It’s another panel discussion on this week’s TPV podcast. I am joined by Dominick Hardy, Jeff Unsworth, Carl Gilbert and Nana Piesie.
Our topic of discussion is investment criteria and deal/property review. It’s like a before and after assessment of our property deals in other words.
Before - what is our property investment criteria? Hint: it should contain both descriptive words and numbers or measures.
After - here we get to track the budget versus actual of our property investment performance in reality to see how good we were at guessing!
We also have regular review points of our individual property deals or our portfolio. These are usually triggered by a recurring timescale, such as tax return time. Alternatively, we can use other trigger events, such as a tenant changeover or a mortgage fixed-rate renewal as a good moment to assess how our property investment is performing.
That’s my take on the topic BUT what is the view of our panelists?
You’ll just have to listen to find out…
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Transcription of the show
It’s another panel discussion on this week’s TPV podcast. I am joined by Dominick Hardy, Jeff Unsworth, Carl Gilbert and Nana Piesie.
Our topic of discussion is investment criteria and deal/property review. It’s like a before and after assessment of our property deals in other words.
Before - what is our property investment criteria? Hint: it should contain both descriptive words and numbers or measures.
After - here we get to track the budget versus actual of our property investment performance in reality to see how good we were at guessing!
We also have regular review points of our individual property deals or our portfolio. These are usually triggered by a recurring timescale, such as tax return time. Alternatively, we can use other trigger events, such as a tenant changeover or a mortgage fixed-rate renewal as a good moment to assess how our property investment is performing.
That’s my take on the topic BUT what is the view of our panelists?
You’ll just have to listen to find out…
Property Chatter
Welcome to the property voice podcast helping you to navigate safely through the world of property investing, get the lowdown and updates, insights, and outcomes on all matters property with a splash of entertainment along the way, the property voice or voice to trust among the crowd. Now, let's get started with your host, Richard Brown.
Hello, and welcome to another episode of the property voice podcast. My name is Richard Brown. And as always a pleasure to have you join me again on the show today. And here we are in the middle of the property core skills series. And we have another property core skill to talk about today. And I've kind of you know, talked about this as being an investment, Christ's investment criteria, and deal review. And we're going to talk about some, you know, lists of things that we might consider and some numbers which we might consider an evaluation, perhaps before we go into a transaction, and maybe later on once we own a property or we have properties in our portfolio. So that's kind of the gist of it. I'm glad to say I'm joined by a group on the panel today, another, you know, group who have willingly put themselves out one evening, so I'm very grateful you can join me. Just going to go around the room, we've got Dominic, Carl, Jeff, and Nana. And if you could just introduce yourselves quickly in that order. That would be very, very helpful. Thank you.
Okay, thanks, Richard. Hi, I'm Dominic. I've been invested in property since about 2017. My first property, my residential property to live in in 2007, I think. And then I moved in 2012. So I kind of became an accidental landlord and wasn't looking to invest in property. But yeah, managed to keep on keeping hold of my first property. But then around 2017, I thought, because I just look into this really serious later started investing then in properties. And since then I've kind of, I guess, progressed a fair bit in four years, but a small portfolio of biotechs HMOs and holiday laps with myself or myself and also with a couple of JV partners. So yeah, my aim is to invest further grow the portfolio and replace the income from my day job, basically, which, yeah, it's time-poor, because my day job keys are very busy, hoping to replace that sooner rather than later. Sounds good.
Thanks, Tom. I
appreciate that.
Richard, I'm Karla. I've been investing in properties since about 2010. Over that time, I've built up a small portfolio to let's both investing by myself and with joint venture partners. And the last year or two, I've been more primarily focused on tissue and commercial conversion opportunities, looking at larger projects. So so my interest in this conversation tonight is both around buying smaller properties, but also assessing larger commercial conversion opportunities.
So it's a good Karl. Thank you very much. Welcome. Good to see you.
