, but you are being… There is a risk involved and there’s a commitment involved-

Paul Mahoney:

There is risk involved.

Richard Bush:

And you asked what makes a good developer. What we look for when we’re looking for developers to work with is, we look for people who are not focused on the money. If people are focused purely on the money and not on their customer, or the aesthetics of the building, or other aspects of the development but they’re only focused on the money, then we never get involved with them, because it’s not the motive. At the end of the day you make profit from development because of what you’ve created and sold, not because you were particularly clever with the money. So that’s one of the things that we always look for.

Nicholas Wallwork:

That’s a really good tip for people wanting to invest, as to how big an institutional style investors, what they might look for.

John Howard:

And also, likeability, because you’re investing in a joint venture or whatever. You want to make sure… We’re just doing some joint ventures now, and I’m so keen to meet the person early one not just the deal, because if we get on together well, then I’m willing to invest in their deal probably.

Marie Parris:

So what happens if it was a fabulous deal, but you just didn’t get on with the person, the energy-

John Howard:

I would walk away.

Marie Parris:

You would walk away?

John Howard:

I would genuinely walk away, because you-

Marie Parris:

Nicholas, you’re walking away?

Nicholas Wallwork:

I’ll walk away.

John Howard:

… know there’s going to be problems along the way. You’re going to have a friction, and you don’t want a friction. And I’ve been fortunate in my career to work with some fantastic business partners I’ve had over the years, backers. And I can honestly say, even when things have gone wrong, and they do sometimes go wrong, I really never had a disagreement with them, and I’ve worked with them for 30, 35 years and my business now whose about to retire, he says he’s had enough of me after 35 years.

Tony Gimple:

Took him that long?

John Howard:

It took that long hey. Let’s hope the next one-

Marie Parris:

He’s made his money and he’s got out.

John Howard:

Exactly, let’s hope the next one lasts as long. So it really is on the person. You’ve got to be able to gel and get on well. It doesn’t mean you need to, by the way be going to out for dinner every night and holiday together, you don’t want to be doing that, you just want to be respectful, respect them as a person, and like them as a person. You’re not looking to go to night clubs every night.

Nicholas Wallwork:

I think what’s interesting John, is that talking about people, it’s about sourcing the deal as well, because sourcing the deal is not just about the deal it’s about finding the person that needs your solution. You want to create a win-win situation in any property deal. Maybe there’s a distress seller for whatever reason, so you want to make them an offer that solves their problem, keeps them happy, they got what they want, you get a little bit of a good deal hopefully and everyone wins. So it always comes down to people in this world. Business is just a collection of people.

Marie Parris:

Yes, indeed. I can agree with that. So last question, has COVID made you reflect on your businesses differently, the way you do things within yourself individually? Paul, I’m going to come to you first on that. What has it done for you, because we’re almost nine months in. How have things changed? How have you changed things?

Paul Mahoney:

So I like getting asked this question with regards to has our approach to property changed because of COVID, and the reason I like getting asked the question is because it hasn’t. And I don’t mean to sound smug in saying that, but because we are generally quite conservative in our approach certainly for our clients when it comes to investing in property, we want to mitigate risk as much as we want to try and make some money out of it. And therefore, we tend to try to invest in big cities with depth in the market, really strong reasons people would want to live there, ticking all those sorts of boxes, and kind of generally avoiding sort of smaller less sustainable locations.

Marie Parris:

Great. Tony?

Tony Gimple:

Yeah.

Marie Parris:

How has it changed your business? Have you changed?

Tony Gimple:

Oh, it’s busier than ever.

Marie Parris:

Okay.

Tony Gimple:

Seriously. If somebody would’ve said to me that 2020 with COVID, would’ve seen my business boom, I’d have said, “You must be joking, are you nuts or what?” I’m busier than ever. In fact, not only busier than I ever was despite the fact that I’m working from home. Thankfully my wife and I can bear each other’s company.

John Howard:

Well, we haven’t had that… We’ve got your opinion on that-

Marie Parris:

You’re enjoying it.

John Howard:

… but we haven’t got hers, have we?

Marie Parris:

Tony, you’re enjoying it though, working from home?

Tony Gimple:

Yeah. I’m a career sociopath, so it’s really not a problem for me. No, my business has boomed.

