Fringe benefits

Today I had a great chat with my hairdresser .. let's just call her B for short. She is a wonderful young woman, with two kids, a great hubby to whom she is happily married, and they have a lovely house. BUT we got talking a while ago and she opened up to me about the fact that all their income goes on servicing their debt. Mortgage debt, credit card debt, car loan debt etc etc.

Now I'm not saying that this is in any way unusual in the UK today. Many of my friends as I have discovered are on interest-only mortgages. In order to afford a home suitable for bringing up a family, sometimes that's the route you have to take.

But as B said to me, they have absolutely NO capital in anything. They have no money in the house as it has depreciated in value since they bought it five years ago. Their cars are a constant source of financial pain; their credit cards are maxed out; and they have no savings.

As we got talking I realised that she was a bright woman who understood the long-term implications of their situation, and recognised that as she got older she and her husband would not be having the kind of retirement they dreamed about - UNLESS they did something to change course NOW.

The first thing I suggested was that she read Robert Kiyosaki's 'Rich Dad, Poor Dad'. A GREAT book for anyone wanting to change their financial course in life. A few days later she texted me to say she had bought the Kindle version and was avidly chomping her way through it (not literally I hasten to add -  it's digestible but not edible)!

So when we met today I was interested to know just how she'd been getting on. Clearly the messages within the book had struck a chord and many changes had taken place in their lives since I last saw her.

1. They have changed their cars to pay off the loans completely and bought two much smaller, more economical cars. They no longer have car loans, AND they are saving money on fuel.

2. B has taken on some extra work (just a day a week). Although she has to pay for one day's extra childcare, the income she gets is going directly to paying off the credit card loan, which she thinks will in the long term be much better for her children and she makes enough to cover the childcare and make a profit.  (In September her son will qualify for 15 hours free childcare a week so that will also reduce their outgoings).

3. They have created a monthly budget which they stick to come hell or high water. As she said to me 'I used to think frugal people were so irritating - now I understand how exciting it is to find a bargain'!

4. They are looking around at better mortgage deals and looking to swap round their credit cards so that they can pay off more of the capital and pay less interest. (A great website to get started is http://www.moneysavingexpert.com/)

I was SO proud of her! She has

• believed in herself and the ability to change
• created a plan
• taken action
• been disciplined and stuck to it

Soon - she will start to see results!

I was so impressed with B - not only is she a great hairdresser, but she is starting to prove that no matter how much or little you have, you can CUT out excess, SNIP away at debt, SHAVE out unnecessary expenditure and ensure FRINGE benefits for life. There's no doubt that GROWTH will follow!

[Groans all round : ) ]

Immigration, communication and realisation!

One of our smaller - might I say 'bijou' - properties, is currently rented by a lovely Polish family. They are clean, considerate and polite. They always pay their rent on time and they have been extremely easy to deal with over the three years that they have lived there. That is, except for one embarrassing problem -we just can't understand what they say!

Over time, I have managed to work out the reason for the odd phonecall or other, when a word like 'boiler' or 'carpet' or 'garden' has appeared in their stilted English conversation. The rest of the chat has been pure guess work, but obviously we haven't been far off, as whatever the problem was seems to have been addressed, and all is quiet again.

It must have been just as difficult and frustrating for them as for us, dealing with an inept landlady who cannot speak a word of Polish. But over time we have muddled along and all has been good.

A couple of weeks ago they gave us their notice to leave the property so I advertised the house and within hours had a stream of messages from people wanting to look round. One call I had was from a lady who had an unusual accent (perhaps Eastern European) and we arranged a viewing for the following day. As soon as we met and she started to talk, I knew she was Polish (although she did have a much greater command of English than our other tenant) and I guessed she would immediately like the property (which she did).

What I wasn't expecting though, was that on entering the house she recognised the current tenant and a string of animated conversation flowed forth between them, complete with excited gesticulations and facial expressions. The communication between them was highly entertaining, especially so as I had absolutely no idea what they were talking about! Suddenly I realised how it must feel to be on the other side. Not knowing the language, not understanding the subtle cultural differences, not being able to pick up on the nuances of meaning conveyed through spoken language. It was both interesting and worrying at the same time.

