I’ve Bought an Industrial Estate (kind of)!

Ascroft Court

In this now roughly quarterly property update I’ll cover:

  • Commercial to Residential – Ascroft Court
  • The Bristol flat flip that didn’t
  • The Telford flip that brings balance to the Force
  • Universal Credit nightmares increasing prisoners
  • I’ve been told to stop these updates

Commercial to Residential – Ascroft Court

We completed, finally! If you’ve not seen the 1 min video on facebook of me and my JV partner Clive in front of the buildings, do go and take a quick look (you may need to be my facebook friend to see this, so ping me a friend’s request if that link doesn’t work).

Whilst the sign says it’s an industrial estate, as you can see it’s really a small business park of 10 office units across 4 discrete buildings. The address is Ascroft Court, Peter St, Oldham, OL1 1HP and comprises all the 2 storey buildings you can see on this Google Streetview link.

It’s been a roller coaster of a purchase. The final offer was accepted in July 2016, and we’ve just completed some 7 months later in Feb 2017. Several times the vendors were threatening to withdraw due to delays and issues like: restrictive covenants; asbestos reports; mains drains issues; funding delays; building control certification problems; builder issues; squatters; etc etc.

If it could go wrong, it did go wrong. It seemed that every week for months on end there was a new problem to resolve. The clichéd phrase: “If property was easy, everyone would be doing it.” was never far from my lips for months. But that’s when you just have to dig in and just keep swimming: 🙂

Here’s the breakdown of the units:

  • Unit 1 & 2: leased to Oldham Citizens’ Advice Bureau
  • Unit 3: leased to a dentist and private medical practice
  • Unit 4 – 8: currently vacant, to be converted to residential
  • Unit 9 & 10: previously sold on 999 year leases, so effectively ignored.

The basic plan is to retain the current commercial tenants, and convert the empty units to residential, for which we already have the necessary planning permission.

Here are the figures:

  • Last sold in 2004 for: £1,100,000 (£1.55M in today’s money)
  • Purchase price: £390,000 – yes you read that right
  • Current rent: £34,400
  • Refurb inc all finance fees: approx £322,000
  • Expected new rent total: £160,000
  • Expected post works valuation: £1,300,000
  • Expected equity created: approx £600,000
  • Expected monthly net profit: approx £4,500

The Gross Yield, including refurb and all other costs etc will be £160,000 / (£390,000 + £322,000) = 22.5% yield, which is a very healthy figure I think you’ll agree. And whilst it looks good on paper I’ll never see any of the equity of course as it will be locked away in the property, and it’s cash flow that is all important.

The monthly profit is after interest, but before capital repayment, i.e. it assumes an Interest Only remortgage. In reality it’s unlikely we’d get an interest only commercial mortgage, but I used the IO figure to show the profitability compared to a typical Buy To Let property, so the real net income will probably be around £3,000 pcm after capital repayments are factored in. Additionally I’m sharing that income with others, so my own slice will be rather less.

However you can see why this deal has been a main focus of mine over the last 6 months. More details next time as the refurb progresses.

Bristol Title Split

Previously I reported that the last of 4 flats was left to complete. After a protracted and frustrating conveyancing process lasting several months, we finally dealt with every one of the very pedantic issues raised (none of which had been an issue for the previous 3 flats that sold smoothly), and agreed to exchange on the Monday.

Note when I say we agreed to exchange, we were in direct email and phone contact with the purchaser (something I’d recommend anyone buying or selling does, most of the time it ensures a smooth and swift transaction) and were managing the conveyancing issues with her directly. She agreed she had no more issues and was happy to exchange on the Monday.

Monday came and went with no exchange. Chasing, Tuesday came and went. Chasing again and Wednesday went. Then on Thursday we get a 1 line email from the buyer’s solicitor, completely out of the blue:

“I have been advised by our client they are no longer proceeding with the purchase.”

And that was that; 4 months of conveyancing wasted.  The upside is that since the price was set, Bristol has been going up in price, so we’ve put the flat back on for more than before… and we’ve sold it in just 7 days. 🙂

Telford Flip

Back in August I agreed to sell the Telford flip to my JV partner. Unfortunately this sale has also dragged on with various ups and downs, and having thought it was finally sorted a few weeks ago, it has fallen through too. Why will have to be a story for another day. Both this one and the Bristol flat sale fell through within a week of completing on Ascroft Court… That I believe is the universe’s sense of balance being restored!

