Essential Property Podcast - Episode 55 Review
Date: October 26, 2024
Source: "Ep.55 - With Battison Now Complete! Paul & Amanda Share What Is In Store For 2025" - Essential Property Podcast
Overview:
This podcast episode features Paul Samuda and Amanda Woodward, experienced property investors and developers, discussing the completion of their major project, "One Battison" (formerly known as Project 1B), and their outlook for the property market in 2025. They also touch on their new digital podcasts and their purpose.
Key Themes and Ideas:
Completion of Project "One Battison":
Project Overview: The property was a former pub with a hotel/rooms above and a function room, purchased in 2021. The renovation took around 3 years from initial viewing to final completion.
Planning Challenges: The presenters emphasize how difficult and time-consuming it was to obtain planning permission from Stoke Council, taking over a year despite initial expectations it would be straightforward. This underscores the importance of a strong team and the ability to negotiate with planning authorities.
"Our policy is always purchase things subject to planning ... the planning process is so tough and difficult."
Refurbishment Stages: The renovation began in January 2023. They opened the top two floors first, followed by the rear ground floor, and the final rooms were completed recently.
Fire Safety and Building Regulations: The conversion of a pub into an HMO presented significant challenges concerning fire safety regulations. The project required extensive fire risk assessments and compartmentalization measures, highlighting the importance of working with strong building regulation companies and recognizing that building regs are "upping their game."
"I don't think one can underestimate the need for strong fire risk assessment and taking that into account if you're introducing building regs."
"We have to provide particular updates, we have to sign certain waivers...it basically just talks about the whole fire side of the building."
Budget Overruns: The project significantly exceeded its initial budget due to unforeseen issues such as roof replacements, unexpected groundwork, and changes required by building regulations and the fire service. They advise a 15-20% contingency for non-straightforward projects, as opposed to the typical 10%.
Successful Rental: Despite challenges, all renovated rooms rented quickly at "fantastic rents," validating the "build it and they will come" approach.
Refinancing Goal: The primary goal now is to refinance the property, recoup their investment, and return funds to investors, which is contingent on favorable interest rates and property valuation.
Market Positioning and Rental Strategy:
Unique Offering: They aimed to create larger, higher-quality rooms than existing HMOs, in a location not traditionally known for such properties.
"We went into this development with a view that we wanted to create rooms in Stoke on Trent that didn't already exist."
"Build it and They Will Come" Strategy: They deliberately chose a location not traditionally popular for HMOs, banking on the superior quality and design of their property to attract tenants.
Tenant Profile: They successfully attracted a different type of tenant, including those who drive and prefer parking options.
Cautionary Advice: They caution against this strategy for less experienced investors, emphasizing the need for on-the-ground market knowledge.
"If people are looking to do a development in an area where there are minimal hmos then my first response is that there are no hmos there for a reason."
2025 Market Outlook and Investment Strategy:
Government Uncertainty: The presenters express concern about the current government's policies and their impact on landlords, noting that although the government is pushing for planning permissions on development, they're passing renter-friendly legislation that negatively impacts landlords.
"It's a tricky balance with this government because obviously with their R Rights bill they're Pro renters but they want more housing but everything that they're doing is pushing certainly landlords at our level to not invest or to sell in some cases"
Interest Rate Concerns: They highlight the negative impact of the budget on long-term interest rates and are skeptical about significant interest rate drops in the near future, which impacts their refinancing plans. They note that the UK is lagging behind other countries that have substantially lowered rates.
Economic Concerns: They express worry about the stagnant economy, potential recession, and stagflation, and believe these issues will affect investment decisions.
"It looks as if the country is going into recession...there's been no growth in the last quarter...stagflation...is the worst of all scenarios that's something that any country wants to avoid at all costs."
Cautious Approach: They advocate a cautious approach to new investments, advising landlords to wait and see what the economy will do before going into new deals, especially given high financing costs and the slowing down of rental growth.
"I'm cautious...I wouldn't be running into doing loads of brand new deals on the basis that I'm overoptimistic."
Flexible Rental Strategy: Acknowledging that rent increases may have reached a ceiling, they advise being more flexible with rental rates to ensure occupancy.
Impact of "Work From Home" Trend: They're seeing higher maintenance costs with more people working from home, with more wear and tear on kitchen appliances and common areas.
Digital Podcasts:
Purpose: They are using digital podcasts to share information more frequently and on more specific topics and are trying to incorporate more technology to share information in their business.
Content: The digital podcasts cover various topics, including budget analysis, rent-to-bills, and topical analysis such as post-budget analysis and the US elections. They are meant to bridge the gaps where they don't have the time to conduct a full traditional podcast.
Future Plans
They're looking for another property to develop and plan to stick to the range of 15-20 bedrooms, and are open to locations in Stoke, Crew, or Newcastle.
They'll be releasing another podcast at the beginning of January with more detail about their 2025 plans.
They're planning a future podcast on their new areas of Birmingham, Burton, and Derby.
Key Takeaways:
Property development, especially conversions, requires meticulous planning, strong teams, and realistic budget contingencies.
Market knowledge and a unique offering can allow for successful developments in unconventional locations, but this is not a universal strategy.
The current economic climate and government policies create uncertainty, necessitating a cautious approach to new investments.
Being flexible and adaptable in rental strategies is important.
Digital podcasts are an effective means for them to communicate more frequently with their audience, providing more specific and topical information.
Action Items:
Continue monitoring economic indicators and government policy changes.
Use the information provided in this podcast to make informed investment decisions.
Review the digital podcasts to gain more specific knowledge on various topics.
Reach out to Paul and Amanda to discuss any new developments in Stoke, Crew, Newcastle, Birmingham, Burton and Derby.
This briefing document provides a thorough overview of the podcast's contents and can serve as a useful resource for those interested in property development and investment.
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