Richard, morning name is Jeff Windsor, invest in property for just over 10 years now focusing on single vital areas, mainly up in the Northwest. My priority is just to get an additional income to keen on giving them my day job I enjoy it completely at the moment, but having the additional income is great. So continuing to do that and hopefully looking into a bit more different deals from single let's HMOs may be smaller gets with the current environment. Perfect. Thanks, Jeff.
Welcome. Thank you.
Hi, my name is Nana. I'm from Sweden, me and my fiance, our company in the UK. And we have invested since 2019. We're at the beginning of the journey at the moment we have three rent rampages most of we just completed on one by two let that strong renovation and yeah, we have done and tried different strategies just to test the waters. Yeah, we still do that. And my goal is that next year, I will leave my work so I can focus on the property full time and scale. And yeah, that's about me.
It's not a welcome back. Couple of welcome backs here actually so but yeah, now has been one of the consistent members for sure. And thank you but in Alright guys, well, thanks a lot. I really appreciate that intro. So let's get into things. So let's start with investment criteria. So what are we talking about? Do you know what I mean by investment criteria is can we describe what we're going to invest in? So in loose terms is what I mean by that. So obviously, you do have a way in which you can describe what you're looking to invest in, whether it's an investment or development, obviously. Do you do that currently? And if so, what sort of things are on your list? If you like?
Do you mean, like property? Or, like the metrics? I mean, when you say invest in
Well, what's on your list? I don't know. So I'm just keen to understand what your views are. I mean, my views is I've got some property stuff. And I've got some numbers stuff or metric stuff. Yeah.
For me, and then on the property side. I mean, I guess I mostly look at toilets, HMOs holiday lights. Trying to extend that a little bit with BRS. That's looking at larger developments like I think Carl and scrap some others are. But yeah, they're kind of like assets I guess I'm looking for. But then on the metric side x, I'm trying to replace my day job, it's just, I'm looking for something that kind of next, a certain amount per month, profit. So around 200 pound a month profit. That's kind of one of the key metrics that I look for.
So you see got on another side, you got something measurable there with the 200 pounds a month. And on the property size, you talked about different strategies. But if I were to say to you, you know, we're in an HMO in Timbuktu Do you would you say that fits your criteria?
I'm not averse to investing further afield? Perhaps not Timbuktu? I don't know too much about that area. So we take a lot of time, I think to look into that. But if it's an area I know, or something in the UK, obviously, because I know the market in the UK pretty much but it's a property abroad depends on where obviously take a bit more work, but there's a few actually areas abroad have been looking at. Okay, for several after the holiday, let's primarily
make sense.
Interesting. And what about other people? Yes. So
a bit already, when it comes to investing to my boat last week, a few weeks ago about knowledge is king. I'd like the single lets I like to know where I'm investing what I'm investing in. I have a very small search area for my properties. So location is this is the thing for me. I need to know exactly what the demand is and all the criteria we've previously spoken about, about a particular area. So I'm very, very boring when it comes to this sort of thing. I do have, I do look for HMOs. I'm something I started looking into. Well, obviously they have different criteria for me as an investor than single. So all my single apps are that you're looking for a return on investment for me between 15 and 20%. That's, that's what I would expect. That usually corresponds to about seven or 8% gross yield. But I am just boring when it comes to HMOs. I've got been looking a lot recently and obviously, the current market is crazy. prices are going up. People are buying crazy figures. As soon as a property comes up for sale and the word HMO profitable investment comes into that search criteria suddenly snapped up for pressingly. So on an HMO for me. I'm looking at around probably 20 to 25%. And I just can't see those numbers at the moment. It's disappointing, but it's something that we need to live with. And we'll see how things go over the next few weeks and months.
Yeah, just I mean, I wouldn't necessarily say it's boring. You know, I think having a lot of information available to you, will keep you safe, right? So I wouldn't say that's a boring thing. I think that's a good thing. But in terms of the criteria, then you say obviously it's different. And then you have you know a lot of things you look into just kind of give us a flavor what sort of differences might there be between We'd say, a single HMO on the one hand. And then second of all, if Do you have a list of criteria that you would check off? written down? Or go on a, you know, device or something? And if so, how long is your list?
