Welcome to the fifth instalment of our "Smart Landlord" 2019 campaign, where we present a guest article by Liverpool property developer, Paul Nicholson.
You've heard of smart phones, smart highways, smart meters ... well, this month, to celebrate our 10th anniversary, Property Tribes champions the concept of the "smart landlord" as we believe that is the profile of the landlord who will survive the current challenging market conditions and taxation and regulatory landscape.
Smart things are adaptive to change, problem solving and always seeking out efficiencies to operate more smoothly and at a higher level, and that is how the smart landlord approaches their business.
With a buoyant Northern market pushing house prices with the attractive yields creating from the South and harsh tax regime imposed by the government coupled with regulatory requirements undoubtedly landlords have started to feel the squeeze.
The uncertainty of Brexit and rate volatility have resulted in constructions costs gradually creeping up on developers.
These factors have made it more crucial than ever for landlords and developers to unlock hidden value when identifying opportunities to provide both strong capital growth and rental yields, 2 factors I have considered equally important when amassing my property portfolio more than 200 rental units.
I have recently moved away from investing in the ever-popular cities of the North which are becoming over-crowded with investor-led development and investor activity soon creating an oversupply depressing not only values but rental demand – the more stock the less demand so prices will drop.
I started acquiring in these areas many years ago and now benefit from the capital appreciation and increased rental figures, as they say timing is everything.
I was told many years ago I was on the wrong lines investing in the postcode areas of L6 and L7 in Liverpool, now a study by Totally Money identified them as the most profitable for landlords.
I have taken a more focused view and look towards commuter towns, places that need a little TLC to be a vibrant community once again. They are perfect locations for young professionals who cannot afford the city centre stifling price tags but want the same luxury accommodation that is a 15-minute commute to work.
Often such locations are town centres which boast great infrastructure and transport links already, another tick in the “why to invest” box.
I have chosen St Helens, a previous industrial powerhouse home to the likes of Beechams, the world-famous Gamble of Gamble & Proctor and Pilkington Glass.
I am sure I am on course to repeat my postcode spotting magic! Its location is in the middle of 2 Northern Powerhouse cities Liverpool and Manchester where property prices and rental figures are at crippling figures for the young discerning professional classified as Generation Rent.
Not only does our investment and projects work well for our target market but it is also allowing local businesses to flourish as it creates the much-needed footfall in town centres that have struggled since the changing face of the retail landscape.
The town centre will now be viewed as a residential area with a promising leisure scene, changing the face of town centres as we see them today struggling to fight larger retail parks, out of town shopping centres and the internet. Our investment is reversing the decline of the community, once dreary and dilapidated they are now desirable and vibrant communities representing a dramatic urban renaissance.
For the benefits described councils are often in support of planning applications of sound development as it strongly assists regeneration of their town centres. It is important to work closely with the council and harbour a strong working relationship.
From the outset, I set out what we expected from the relationship. It is vitally important to then deliver on your promises which I have done at every step. It also encourages brownfield development preserving green belt and strong message to preserving spaces for future generations.
This type of development is extremely difficult however and not for the faint hearted. Converting old forgotten derelict buildings into modern day apartments comes with great difficulty, especially when having regard to the fabric and heritage of the building and the community in which they sit. To this extent it is essential to have an experienced professional and build team.
I believe this year is time for #TeamNico (our social media tag) to make our mark on urban living.
It is important to ensure that there will be rental demand for your product. I have found the adage is true of “if you build it (I would insert “well” here) they will come”.
Research by international agents Knight Frank and Savills has shown that young professionals are just as concerned with having “best-in-class” housing as opposed to the old belief of “location, location, location” (sorry Phil & Pippa). They want to be urban pioneers or “Hipsters” (picture the likes of Google and Facebook staff) and be the first to reside in new and upcoming areas.
One can see this culture happen at the now very trendy (and expensive) Tribeca area of New York.
In 2018 we completed 2 town centre conversion projects being Nicholson Lofts (5 storey retail building into 15 apartments and 1 retail unit) and Nicholson House (4 storey office block into 18 apartments and 4 retail units) with a combined value of £4.6M.
These projects now sit within our rental portfolio of over 200 rental units which we manage in-house. We are now on-site at our next mixed-use projects which will comprise 37 rental units and hopefully a 11,500sqft rooftop garden terrace. We are also in discussions for various other sites across the Liverpool City Region.
Late 2018 marked my 10-year anniversary of becoming a landlord and afforded me the opportunity to reflect.
It is important to continuously reflect and improve your offering to stay competitive and ahead of trends, never be complacent.