I thought to myself : 'what is the current tenant saying to this prospective new tenant'? Hoping desperately she wasn't saying something awful about us as landlords! Actually, my fears were quickly allayed as I was told in no uncertain terms 'You have been excellent landlords'! As I stood there, glowing somewhat in praise, I was suddenly struck by her own confidence in speaking English that had clearly improved over the few years living here in the UK.

It must have felt very strange when she first came to the UK to make for her and her family a brand new life here. I bet there were times when she felt lonely, homesick and nervous. I could of course go on here about how important it is at a time like that to have quality housing etc etc. But actually I really want to make the point that it took her a great deal of courage and faith to immigrate here and yet I baulk at the slightest project hiccup!

I have the benefit of a wide network, good contacts, a reasonable command of English (less so the local dialect admittedly!), strong links with the community and a knowledge of where to go should I need information or advice. She had none of these, and yet bravely made the move. It's true, communication takes many forms and in this instance I can say that I definitely heard a great lesson about courage in the face of nerves that no words could convey.

Networking

This last month has been exceptionally busy for me in many ways. As well as developing a large property locally, which we bought in December, we are buying another large Victorian property not too far away to develop as an HMO as well. We sold  the other property (mentioned in my 'Selling houses' blog post ) and are awaiting the proceeds from that sale!

Getting into the HMO (house of multiple occupation) territory has been, well, I'll call it interesting! We have encountered shocked building regulators, stunned planners, taken aback developers and perturbed builders. Many trying to dissuade us from our intended course of action. Admittedly, they have reacted this way because we have literally stumbled upon problem after problem, and our ignorance in this field has been evident! However, what I have learnt from the process so far has been much greater than if I'd just read about it in a book.

Kitchen into extension

Extension - in its raw state!

Original kitchen

Newly built stairs to loft extension

One of the new en-suite shower rooms

New door frame for fire doors - it will be attached to a wall eventually!

First look at the Velux windows

Looking down from the loft

I can quote the acoustic tolerances in decibels needed for a registered HMO; list the fire safety requirements and necessary wall linings; tell you the various laws and policies that govern HMO development; and give you the low down on information repositories. What I can't tell you is where to get the mettle to do it.

Because believe you me, you need mettle in this business. Although I had quite a bit of experience as a 'landlady' I had little as a developer. I had dipped my toe in the HMO water and found it to be tantalising, so we decided to take the plunge! But the development of a seven bedroom HMO is a project on another level!! Having support from others around you who do believe in you and will encourage you is absolutely vital, as is networking with others who have trodden the path before.

We recently attended a PIN meeting in Stoke which was highly valuable and I would thoroughly recommend it. Check out Property Tribes forum too - a lot of worthwhile contacts and experienced landlords and investors post there.

Developing your network takes some time and effort, although I can't complain about the oft-used venues for such rendezvous (delightful coffee shops, tea rooms and charming hotels being my faves)! You will find that far from creating competitors you will develop friendships, and in hard times it's these folk who will be your most valued supporters.

Selling houses

Although it is only ten years old, like certain makes of car, or dress fashions, the house I'm writing about today has not aged well. Let's call it Number 14 for sake of argument. Mind you, it's mainly to do with the people who have inhabited it. Over the years since buying this property (off plan), we have had such a variety of tenants that none of them has really 'fallen in love' with it and made it their home. Not like some of our other properties, which tenants have truly made their forever home (and which we are not about to threaten - a bird in the hand is definitely worth two in the bush in the rental business).

It was left in January looking sad and tired. Carpets fraying, paint faded, wallpaper peeling, bits and pieces broken off here and there (handles, radiator thermostats, toilet roll holders to name a few). This poor young house looked like it needed a holiday from the tenant inhabitants it had held. It needed a makeover and it needed it now!