Yes, or No, I don't have anything written down. It's all about feel. It's all about knowing an area and knowing whereas good was not and what you'd expect from those particular areas. So the biggest thing is the HMO is different than a single a is looking for good schools, good networks, shops, etc, HMO, looking close to town centers, transport links, etc. So the second criteria are which are slightly different, but they both benefit from the same criteria. There's a lot of overlap. But generally, you're looking at the things we've previously mentioned about what we're looking for in an area. What was the employment? What are the actual shops? Like? Is there a shopping development with restaurants? Is there a train station, all these different things that we've talked about previously?
Okay, sounds good.
I'm wondering, has anybody got a red mist?
Oui, oui? Oui. Oh, can I go? So we have a read from this than a lot of what Jeff said, we actually have dinosaurs. Because as you're aware, we're from Sweden. So we need to like that the date is very, very important for us, besides calling the agents and etc. and asking them wants to demand this. But we look like from the salary, what people are earning, how they were they want to live, where were the closest amenities? Basically what Jeff said, and then depending on what type of property we are looking after, if it's a terraced house, or flats or semi-detached, that also depends on how much are we willing to pay? And, yeah, everything. And my fiance's count, and so she's very good with Excel and all of this. But we have criteria of 14% ish on the beitler. But as you're aware of, if let's say, you're in an area where it's a lot of capital growth, then maybe we can lower their ROI, because we will then retain it back turning capital growth, and we get our money back much easier. So it's, it's a bit of, like, you need to look about look to the whole picture. And not just like the RA y, like there's so much stuff that you need to factor in. So we try to keep us in the HS two area or surrounding areas, cities that are surrounding to today because we know that capital growth would go up and the demand would be there. So and yeah, just looking what type of employers are in the area and coming or moving out. So you don't you're not like stuck with just one employer and then believe and, yeah, your investment goes down south.
Sounds good. Maybe your investment goes down south wouldn't be such a bad thing.
Yeah, depends.
Come on, Carl. I bet you've got a list I bet you've got a list.
Why do I tend to so move away from the more house kind of Beitler discussion and moving on to the other stream effects on which commercial promotions I tend to use my deal analyzer to kind of capture all the different elements to compare to check for but that's probably the second stage. honestly don't have a list for the first stage, which is the more kind of basic stuff so location, like in around the London commuter belt, but how far from the town is it? How long does it take to walk to the station? What's the flood risk? How big is the building does it Below 1500 square meters so suitable for class Ma, for example, is it listed is it in an article for area what's the planning history. So, those are the initial criteria that the deal has to clear in order to start looking at it in more detail then becomes in that the analysis stage which is very involved, looked at the error in a bit more detail the sales and rental demand the demographic, looking at the gdv of the project, the bill costs the duration of the project. Then once you've got those core components a bit clearer, then you can start to see how the deal stacks up. So the bottom line is the bottom line metric that I'm looking for, amongst others is 20% return post finance, there are other metrics in there that I look to see kind of look to make sure they look okay. Just the variable process I follow.
And it's interesting that you know, obviously you've kind of touched on a point there which is that it could be levels right or layers. I often like this type of critique or analysis or whatever you want to call it is peeling an onion there are multiple layers you just peel an onion, and if it works, you keep peeling if it doesn't work you stop peeling. I think that's the principle
Yeah, trying to try and prove or disprove an opportunity as early as possible. So it's in the past I've gone through like checking and checking in check and doing all these assets and then you realize this article for the Our strength is as you refine your process he moved easier checks for upstream. Try and try and kill it as soon as possible. If it's gonna die, it's gonna die.
Yeah, try and kill it as soon as possible.
Because the one thing that I've known, I've found is, he can't be soft on the analysis process, you have to be pretty tough and pretty ruthless. I mean, obviously, try and make it work as best as you can, but you can't be overly optimistic. If it's not going to work, then you want to find that how now rather than further down the line.