Marie Parris:

Okay. Richard.

Richard Bush:

Has it changed us? Well, nothing fundamental. I think at the end of the day we’re an investment business, and so we rely on confidence. And for our investors to feel confident they need clearer communications, so what we have been doing all the way throughout the COVID period and we will do more going forwards, is more regular updates on how the projects are progressing, because there’s so much uncertainty. The investors are concerned that things are not progressing. And actually, that’s worked in our favor, because we’ve got closer to our investors, and we get more feedback so we can improve our business more in the future.

Richard Bush:

So we haven’t changed fundamentally, but it has made us more aware of the feeling of uncertainty and how that undermines people’s confidence to invest.

Marie Parris:

Yes. John, same question.

John Howard:

Overheads, overheads, overheads. It sharpened everyone’s pencils I think during the lockdown. Why am I spending this money, why am I doing this? Why are we doing… Why is… And of course, property wise people have sat at home and said, “What the hell are we doing sitting here, why don’t we… What we were going to do in five years time, why don’t we do it now?” And that’s why there’s been a boom in the property, because people are moving. And I’ve got friends in lots of different businesses, which is surprising to think a property developer has friends, but I’m told they’re my friends, and what’s clear is that they’ve all looked at their businesses and said, “Why do we need all these staff? Why do we need this? Why do we need that?”

John Howard:

Sadly, in some cases, they’ve reduced their staff by quite a lot and not made any difference to their business, because they’ve done it smarter, been more clever how they’ve done it. And that’s very sad for the people who’ve lost their jobs, but of course a lot of these businesses that were making money anyway, are suddenly making an awful lot more money because they’ve taken so much slack out of their business.

Marie Parris:

It’s more leaner.

John Howard:

They’re leaner, and they’re making a lot more profit.

Richard Bush:

And they will grow, and they’ll re-employ. It’s going to be a-

John Howard:

And they will grow, they will re-employ.

Richard Bush:

… temporary thing.

John Howard:

But actually, any recession, any slight whether we’re in a recession… Well, officially we’re in a recession, aren’t we? Any recession, people evaluate their businesses, and think, “Crikey, we just better be a bit careful here,” and that’s what they’ve done. And that’s what I’ve done.

Marie Parris:

Nicholas, last word to you.

Nicholas Wallwork:

Yeah. I mean, the guys have covered a lot of stuff there. I mean, fundamentally our business hasn’t changed. John’s phrase of sharpening our pencils, we’ve done that, we’ve reduced some overheads. Interestingly, we’re still spending the same budget on marketing, because we believe that’s important. I think in recession, one the first things that people think they should sharpen their budget on, is marketing-

John Howard:

And that’s the last probably.

Nicholas Wallwork:

Quite the opposite, you need to spend more on marketing to make sure you’re there in the forefront doing that business, that maybe other people have stopped marketing, so there’s more business to be had. So that would be one sort of bit of advise I’d give people out there from a business perspective.

Nicholas Wallwork:

We’ve kind of improved our letting process, we’ve looked at all the processes to make them more efficient. We brought on-

John Howard:

Is that because you had more time, Nicholas during the lockdown-

Nicholas Wallwork:

I’ve had less time.

John Howard:

… [crosstalk 00:49:54].

Nicholas Wallwork:

As I say, similar sentiment around the room, we’re busier than ever. We’ve got more customers, we’ve got more opportunity coming up so we’re sharpening our pencil in terms of preparing our development pipeline for early next year. There are some good deals coming up.

Marie Parris:

Good.

Nicholas Wallwork:

And yeah, excited to be doing business in 2021, is the theme really.

Marie Parris:

Excellent.

Marie Parris:

So there we have it, we’re out of time. We hope that you’ve enjoyed watching Property Summits as much as we’ve enjoyed sharing our expertise with you. Until next time when we’re speaking about looking ahead for 2021, we will see you then. Good-bye.

 

 

 

 

 

 

Property Summits

Intro to Nova Financial Group
Intro to Nova Financial Group
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BTL for Business Owners
BTL for Business Owners
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London and City Centres – Mass Exodus?
London and City Centres – Mass Exodus?
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Property Summits Online – Episode 2
Property Summits Online – Episode 2
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Property Summits Online – Episode 1
Property Summits Online – Episode 1
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