So we set to - tidying the garden, restoring handles to their rightful places and repairing chipped, worn or torn bathroom accessories. Fully redecorated and with NEW carpets fitted, this house has been restored to its original (or near-original) state. Now that the garden has been tidied, and the air inside smells faintly painty and clean, and the walls are back to neutral and the toilets are sparkling clean, and the carpets have been newly laid - well, it all looks great. And again I see the potential of this house to offer a lovely home to a young couple or small family. Three beds with an ensuite to master upstairs (plus family bathroom of course), downstairs a lounge diner and kitchen and a guest wc (as the EA calls it).  Fully double glazed and centrally heated and a good size garden.

And even today as we went into the Estate Agents, I had second thoughts - 'Should we maybe just keep this house and rent it out again?'. But no, this one HAS to go. The strategy demands it.

Anyway, it's perfect for a clean and tidy couple, who will look after this place and make it their own.

But a house like this - empty, newly redecorated, with three beds, for less than £120,000 for sale in Crewe? It probably will be purchased by a clean and tidy couple who will do exactly what we did ten years ago.

Rent it out to someone else!

Feel the fear and do it anyway

...was the title of a well-known book by Susan Jeffers, all about making the most of the gift of life by recognising what holds us back and addressing those fears. Fear is part and parcel of any new project or change. Perhaps it is the brain's way of counteracting the adrenaline and excitement that can also be generated with the prospect of a new direction. Any project that feels bigger than one you've undertaken before, or bolder than one you've experienced personally, or braver than you currently feel, is likely to create fear. Sometimes that fear can actually help us as we examine a particular course of action in more detail - it enables us to be less emotionally involved and more analytical. However, generally fear is a tether which keeps us tied to a post made from our previous experiences. These previous experiences include our failures; reminders of things we think we cannot do; messages from our past (childhood, school, university, relationships) which tell us 'DON'T DO THIS AS YOU WILL FAIL'!

So we only move in a circumference dictated by an invisible lead, tethered to the post of our past.

Let me tell you I have felt fear about the various housing projects I have (and am) involved in - regularly! Not a day goes past when I don't wonder 'Can we really do this? Have we bitten off more than we can chew? Are we being too ambitious? Are we crazy taking on all these complicated projects' (because that's how they often feel).

But then I stand back and wonder 'What's the worst thing that can happen?' and usually I realise that actually  even those apparently terrible things aren't actually the end of the world. There are usually ways out of a situation that appear when you are desperate, and the human spirit is indomitable in its creativity - particularly when under pressure.

And I also remind myself of other people who have tried and failed - what happened to them? Often, they've gone on to accomplish even more than they first dreamed of by persevering and overcoming problems. It seems to me that it is perseverance and tenacity that really overcomes fear.

In property development, as in any area of life about which you are uncertain, fear comes with the territory. There are so many uncertainties in property which admittedly I do  worry about. But I try not to let those fears affect me as I know how stifling they can be. Sometimes I need to remind myself of the plan and what we need to do to make it work - this helps me re-focus and regain confidence. Sometimes I need to remind myself of my beliefs in why we're doing it - thy 'whys' of our plan. Sometimes I need to remember the facts about our situation - that our service, product and business are meeting a real need and are in demand.

Sometimes I just need to take time out and pray!!

Jeffers wrote 'The Five Truths about Fear' which I quote below:

The Five Truths About Fear

FEAR TRUTH #1 The fear will never go away as long as you continue to grow! Every time you take a step into the unknown, you experience fear. There is no point in saying, "When I am no longer afraid, then I will do it." You'll be waiting for a long time. The fear is part of the package. FEAR TRUTH #2 The only way to get rid of the fear of doing something is to go out and…do it! When you do it often enough, you will no longer be afraid in that particular situation. You will have faced the unknown and you will have handled it. Then new challenges await you, which certainly add to the excitement in living. FEAR TRUTH #3 The only way to feel better about yourself is to go out and…do it! With each little step you take into unknown territory, a pattern of strength develops. You begin feeling stronger and stronger and stronger. FEAR TRUTH #4 Not only are you afraid when facing the unknown, so is everyone else! This should be a relief. You are not the only one out there feeling fear. Everyone feels fear when taking a step into the unknown. Yes, all those people who have succeeded in doing what they have wanted to do in life have felt the fear - and did it anyway. So can you! FEAR TRUTH #5 Pushing through fear is less frightening than living with the bigger underlying fear that comes from a feeling of helplessness! This is the one truth that some people have difficulty understanding. When you push through the fear, you will feel such a sense of relief as your feeling of helplessness subsides. You will wonder why you did not take action sooner. You will become more and more aware that you can truly handle anything that life hands you.