That's good it's a good point, actually. Because, you know, there's, there's literally one, I don't know, hundreds of 1000s if not millions of properties. I don't know if it's millions, but there are hundreds of 1000s of properties, you know, to choose from. So this is kind of planning around, you don't necessarily need to force it. Okay, they're not all on the market at the same time, or available to purchase or invest in at the same time. But it's quite odd it's quite slow-moving, I suppose. But there's another one that will come by so it is worth being brutal. Cool. Let's just be distracted thereby what I can see on screen, which is pretty interesting. I've got to tell you now because it's a podcast. Nanos just had his dinner brought to him. So that's, that's amazing. I'm gonna ask him a question now so he can't start eating. Now let's just talk about let's talk about some of the numbers and so what are your key what are your favorite key performance indicators or the metrics or the numbers that you'll look at? Not just Just give me a few of your favorites? I just like to understand
that I just use two legs that our eye and net cash flow net profit per month, they're just the two I use I don't find anything else too helpful.
Keep it simple. Yeah. Yeah, definitely use
I was gonna say what do you use Nana
though net cash flow, ROI, and the potential capital growth potential we go through five years, and then we just split the median of that. So we put that as si capital growth ish, but I mean, this year has been quite unfair and lastly compared with what has been before, but yeah, that's that that that's those three metrics. were gone. Okay,
so Jeff, I think I cut across you though, and you're about to start talking. What were you gonna say?
I literally am gonna reflect on what Dominic and I said about their ROI and net cash flow with the things that we'll all my investments. The simplest thing to do is before you get into all the analysis, that policy and look at those they are allowed is that in your range does that meet certain criteria, it's easy to do easy to reflect on. And suddenly, you can then just do a deal of many, many years ago, I've spent hours and hours and hours, looking at a property, going through all the analysis and then realizing the ROI wasn't good enough for me, or then pending, or finding one that was good enough for me and then pinning all my hopes, or my dreams on that single property, which is ridiculous. But when you're a new investor, that that's what you're thinking about, you're thinking with that first or your second property in your investment. That's what you need. It's a perfect deal. And suddenly, someone else comes out and buys it from you or all your analysis doesn't seem right, because you've missed them what these things out, which you can expect to see.
driven by the ROI on the net cash flows pretty, pretty high up the rankings. So far, a little bit of capital, future potential capital growth, but I bet the developer amongst us might have maybe one or two more.
Yeah, so back to development projects. So the headline metric for me is the return post finance. So this is the overall profit that the project will return versus the total cost of the project, after taking into consideration and a development that costs and purchase debt costs. So this is also important because the banks and investors will be looking at this. So even if you're willing to drop it, maybe to 1716 15%, you might be willing to take that as a developer, but then you might struggle to get development, finance from the banks. Then on top of that, also keep half an eye on the annualized return for investors. How much would they get your one year from the investment? If it's a whole model might look at the number of units held, and the number of units that need to be sold to exit the deal. And the net cash flow? I tend not to look at capital growth because I'm focusing on the in the southeast. So the London community belt, so most Arizona, high capital growth areas anyway. Yeah, yeah, no
surprise, you talk about profit. And you do make a really good point about the funders, they basically they force you to do a good project, actually, it's not bad in a way, it's good because they kind of basically say, well, we think you need to do 20% profit on your total cost. Oh, as we weren't lying to you. That's not a bad discipline to get into, is it? But the irony, though, is, if you've got an interesting exit strategy. So for example, if you want to build to rent, that you'll think well, I could probably take more of my profit on the back end on the rental. And therefore maybe I could take a pinch below the 20%. Equally, as you just alluded to, if you've got kind of a split strategy, why you might sell a few units and retain a few units. You know you can actually again, you know, pay yourself back out at the back end as well. And that, so that that does sort of change things. But unfortunately, the lenders probably won't join you in that journey.
So yeah, yeah, that's an interesting one because when you start looking at the whole model, sometimes you see the net return being higher than what you what you're looking for. And you start thinking, Okay, well, maybe I can increase the purchase price because I'm still going to be hitting my rental targets. But of course flips Flipside is that as you say, the bank isn't interested in holding it? Or they say, Well, if, if we can come to the end of the project, we need to exit this or even exit at any stage prior? What is it going to be the return for selling it? Or what is the sale exit?
