My first foray into property investing was in the late 1970s.
Around that time the new Conservative government of Margaret Thatcher was elected signalling that the residential market was about to be de-regulated. This eventually came alongside the deregulation of the financial markets – this latter led to the boom times of the 1980s, the filofax toting, Porsche driving, Yuppy era, long since forgotten.
I had previously bought a small shop in a market town nearby with the intention of using it ourselves; my wife had a hairdressing business in a rented shop. As it happened at the time we started a family, so she didn’t move in, but we had fitted it out already, and so we decided to let the shop to hairdressers – hairdressers’ shops eventually became a bit of a trend for me. There was land and buildings to the rear of the shop that, without too much work, I converted into workshops and let them off as well.
In those days buildings like these were going for a song after the recession in the 1970s, and by dividing up and letting out, making the absolute most of the available space, my return (I had purchased for cash) was phenomenal; I probably had my investment back in a couple of years. That spurs you on!
I had no experience of borrowing money, and frankly in my 20s I was nervous about doing it – I’ve never had a mortgage in my life – so I saw my ultra conservative investing strategy in property as using my own savings, buying run-down or under-used property cheap and doing most of the conversion work myself – in fact the amount of work needed on that first, and some of the other investments I made, was quite minimal.
I remember we removed some of the dividing walls in the shop to give extra space, and some support pillars from under the shop basement, which was on two levels – shop front and rear access – by having the RSJs strengthened and extended. This added value to the shop and cleared a great space in the basement for another let – a bonus. No building control in those days!, but hey the job was done properly.
So that became my lifelong policy: funding developments myself, buying property with break-up potential to maximise underused and lettable space, creating multiple tenancies and gaining maximum revenue from the space we had. A lot of the work I did myself with the help of a small group of tradespeople contacts, keeping my costs to an absolute minimum.
I could have grown much quicker and probably made a lot more money had I borrowed and bought more properties, but I had a full time professional career so I couldn’t let the property business overwhelm me – I would continue to do the property work at weekends and in holiday times and grow the portfolio organically.
Having been raised on a farm where building work was a constant, and having trained as an engineer, I had all the basic skills necessary to develop properties, and my family had invested in property for the several generations that I’m aware of – my paternal grandfather’s line were farmers, and my maternal grandfather, also from farming stock, made his living as a cattle dealer. He had grown a portfolio of shops and residential in-terrace houses. The latter, which by my time were on rent controlled regulated tenancies, were earning peanuts – nobody in their right mind would have been a new investor in residential at that time.
An abiding memory I have was of us kids following my mother around, tramping streets in our local town collecting rents from some really lovely old ladies and gents who always had the cash waiting every week without fail on the sideboard, the payments all recorded in a little rent book – it was all nonsense as the financial return on your time alone probably just wasn’t worth it.
However, a new era was dawning, the Assured Shorthold Tenancy (AST) was ushered in by Maggie in the 1980 Housing Act and that encouraged me to venture into residential flats – I was sure I could do better. I bought a big old house with land and some old out-buildings to the rear – again for cash. At the time there were local authority grants going so I applied for one and employed a building contractor to do the conversion work. All this worked out well and in addition I had the land and out-buildings to let as small workshops, which were in demand for small trades.
In the early eighties no one but no one was letting residential properties, and one bedroom flats were just ideal in a small market town in commuter distance to Manchester – they were in high demand. In fact when I advertised them in the local paper, a tiny classified advertisement was all that was required, I was inundated with phone calls – I think I counted 30 calls in one day for one of the flats.
That had been the extent of the pent-up demand caused by a shortage of rental accommodation, in turn caused by the idiotic and misguided socially inspired Rent Act legislation. The legislation brought in years earlier to control the rental market for the benefit of tenants had effectively destroyed it – the upshot was that all the landlords had had their figures burnt and had abandoned it, to the detriment of tenants. Do we really need to go through this destructive cycle all over again? Have the politicians learned these basic economic lessons, or are they economic illiterates?
One promise I made to myself when I started my landlording career, remembering our trudging the streets on those wet winter Saturdays, was that I would never ever find myself knocking on doors collecting rents.
Fortunately there was by then a great solution to hand – the Banker’s Standing Order. Every tenant I’ve ever had, commercial as well as residential, was signed up to a standing order, and it worked a treat. I’ve always said that the BSO was the “best thing since sliced bread” for landlords – it enabled me as a part-time landlord with a demanding full-time job to manage a portfolio of properties. I’ve never had a problem with standing order payments in 40 plus years of letting, tenants were happy to comply, which saved them time as well as me, and I can honestly say, I’ve never knocked on a door for rent.
The great thing is, with standing orders, especially now that you can monitor your bank account online, it removes the painful process of paying rent every month from the forefront of the tenant’s mind, it makes for a better more professional relationship for a self-managing landlord, and it’s all automatic. If a tenant misses a payment there are only two possibilities: they stopped the standing order, or there was a lack of funds in their account. In both cases you are prompted to take action immediately.
