Hey everybody, I wanted to tackle very briefly, the subject that comes up and I felt compelled to actually do live on it because it came up in a conversation this week with a gentlemen who I know who has a couple of properties in London and he’s a landlord that’s become a landlord by the very fact that he owned his property before and moved out of it.
Him and his wife got married and they rented the house out and so he has developed equity in this property and he rents them out and I was saying with that type of equity that you’ve got there if you’re sitting on million plus equity then there is a large income that can be generated from that.
I did briefly explain that if you took some equity out, split the money up and spread it across a portfolio in a different part of the country you could be looking at five, six, seven, £8,000 a month cash flow, or more if he did it the right way. During the conversation, although there was a part of him, you could see that this could be an opportunity here. There was another part of him that looked reserved and I asked him what are your thoughts?
He said, I have an ethical question in my mind, about whether it’s a good thing to be a landlord building a large portfolio. I said what is the dilemma you’ve got? He said, the dilemma I have is that if I buy property, then it automatically puts stress on the rental market in terms of people may not be able to afford to rent, but also it would force the value of properties up and then that makes them unaffordable for other people. So, for me, being a landlord would cause that, so I have a challenge with that.
This is an interesting point because this question has come up a lot over the years and I’ve been speaking in public on this subject for many years and I said to him, okay, let’s be clear, house prices in this country will continue to rise, irrespective of what your idea is right now, individually and on the basis that there is a population growing at three or 400,000 people a year.
We are not building enough houses, there has been a massive housing shortage for probably 25, 30 years and will continue to be so. And in fact if you look at the statistics, the government and a couple years ago PricewaterhouseCoopers did a survey that showed 50% of our population between 25 and 40 are going to be renting anyway and dynamics of their careers, not wanting to get on the property ladder straightaway, being transient deciding where they want to live, et cetera.
I said to him, my personal perspective is that as a landlord I have a choice on what strategies I buy into a civil. Our portfolio that we have built over the year started off as a buy to let portfolio then I started looking at social housing, then asylum seekers, HMOs, non-HMO strategies, commercial to residential, et cetera and the beautiful thing about property as a landlord, you can choose the type of strategy you want to go into.
If you want to talk about ethical and social consciousness then if you look at the last five, six, seven properties that we bought have all been for asylum seekers and we have a seven-year contract, 10-year contract with the government. These are people that would be put in a shelter, they haven’t got a home, thrown out of their own country. We have special needs tenants who are basically people that are extremely vulnerable. Special needs, physical challenges, emotional challenges need carers in the houses so we provide housing for that.
Also providing housing for people that have come off drugs being reintegrated into the community or alcohol and they’re vulnerable in the sense they have people to keep an eye on them. So we provided space for him and he was like right okay. These are people that desperately need homes and there are not enough homes and the government are crying out for landlords to come to the table. Then we talked about the international investment into this country.
I said if you look at some of the areas where the price has been forced up primarily you’ve got huge amounts of money coming in from previously India, definitely Russia, China and even Brazil at one point we had this massive influx of money, Hong Kong, Singapore people wanting to buy properties here and forcing those values up in some areas, particularly high because they’re buying not even doing anything with them just for a second home.
That’s another factor as well. We’ve got the natural organic growth properties double every seven to 10 years approximately in this country. So we’re not going to avoid spikes. Yes, we’ve got government intervention coming in and putting grant money into those areas as well.
As I was explaining he said I think we need to talk, and it just shows you that sometimes if you watch something in the media and the news. If they have a friend of theirs, and I had the same challenge going to Denmark for the first time and they say landlords are bad people and I say why? The view was that landlords were greedy and buying properties purely for greed and not everybody was saying that but a lot of people have this perception.
Landlords buy property to generate business. They have spare money to buy the property or to raise money to build a portfolio and they’re also providing homes for people that can’t buy a property and also providing some security and long-term security for their kids in the future. In the same way somebody might build a restaurant chain or provide products and services.
Real estate is simply that, so if you’ve got ethical questions in mind and you’ve got people challenging you on it one of the first questions you could ask them is what company do you work for? If you Google most companies there are normally ethical dilemmas or negative statements or scam articles written about that particular company they’re working for.
Whether it’s a bank or food chain supply and reality is you can’t really design your life and make decisions based on other people’s opinions of number one you, because that’s just bullshit, you are who you are. You’ve got great opportunities to be incredible in what you do, but also their opinions on market conditions like trading the stock market. Some people have a good view and bad view. Eating certain types of food just because somebody wants to be a vegetarian doesn’t mean to say that if they’ve got friends that are meat eaters they suddenly disown them or vice versa it doesn’t work that way. I think you can’t really compromise your values.
If you want to build a business and for your family and you create security and you want to provide housing and homes for people that need it I’ve got students that need properties. I’ve got asylum seekers that need properties, I’ve got working professionals that need properties, we have elderly people in our properties in south Wales, for example, who love living there they can’t afford to buy and they don’t want to go into a crappy home.
The beautiful thing about this is whatever your business, you can make it ethical and the great thing is that you can choose a strategy in that area. So, as a property investor make that decision. Try not to be put off by some of the media and the hype around this industry as sadly there is a lot of negativity and the reality is that, if the world wasn’t made up of people who own properties and people own and rent properties there’d be a lot more homeless people.
The great thing is you can choose as we’ve done is to take an area of the industry and look to provide homes for people who really need it.
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