Yeah. So that's interesting because that's really driven by a third party, which obviously in this case, is the bank. So banks and lenders, banks and lenders, banks, and valuers, why don't they say, you know, definitely control the purse strings, we can say that. And therefore they can control a lot of what we do as developers unless we happen to be funded through personal cash or, you know, private finance or something like that. Yeah, very good. So we spent a bit of time looking at maybe going into a deal, right? So investment criteria is a by investment criteria to you know, to measure, you know, the deal. But I think part of this conversation is all about, well, what happens once you've got it, you vote you own a property. So you own a property, maybe several properties, in which case we're talking about our portfolio. So do we have criteria or do we have metrics for properties in our portfolio, whether it's one or many and if so, So, what are they? And equally, does that help us in any way? What do we do? Do we have a process Do we have do we make decisions around the information that we're finding out.
So that's just something I've recently actually built into what I have in our table, some exact templates like track my portfolio and the rental income. So past few weeks, actually, it was something in there to help me track all the metrics. So it's mostly automated, I still need to put in a few figures in there. But it's kind of good because then it gives me a real-time ROI. I also got like a lifetime cash flow, 12-month cash flow, some other figures in there as well. So I can see how each property is performing. So yes, it's not 100% kind of accurate, because I don't have all the accounting numbers in there. But like on a per property basis, it allows me to do comparisons between each property, which I think is useful.
Yeah, we also have one that we call an income summary. So we have all of our rent to rents. And we also have, like, if we even do like a commercial, like we have done now, this several months, we have how much we have paid for that, for that Facebook ads, and how much time yen are graded for us. So we tried to track everything and see which property is performing better. And, and also, as we have other investments, like stocks and pressure bills, and etc. We tried to compare them went, Okay, this one went much better than the properties and etc. So just trying to have a track going on everything.
Thanks, then, just going back to when you actually did the introduction, as well as the certain key areas when I do reviews of my properties. So you mentioned about when we mortgage when you have any tenants, that sort of key areas when I reassess why I want to do with my properties. Another one is to do an annual rent review. So should I be increasing the rent? Is the room fair? But I then look at the tenant, is the tenant a good tenant for me? are they worth keeping? are they worth actually working with? Like previously, I've done rent reductions because the tenant has been tenants, they keep the property really well. They tell me exactly when things go wrong, why they go wrong as a tenant worth keeping. So that's what the criteria is for me is who was the tenant and how they interacted with me and held the property? Say we mortgages and other times, right? Do I want to then remortgage this property do I want to sell it because it's the ROI. Good for me. And then another criteria is the overall condition of the property. So I look at the property and go or boiler is falling apart, it's taking a lot of servicing, Therefore, I need to replace it. Is that worth a look at other things like kitchens and bathrooms? What condition are they in? Have I replaced them? Do they need replacing? Things like carpets and general conditioning? Is that something that is going to cost me a lot to do in the short term and therefore not worth holding on to long term because the tenants or the area that it's been purchasing is not growing? Well, or it's not renting out? Well. So there's a lot of things and then there's the upside is hasn't the property done really well and therefore I can release a lot of funds. So if you need to remortgage or like a couple of properties, I've got my own name, so I wouldn't remortgage them, I probably ended up selling them if they were doing well, because of tax implications, etc.
Yeah, I'm going to come back to some of the points you've made there. Jeff, you make some really interesting points. But I just give Carl the opportunity of joining in this part as well.
Yeah, probably similar points to what's already been raised. Assessing each individual property in the portfolio on an annual basis looking at how much leverage There is, of course, the overall loan to value how much exposure there is to develop to debt. Also assessing properties On a performance basis based on not so much how much was invested originally, but kind of reviewing that, based on how much capital is left in, in the deal? Would it be better to, to sell that and invest it elsewhere? Is it maybe the property price has gone up and maybe worth exiting for a better investment?