Great rant from the RLA about Local Authorities

I loved this rant that I read today from the Residential Landlords Association:

The latest campaign news from the Residential Landlords Association

January 2013

Welcome to the January edition of Campaign Watch.

January may herald the beginning of a new year but that has not made the slightest difference to a plethora of local authorities, who are committed to implementing a series of ineffective and bureaucratic anti-landlord policies in 2013.

Whilst 2012 was dominated by Newham’s draconian proposals for a blanket selective licensing scheme (coupled with a blanket Article 4 Direction for good measure), this year could well be dominated by events in Liverpool, where the new Mayor has announced plans for an even bigger licensing scheme than that foisted upon Newham.

Increasingly, the RLA is perturbed at the growing number of local authorities who ignore their own failures to enforce existing rules and regulations governing the private rented sector, and are unable to correctly manage their budgets. Instead, their answer is to add a new layer of bureaucracy that masks these failures and creates non-jobs to keep members of staff employed.

If local authorities truly want to improve standards in the PRS then they should begin to work constructively with landlords – the vast majority of whom provide good quality and affordable accommodation – by encouraging the growth of self-regulating, accreditation schemes. At the same time they should use their armoury of existing powers to hunt down the small number of criminal landlords who bring so much shame to the industry. It is that message that the RLA will be spreading during the forthcoming year, as it continues to challenge these failing councils.

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Hear hear!!

D-Day

For many people they were preparing for the big night out (or in). Ironing party frocks, chilling champagne, and preparing canapes ready to pop in the oven later for when their guests arrived.  Me - I was sitting in the County Court room keen to do legal battle with our recalcitrant and uncommunicative tenant, who I was HOPING would be finally evicted from the property. So at 4pm New Year's Eve there was I in my best Next suit, looking as professional and competent as I possibly could, listening to the judge describe, reiterate, explain and emphasise the law. Section 21 of the Housing Act 1988 to be precise. 

It was not the most exciting thing to be facing on the last night of the year. As I sat there wondering when he would give me an opportunity to state my side of the case,  my mind drifted to what I would prefer to be doing. And funnily enough it was not facing a rather dour-looking man talking to himself, and a dastardly tenant sitting on a bench next to me sheepishly glancing across, hoping for a full reprieve. It was a very short hearing, the majority of which was a discussion of the judge to himself as to whether we had presented the correct documentation for this eviction at the correct time. There is a HIGHLY specific time frame for issuing notices to quit under Section 21 - beware if you get this wrong!

He decided (after much humming and hawing and commenting this way and that without any reference to the other two people in the room - they being me and the tenant) that we HAD followed correct procedures and therefore, he duly passed judgement that SHE (the tenant) had fourteen days to vacate the property.

Yee haw!! I nearly broke out the New Year champagne there and then. Having received no rental payments from her for the last 7 months, funds had been coming from other sources to pay the mortgage on this property and it had not been easy. Which meant that it was only a cheap sparkling white from Aldi that we actually had chilling in the fridge. 

I don't want to celebrate other people's misfortune, I actually have a lot of compassion for this tenant. However, not paying your rent and not communicating about it is a sure fire way to get evicted from a property. 

It was an annoying and upsetting process to go through, but we learned a great deal as you can imagine. The tenant has now vacated the property and we are redecorating and improving it ready for the next phase (including removing the garish wallpaper which was put up without permission - another story)!

Does it make me regret anything? No, I actually feel that this has been an important learning curve for us. We've learnt about the law and the process which underpins its execution. We've also learnt about the absolute imperative to vet and check tenants, and double-check again! We've also learnt that there are ups and downs to any business. Plan for the worst and hope for the best is probably a good motto to have. 

And suffice to say, later that night  we enjoyed every drop of that sparkling white from Aldi!