You know some people talk about balance as if it’s a good thing. Liam Neeson (Qui-Gon Jinn in Star Wars) said of Anakin Skywalker that he would “bring balance to the Force”. But it’s always occured to me that given at the time the Jedi were dominant, that balance could only mean the rise of the Dark Side to balance the Good. So basically, in that case, balance was a very bad thing! 😀

Which is why I can only laugh at the irony of having 2 sales fall through, within a week of a great deal completing.

My First Court Eviction

Venmore’s and I have finally had enough of our errant tenant in Liverpool who has now given up all pretence of paying any rent and refuses all attempts to communicate. Lawyers have been appointed and court papers submitted, we’re just awaiting a court date now, but we’ve been waiting an awfully long time already.

I personally see this a failure to manage the tenant, both on Venmore’s part and my own. It should never have got this far, but the tenant has done a sublime job of manipulating the situation. It’s a tricky one as the tenant has been in the property for 11 years, and I really wanted to save the tenancy as I believed she could continue to be a good tenant for many years to come. Obviously I was wrong. Sometimes you get a bad egg, and sometimes good eggs turn bad.

I think it’s important to point out here that I’ve been a landlord for coming up on 4 years with each year increasing the number of tenants I manage, and this is the first time I’ve had to actually go to court to evict a tenant. It’s annoying, it’s a waste of money, it’s a waste of time, it’s a waste of effort, but it is inevitable. This was going to happen eventually, and I’m actually pretty happy with my record on that front.

This is where small landlords can come unstuck.  The law of averages says eventually you’re going to get a bad tenant who doesn’t pay. Whilst always awful, if you have many properties, it’s not a disaster. But if you only have a couple, it has much more of an impact.

Universal Credit

UC has become a dirty word for me. I can’t begin to explain how badly it’s been implemented. I can only assume that it’s been deliberately designed to be hard to use, difficult to engage with, and punishing in its application. You know I had a tenant who’s served 15 of the last 20 years in jail say to me:

“I might as well go back to prison, it would be easier than dealing with Universal Credit!”

Let’s take direct payment to landlords for example: I filled the correct form for 1 tenant back in November. I sent off the correct corroboratory evidence immediately after. 2 weeks later I’d heard nothing so chased. I got a “We haven’t got your information yet” stock email reply.

Every 2 weeks since I’ve chased again, and all 5 subsequent emails have been simply ignored and not responded to. Only this last week have I finally got a real person dealing with my case to sort it out, who is actually capable of having an email conversation, hurrah, though some 3 months later! Yet despite even her involvement, I still haven’t had a single direct payment. We’ll see if it actually works out in the end.

I’ve been told to stop these updates

Well that’s it for another update. You know I’ve been told by several people that I shouldn’t publish updates like this. I’ve been told that when asked how things are going, the answer should always be: “Fantastic! Couldn’t be better!” Maybe from a marketing / salesy perspective that’s good advice. There’s just one problem: I’m an Engineer by trade; I deal in facts, not fluff. 

When it comes to property, it’s not a matter of “if” something’s gone wrong, but “when”. Things go wrong all the time, it’s inevitable; what matters is how you deal with the problems, your attitude, and your problem solving skills. If property’s problems keep you awake at night, you need to have a think about whether what you’re doing is right for you.

The truth is that if someone says the sun always shines on their property portfolio, the grass is always green, and everything always goes smoothly, they’re lying to you. I believe in making relationships and really talking to people, and every single property investor I’ve had an open and honest conversation with, eventually owns up to the property nightmares they’ve had or are continuing to have, but 90% of the time they don’t advertise it openly.

So I tell it how it is, warts and all, because that’s the reality. I believe I can best serve you by telling it like it is. If you want to invest in someone, and you fall for the shiny sales patter, and get taken in by the glossy presentations and allow the smoke & mirrors to hide the reality that property is not a smooth ride, then you need to have a long hard look in the mirror and have a think about your judgement about who you trust.

Having said that, what probably does not make good reading is what’s going well.  I could mention the family I’ve been renting to for 4 years, who’ve never missed a rent payment, who never complain, who I never hear from until it’s time for an inspection or rent rise, and who’s property has gone up in value about 15% over that time. And there’s not just 1, I have several properties like that, that just tick over quietly making me both monthly cashflow, and (mostly) quietly growing in value.

But who wants to read about that! So what’s the lesson of all this: Just keep swimming! 🙂

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