Yeah, so I'll start with that point last, that last point for us, which is the difference between the return on investment or cash, the original cash investment, and the return on equity, you know, so if you've got equity that's built up in your property, that's not the same as the original cash investment. And what sometimes people find is that because house prices are changing over time, the usual is that the equity position increases over time. And so that, you know, if you, if you just look at your ROI, or whatever the figure is, I put 30 grand into this property, just pick out whatever is right about 30 grand into this property, and just keep looking at your rental performance versus that original cash investment. But let's say for argument's sake, that and that, you know, that that 30 grand was maybe 25% of the value of the property. But let's say that, you know, you've done really well from that property, and it's now you know, 60 grand of equity. Well, you know, if you do your returns based on your equity position for 60 grand versus your 30 grand, you'll get a different result. And so, I think that's really good to highlight that, you know, because people often, you know, forget that. And then what is that equity serving you in the best way. And, Jeff, you also kind of talked about, you know, you talked about evaluating whether the property still serves you whether the tenant in front enough is still serving you, I got a copy with that. And also, you're talking about potential maintenance or refurbishment costs that are either going to happen now or maybe sometime in the future, I imagine is what you're identifying. And, and whether it's an opportunity, perhaps, to do something different as far as driving. So when it's okay to track things, and measure things, and have a nice, fancy spreadsheet, but the question is, so what? So what, what are you going to do with that information? Apart from it being a nice, fancy spreadsheet, you know, and we can have a red, Amber green, and we can have flashing lights for all, you know, we like, but what we're going to do with that information? So do what do people do as a result of this review process? So whether it's triggered by remortgage or change of tenancy or your tax return, or whatever else, what do you do when you've kind of got that information on some sort of report or dashboard? Or whatever it is a spreadsheet? What do you do? Do you do anything? Or do you just look at you know, look at it? I'm sure the answer is not. He's just looking at it, right?
Yeah, I mean, for me, I think I mentioned that started when really been investing since 2017. So I've only, I guess, got these processes in place the past year or two. So I've not had much opportunity to act on I guess the results. There is one property I have, which is not one of the properties I've purchased, actually, as an investment property does not perform great. And actually, the ad runs in these numbers, and looking at these metrics is just kind of reaffirm that as a property I'm looking to sell. But yeah, from that point of view, it's kind of just confirmed my decision to sell that property in the near future.
Yeah, I've had a couple of instances, especially buying tenants, obviously, we try and have low-income tenants. So people on Universal Credit security, so I've had ups and downs with those types of tenants. But one particular instance where there's a tenant who's putting on a few payments, finally getting the money back from them. It's one of the properties that hasn't really grown, it's not a particular growth area. So there's no cash stored up into this investment. But it's a good rental income when the tenants paid. So do we decisions, or do we actually like to go? which is near impossible nowadays, with a lot of the COVID restrictions, or do we just knuckle down, work with the tenants, make sure that pay makes sure the property is taken care of. At the end of the day, it's a very good owner. It's one of the best returns on capital deployed. So it's good in that aspect, but at the same time, it's always a worry, it's one of those where are we going to get paid this month if we're not going to get paid? How long is it before we get paid? Will it be three or four months before they actually get the rest of the rent paid? Can we come around eventually but it's one of those worries and we're on a rock and a hard place is do we sell and not make much money? Or do we keep persevering and actually take the money that's coming towards us but then there are other tenants which are perfect and you use this happy day and it's easy when you do an evaluation and you go actually that's perfectly fine and want to do anything can as I mentioned before was capital employed is I've got a few which are in my personality, so I don't want to then take mortgages out on them. I'm thinking it's making good money for me, so I'll leave them alone. As simple as that. Were anything that's in one of my businesses, I will then review and they will take money, remortgage, and then redeploy that capital as well.
Interesting.
Yeah, when it comes for us we look at the rent HMOs for that see, we're especially now during the COVID period, in the beginning, some of the HMOs was empty. So the forecast that we just went down the toilet, so we have to check on that and then the one of the other HMOs needed an extra renovation not much, but still. So we were just practicing why that happened, how come and how we can combine maybe the partners that we're working with should maybe going find tenants from somewhere else. So we can just pivot. So yeah.