I can still remember the thrill I got from being a landlord in my own right, a new era was dawning with de-regulation which made your investment in residential property very safe, and at the same time there was that nice feeling that you were providing much needed and safe accommodation, and a valuable community service.
In the case of commercial you could let it and forget it because with a full repairing and insuring lease the tenant takes all the responsibility, and all you have to do is collect rent, which drops nicely into your bank as a standing order. That really is a passive income, and in one case the shop I purchased 30 years before was producing as much in annual rent as I had originally paid for it.
In the case of residential, that’s a rather different story because unlike commercials with long leases, tenants don’t stay so long – I think six or seven years was my longest let, but 6 months to 18 months is perhaps the norm. That creates a good deal of work, because every change means a good bit of cleaning and refurbishing work, marketing, viewings and paperwork. The odd bad tenant, despite careful vetting, creates a fair bit of anxiety and stress at times, but one learns how to deal with it and to live with that.
I’ve always believed in operating as a responsible landlord, making sure all the current safety regulations are being met, and treating tenants as customers, and with respect. I was an early member of the then North West Landlord’s Association, when their early, quite primitive by today’s standards, newsletter kept you right up-to-date with all the latest landlording tips and tricks and current regulations. The NWLA of course morphed into the Residential Landlords Association (RLA) before its recent combination with the National Landlords Association (NLA) to recently become the National Residential Landlords Association (NRLA).
I developed a routine for letting both residential and commercial properties. My interest in the legal aspects had prompted me to study property law which in turn led me to developing documentation that provided a high degree of protection. Eventually when credit checks became available I used these as well, along side employer and landlord referencing.
In those early days there was something called a section 20 notice. There are of course two instances of section 20 notices in property in England: (1) is the notice served in relation to early shorthold tenancies under the Housing Act 1988, and the other, (2) refers to section 20 of the Landlord and Tenant Act 1985, as amended by the Commonhold and Leasehold Reform Act (CLRA) 2002, which involves leasehold property and consultation with leaseholders on major works. I’m referring to the former here.
You had to inform your tenants beforehand that they were entering into a shorthold tenancy so they were pre-warned that it could be ended with a notice – the Section 21 notice. I would always attach all the necessary notices to the tenancy agreement and have each one signed for. An in-going tenant will sign almost anything when they are taking over the property, but it’s often impossible to get anything signed once they are ensconced in the property: it was in those days vital that you could prove the section 20 notice had been given, if unfortunately it came to an eviction. There were plenty of landlords back in those day stymied on eviction when they couldn’t prove they had given the notice.
Over the course of a long letting career I have had very few occasions to use the eviction process – perhaps giving the lie to the “hue and cry” for the need to abolish Section 21 – but those evictions I did have, and the commercial rent arrears cases I ended up pursuing in court, I treated as valuable learning experiences. I found it was often uneconomic to use a solicitor as the legal costs often amounted to a big proportion of the monies recovered, so I developed the skills of putting a claim together myself and always litigated in person.
It can be done very effectively as a layman. In one case a judge complimented me on my presentation saying it was more professional than those of many of the legal briefs who came before him, but by this time I had been through a bit of a learning curve in courts – I found those experiences rather enjoyable and they are very satisfying when you win, and I thank those delinquent tenants I had for giving me those great opportunities to learn.
Banking on it
My biggest challenge was when I bought a large bank building from Barclays. It was recession time again in the early 1990s and property was sticking on the market, bank loans were hard to get, and with interest rates hitting 16% people who had borrowed heavily where gong bankrupt right, left and centre, losing everything. Some close friends of ours lost their own home at the time. I got a real bargain with a cash purchase for the bank.
The bank was a three storey building with a large basement and a rear extension on one side. But this time it stretched me to the limit with the development costs, especially as we found dry rot and had to replace all the street level floors – these developments always cost more than you budget for. It had the potential for two large shops with basements, and two floors of offices above, plus another rear extension, and the conversion worked out great over a couple of years; hard work over an extended period but I really enjoyed it and I certainly learned how to spot and deal with dry rot properly.
With no mortgages and a really good income from my portfolio this went on for some 40 years after the first one I bought, and it gave me real security in life, especially when redundancies were threatened in my main occupation, though I eventually took early retirement and set up something else connected with property – I founded LandlordZONE in 1999.
During my searches online in the very early days of the internet, my AltaVista browser (remember that?) was turning up a couple of American landlord websites. They were pioneers but pretty poorly presented I thought, though at the time they provided what little information and good advice there was for landlords, apart from what the landlord associations were providing. Of course the American market is far different from here, so I set about making a website myself and populating it with UK specific information and advice from my own experience.
In those days with the Internet in its infancy, Google was just starting, the website slowly gained traction, and coupled with a busy forum for landlords, the articles I was writing for trade journals and talks at shows and exhibitions, we began to monetise the business. I say we, as by this time I was employing a full time tech guy and two part time assistants to run LandlordZONE, but all that’s another story…