-
14/7/25 8:13 pm
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
When most landlords were shunning the property market after the 2008 crash, Paul Taylor was diving in. He was buying up flats in his native Leeds where their values had almost halved from the financial pre-crisis peak.
This inspiring story is related in a Daily Telegraph article by Samantha Partington which tracks Paul’s property investor journey from Leeds University IT student, commercial property letting agent and on to becoming a full-time landlord and property developer.
Paul started his property investing career buying-up repossessed Leeds city centre flats when prices had collapsed during the financial crash – one man’s crisis is another’s windfall.
It takes nerve to buy at a time when everyone else is fearful and the economy looks like it’s going to hell in a handbasket. These eventful times are easily forgotten now, just how stressful it was, but Paul had the foresight and the luck to buy at just the right time, to make a killing. It’s the classic investment wisdom Warren Buffett talks about: "Be fearful when others are greedy and greedy when others are fearful"
According to the article, Paul built his property portfolio, learned some hard lessons along the way, and shifted from investing in city centre flats to suburban family lets. He eventually transitioned into commercial to residential conversions. His story clearly demonstrates the wisdom of buying at the right time to get value, adapting to change and finding what works for you, and what doesn’t. It’s the key to surviving – and thriving – in today’s rental property market.
When the global financial system almost collapsed in 2008, most property investors were like rabbits in the headlights. They had been piling into property like it was going out of fashion, debt financing themselves up to the hilt, and many simply went bankrupt. But that’s when Paul Taylor went shopping.
With the cash he had saved from his commercial property management and lettings business he grasped the opportunity when it presented itself, and luckily for him he was in the right place at the right time to take advantage.
At that time, cash starved developers were in hoc to the banks and in danger of going bankrupt themselves. The banks were also in trouble, desperate to offload repossessed stock at knock-down prices. New build flats that had been selling off plan for £180,000 were suddenly available at half that amount.
“I worked out that you could buy at less than the cost of building,” Paul told Samantha Partington. “That’s when I realised there was a chance to get in at the right level.”
He bought his first flat with his own cash savings and refinanced to buy more. He was on a roll and by the time he reached his early 30s he was managing his own portfolio of a dozen or so apartments.
His client base was young professionals, city workers who at the time were moving into Leeds which is a key financial centre outside of London. His business model was successful because he could easily let his flats and command good rents, but he was finding that his young professional tenants tended to move quite a lot.
Having tenants that are constantly moving, either for better work opportunities or into other shiny new apartments with better facilities, is not the way to a quiet life for any landlord. Not only is there the constant upheaval of conducting new lettings, but also the letting costs involved, and the void periods, all of which eat into profits.
However, the rents continued to roll-in while, given time, the capital values of the apartments recovered to a point where he was well into capital profit territory.
He realised that this was not the best business model and that moving away from flats to family homes, where tenants stay long-term, might be a better option for him. He set about selling the flats and buying-up terrace properties in the suburbs around Leeds.
Taylor eventually sold almost all his flats to replace them with two and three-bed terrace properties in places like Bramley, Pudsey and Morley on the outskirts of Leeds. He found he could pick up these properties, which were ideal long-term lets for families, at bargain prices, being out in the sticks as they were.
These, in the main, were run down properties in need of refurbishments. So basically, unmortgageable for first time buyers. Having built-up his cash war chest through his apartments’ business Paul was able to drive hard bargains for properties that needed kitchens, bathrooms and had structural issues or defective roofs.
As Paul Taylor told the Telegraph: “By going in cash, you avoid competing with owner-occupiers.” “That’s where you find the value.”
With a typical outlay of £100,000 and a refurb costing £30,000 he could offer outstanding terrace rental properties with modern heating and low-cost energy-efficient family homes now worth £150,000–£160,000, and they rented out at £900 a month.
“That’s the sweet spot,” Mr Taylor said. “A solid 7% yield, enough to cover the mortgage, maintenance and still leave something to put away.”
Typically, the property’s EPC rating would be improved dramatically from the low Ds and Gs to, in one example he instanced, a B. Paul said that he saw EPC ratings, not so much as the importance of meeting government regulations, which of course is necessary, but as increasing tenant satisfaction, encouraging long stays and reduced long-term maintenance costs.