Interesting things No, no, thing.
co Yeah, so
we mentioned one consideration that we didn't cover earlier. So that's taxation and potential changes to your personal tax position. So this is something I've been thinking about earlier this year. I've got some properties held personally and some elderly limited company. So next year, I'm going to be looking to wind up one of my companies don't you only been set up to hold one property but I'm going to wind up that company and then consider what to do with that Property Brothers to either keep it or seller boss get rid of the business.
Yeah, so we talked about you know, it's interesting actually people using the metrics or the evaluation process to make different decisions we talk about you know, decisions about changing management decisions about a change in tenant whether to undertake repairs refurbishment, essentially whether to sell a property and redeploy the proceeds elsewhere obviously the I think the February looks at the tax position say on capital gains It is like there's like a tipping point Isn't that where you know you sell and you hardly pay any effective capital gains it's you know, you can have 12 and a half 1000 pounds per owner capital gains tax-free so to owners you can make 25,000 capital gains tax sell that and not pay any tax on it. Then anything above that of course becomes a marginal tax rate. So but then at what point does it become too expensive to sell people some have also talked about releasing money from the property so if the equity is built up, perhaps you can release funds and I don't know what people are doing with those funds but they say they're reinvesting would that be fair or people no one's living off that proposed proceeds in this group. I've heard some plans recommend no Yeah, yeah, I've heard some people talk about that. It's not my favorite strategy that I think it can be a quite high risk and there's another one probably I there haven't been many I don't think it's been directly mentioned anyway which are repurposing the property so you know you if it's from one usage single that you could repurpose it to another usage say multilayered or service accommodation or vice versa. So that's what I often go through personally I go through a portfolio review exercise myself once a year for the entire portfolio and I'm looking you know, do a red amber green scoring system and look at the return on equity funding of the car you were talking about that return on equity so what equity is in the property versus what cash have you put in the property look at both red amber green them against my preset criteria. And then I basically say okay, on a case-by-case basis, so what are we gonna do about that? Could I sell it? Could I release capital? Could I redeploy it? Do I need to renovate it? You know, to I that's But I personally don't. So does anybody do something a bit like that?
Not so much redeploying because most of them I know, very particular types of property in particular years. So it would be probably good if it could. But yeah, I definitely do the annual review and review, etc, with purchasing is not something that would fit my portfolio.
Cool. Okay. Well, you know, that's, that's just kind of the top line things I wanted to talk about. But in terms of, you know, in terms of the investment criteria, or do a review or portfolio review, is there anything else that people kind of do or think about or, you know, suggest people consider,
especially thinking about the portfolio review? I do this, but you could potentially take the area into consideration. So how is the area changed? Since you've invested? Has it come up? Has it come down? So every scenario you don't want to invest in anymore? Suppose equally? Was your investment area? Do you like to invest locally? And maybe you're moving? So do you need to set up all your properties? And maybe location comes into theirs?
Yeah, location? And you know, it's funny, because Nana said earlier, didn't you talked about they try to invest near HS who, you know, infrastructure growth. If that actually happens, by the way? Hopefully, it will. Hopefully. Well, Crossrail hasn't happened yet. So HS two, which I don't know which part of HST you're looking at. But maybe the link to Birmingham might be a little stronger than some of the other components. Let's see. But then, okay, maybe it's a passing thought, anything that you know, you just want to think about, or share with the listeners that you do, or a top tip or don't do in this particular area? In closing? And if so we can share that. Now. Otherwise, you know, I think we'll just go around the table and just has some parting thoughts before we close off a conversation today?
Yeah, one thing I just like to reiterate, is the fact that don't go down a rabbit or when you do analyze your deals, just have a very brief overview of what you're doing first, have a very clear insight into what is your return on investment? How much can you invest, what are you investing in is both single reads by two levels, HMO is serviced accommodation, have all those thoughts before you start than going to the nth degree on analyzing that deal, then getting more which quotes and doing anything, then deciding put an offer in, then it's too late, it's gone. Have a brief overview, talk to the agents who are involved, make sure that what you're thinking suits the seller, and work from there. That's what I could add.