Consumer habits have changed so much since I started from when you could find a tenant (may I say I am not saying desirable tenants) with blue cord carpets and magnolia wood chip to now the need to provide modern day fittings and internet as standard to keep ahead.
The competition is set to escalate with more amenities demanded from tenants along with a sense of community from resident only gymnasium and cinema rooms which will be provided through the larger and increasingly fund-backed PRS schemes, which seem to be overtaking the fractional sales development model.
Consumers are changing what they expect from a rental property but not only that also how they “shop” for their dream home.
They want content online on demand at the click of a button, hence the success of YouTube and Netflix. The advent of social media has made renting properties via platforms such as Instagram possible, 10 years ago you wouldn’t have dreamed it.
Some tenants are now securing properties without viewing, simply by exploring online footage and floorplans with software such as Matterport. We produce a weekly email campaign to the enquiries received over the last 12 months, which is now a database more than 2,500 active qualified buyers for our product, of course adhering to GDPR always.
To this extent we have invested in our own in-house media team to create much needed online content and footage and to bolster our brand awareness.
It is important to shout about your successes so people know who you are, what you do and where to find you.
In 2017, we started a successful PR campaign to raise our profile which saw us receive critical acclaim and sell-out our first project Nicholson House 6 months before completion of the units.
I took the (wrongly) considered view that our profile was now out there and we could relax from the PR bandwagon.
We paid the price (well not drastically) as we saw a slight reduce in initial interest for our next project when practical completion.
We slightly increased media activity a few months before practical completion and we saw a huge spike in activity which meant we fully sold out again off-plan.
It hit home the importance of marketing and brand awareness, often an investment landlords do not make in their business plan. We ended up being totally over-subscribed with 24 applications for every apartment!
By collating and considering this data (which most landlords/agents will disregard) we can analyse the absorption rate in respect of the units on offer and tailor our next development for the demand. For example, if there was heavy demand for one bedroom apartments we would tailor our next project to comprise more 1 bedroom apartments than any other type.
We have a weekly Vlog on our YouTube channel (Luxor Group Official) which shows what it is like to be a landlord and developer. A lot of people are considering being a landlord/developer but do they really know what it is like to be one and what are the daily stresses and hassles you go through?
Well, why not take a look before you take the plunge at our totally unscripted and access all areas vlog to see every aspect.
At Luxor Group, we are creating an academy to assist people to learn the structures and considerations necessary to create a property portfolio.
If you can learn from someone else’s mistakes you may as well especially given the cost of a mistake in this industry. To what extent that portfolio becomes is down to the individuals “what” and “why”. Some regard property as a safe asset class but do not want the hassle of the day to day handling.
I am looking to create a property fund whereby investors sit as a partner across a larger holding of assets. This way they benefit from the development and the rental streams without the stress of the day to day project.
Our social media channels can be found here:
YouTube: Luxor Group Official
Vimeo: Luxor Group Official
To bolster our content offering we produce a weekly newsletter which you can subscribe to by visiting http://www.luxor-estates.com.
Tenants now not only expect a great product but an unrivalled service should issues arise during their tenancy with high levels of digital expectation.
To this extent we have bolstered our in-house dedicated maintenance team using online reporting software and have a tailor-made tenant zone (or as it will be known “Luxor Zone" in creation.
To capitalise on our new investment location, we are considering opening our second office to reduce the time in which issues are dealt with to a matter of hours, providing an unrivalled level of service.
By also having offices located centrally in the communities in which we invest in we can provide quicker response to letting enquiries, even same day viewings and tenant sign up.
We have noted our void periods (if any as our properties are often reserved during the departing tenant’s notice period) are substantially reduced by being able to react quickly. I think with the tenant fee ban looming we could see more landlords look to take control in-house if costs rise and the lessons I have learnt in brand awareness and strong dedicated support staff would be worth considering.
One element of the property game which has always been a priority is maintaining strong relationships with your funders and portraying your vision whilst demonstrating a strong track record.
This is something that continuously features high up on the new year resolutions list! With the ever-changing face of the property investment game it is more important than ever to keep up to date with new legislation and consumer habits and forums such as Property Tribes feature strongly in our source of information, subscribing to many of the Topics on the site for the latest threads.
The life of a landlord, as many will no doubt acknowledge, is varied and sometimes quite bizarre so hearing the experiences and stories of others may stand you in good stead one day!
2019 stands to be the most exciting period in the history of Luxor Group, an award-winning developer and landlord, taking on our most ambitious and largest developments coupled with a strong acquisition pipeline.
Thank you very much to Paul for providing such great content! The video in the footer is a case study of Paul's development in St. Helens where he brought the iconic Tyrer's Building - a department store - back into use by converting it to luxury flats.