It’s far easier and cheaper to tackle insulation and heating system upgrades during a full property refurbishment than it is doing this piece meal, during tenancies or during void periods and waiting for tenants to leave.
Over a period of letting family units there were more lessons to be learned. Like the types of fittings and floor coverings that have the durability to withstand the extra knocks, and wear and tear when letting to families. Every business model has its success formula which best suits the market, and if this formula can be replicated over many units, generally economies of scale kick-in and the investor is onto a winner.
Nothing stays static for long in business. What works well today often doesn’t tomorrow or over the long-term. Paul Taylor discovered that he wasn't getting the optimal profits from flats that desired, then he found that the profits from his single-family units too started to wane. Increasingly, more stringent government regulation of the buy-to-let market, the rising cost of refurbishing properties following the price hikes of materials after Covid, and a hostile tax regime against the residential landlord business, persuaded him that it was time for another change of tack.
He put on hold his portfolio expansion programme in single family units because, as he told Ms Partington: “This government and the last one have made it clear they don’t like landlords. Tax changes, regulation, compliance costs – it all adds up. That’s why I’ve stepped back from expanding the single-let portfolio.”
Off on to a new venture. This time into another niche that Taylor was familiar with, the commercial property market, a sector that the government did appear to be supporting with its permitted development programme, easing the path to creating more residential accommodation by converting commercial units.
For the Government it meant bringing more desperately needed housing on to the market while clearing up what is often underused and deteriorating commercial property stock. This is often property that’s no longer viable in commercial use or it’s too costly to refurbish to meet modern commercial property energy efficiency standards.
As a bonus, commercial stamp duty is different to that charged on residential properties, with lower headline rates. There’s also a 5% reduced rate of VAT available for a wide range of residential conversion and renovation projects. 5% VAT as opposed to 20% can dramatically reduce the construction cost budget.
Most conversions of non-residential buildings, into houses or flats, will qualify for the reduced 5% VAT rate. As an example, an office building conversion into homes at a cost of £1,000,000 would generate a VAT bill of £50,000 rather than £200,000. By building at scale the costs are spread over more units, so compliance and environmental surveys, planning and building inspection costs are all reduced on a per unit basis.
Ms Partington cites one example of Taylor’s latest project: four former canal cottages were purchased from the Canal and River Trust. Though the purchase price is undisclosed, his estimated market value of each unit is in the £350,000–£400,000 range, with a rental value of around £2,500 per month representing a 7% yield.
Paul Taylor’s journey is an interesting case study in adaptation in a changing business environment. Markets need to be tested to find the real prevailing circumstances. With the best research in the world things don’t always work out as planned and circumstances change – a single government’s budget can upset the whole business model for a property investor.
Paul Taylor reflects that his guiding principle of having the return on each investment he made - at every stage in his journey - cover its full costs, with some left over for profit, has stood him in good stead. For Taylor, making sure every investment he makes returns a good income yield is the key to his long-term success.
Taylor’s story highlights many of the challenges facing today’s rental market in the UK’s private rented sector (PRS). It’s harder to make a profit in a single-let buy-to-let business than it once was, resulting in landlords leaving the sector. and supply shortages driving up rents.
Yet that’s not to say that buy-to-let is dead. Multi-occupied properties, short term served lets and holiday lets tend to be more profitable albeit with more management time. There are still bargains to be had and increased rents make it easier to make a good income. There are many opportunities to make money in the sector by adapting to change. Growing a portfolio and taking advantage of economies of scale, as well as incorporating the business to operate as a limited company, are two strategies that are proving effective today.
Buying run-down properties and refurbishing them has always been a profitable strategy, especially if landlords are able to do the work themselves and keep costs low. Operating as a trading business, as opposed to a lettings (investment) business, has substantial tax advantages, that is, refurbishing to sell – flipping in the jargon - as opposed to letting them.
And of course, as Paul Taylor has demonstrated, commercial to residential conversions can be a lucrative business model, but one that’s not without its difficulties. Finding the right property for conversion is only half the story. Getting planning consent (despite permitted development rights), meeting stringent building regulations and complying with environmental concerns, and getting fiancé can be a challenge.
[Main image credit: Alena Darmel]
Tags:
Comments