I, I think people should try different strategies, and just feel what they what's good for them. properties are a very forgiving asset class, so we can try it. Don't be reckless. But try it and see if if you want to do HMOs or if you want to do developments or just simply buy toilets or as to say so because it's a wide range of different type of strategies that you can do, or even sell flowers. So just try and do stuff.
I mean, just to further extend them for that as well. So we've talked about metrics and analysis, I'd say it's important to get systems in place. So you can track all this. Man, it's not going to be perfect the first time and I'm still working on what I do. But obviously, once you've got a framework there and you have something in place, you can extend that, and then you know what I need to add for next time and you can build upon it. So yeah, I'd say don't go in kind of blindly try to work on you even if it's like a spreadsheet to start with. That's better than nothing. So just drag things down. And then you can refine it as you go forward. Good point.
This is what I get for going last So Jeff mentioned, I was gonna say that like analyzing different levels, strike it down and then Don very kindly Come on my podcast systems xR is a good point. I think systems for me is the most important one without
encroaching on a future episode.
I, I make sure that all of the leads that are come in are captured in the system and then we gradually add more and more information as the deal survives subsequent rounds of analysis. And then at some point, it will evolve into analysis spreadsheets and capturing files in a shared drive that that collateral or graduate build and build. So as we get deeper into the deal
are good. What do you think you are last for about me I've got to maybe follow that now with a couple of extra thoughts. I'm that was left. So now it's really good, really good stuff that's being covered. I think for me the most obvious thing to add to it of all would be there's not such a thing as a perfect deal. So you know, there's usually a compromise or a trade-off in some respect. So if people are looking for the perfect deal, it isn't really out there. Someone might write to me, so I've got the perfect deal. But you know, he generally does some kind of trade-off, I have a checklist, there are usually about 14 things on my checklist, not usually on one of them, there are 14 things on my checklist, I very rarely get 14 out of 14, when I'm looking at a transaction when I'm looking at opportunity. I think the other thing is we talked about systems. But I also think having a habit or routine that you know, you go back and review. And so that you if you have a trigger point, so I have deliberate triggers. So we talked about them as we've gone along. But just to remind people to have a deliberate trigger, my tax return is a deliberate trigger, every mortgage is a deliberate trigger, a change of tenant is a deliberate trigger. So I always go and look at my properties in my portfolio with those triggers. And then I do the red, Amber green. And then I go ask myself the question, so what am I going to do anything about this and you know, even if it's not performing at that point in time I try and project forward, then think about the future and think about the future, not just about the rental performance or the capital growth. I think Jeff made the point really well about what's going to happen to this property do Am I going to have to invest more money, you know, to maintain the standard Are things going to need to be replaced at some point in the future Do I have the capital available to do that is now a good time to maybe opt out before that happens, how I topped out on the market when I want to cash out and like the bottom of the market where maybe I've got a bit of growth to do so I think it's about decision making. I think you know, have had systems have written criteria Have you metrics, have a process and a habit and a routine or trigger whatever language you want to use, but then use the information to make good decisions. And you know, don't necessarily know standing still is a decision I choose to stand still. But you know, at least make a conscious decision. So that's probably our I will leave my particular point so so thank you all for joining me today. You've all changed the order of my screen now so I can't remember who is the first area. So I'm just gonna go Jeff, Dominic, Nana, and Carl. Thanks very much for joining me. today. I'm just gonna do my wrap-up. So if the show notes are going to be over the website, thepropertyvoice.net if you want to talk to me about anything from today's episode, or anything about property core skills or to reach out to any of our guests, you can reach my podcast at thepropertyvoice.net I look forward to hearing from you. But again, it's all the remains. So thanks very much to my panelists for joining me this week. And thanks you for listening. Once again this week on the property voice podcast. And until next time.
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