FAMILY FORTUNES - Generational property gains

Property is best approached as a long term game. As such the benefits can be even greater if you get your children involved, with compound growth realised over generations, not just years. Alex Daley talks to a couple of families who are playing the generational property game to their advantage. (Plus hear from an expert on p27 about how best to set your family finances up for success).

For some, the goal is to build portfolios to provide a legacy for their children. Many investors bring their family into their property business for tax reasons, you only need to hit the Buy to Let Property Group’s search bar and search for ‘husband’ or ‘wife’ to see how many are looking at that.

For others building a portfolio is very much a family business. They have bought their children into the property world, sometimes at a young age, teaching them, learning with them, making mistakes with them and hopefully having some fun along the way.

Although there is the challenge of getting through the Sunday roast without discussing problem tenants, there can be great benefits to investing together as a family as you not only share the wealth across the generations but also the know-how and pride of establishing a family business. But how do you set the business up to future-proof it? And can having your loved ones involved in the property process be too much of a good thing?

We decided to chat to some investors who are definitely keeping it all in the family to find out more…

OUR FIRST FAMILY

Single mum Kathryn Southall 50 years young, 22-year-old Grace and 20-year-old Izzy, have built a BTL portfolio together predominantly around Wigan. They follow the BRRR method for their rentals but are now looking at serviced accommodation as their next strategy. The story was a warming one to hear, creating selfdependence and growing together.

SO WHERE DID IT ALL BEGIN?

Kathryn’s journey in property started in 2015 after being left having to figure things out after her relationship ended.

“I turned to property because I was a single mum. I had found myself in a position where I wasn’t financially independent, I was very dependent on a person that used money as a kind of control tool. And so a big driver of mine, from an emotional standpoint was that I wanted to teach the girls how to be financially independent,” she recounts.

But it was also about buying back time.

“Being a single mum I realised any kind of conventional job would require me to take more time away from the girls. You don’t get enough holidays. I don’t know how many weeks of school holidays there are, I think there are about 13, and your average job gives you five weeks, I didn’t want that. For me, it was a bad enough feeling that there was only one parent around, for that parent not to be there for ten hours a day. So, I really needed something that fit in with them, so that I could still turn up to the school assembly and I could still take them to their various sports clubs that they go to. Property always appealed to me and it just seemed a really good option. It wasn’t originally to bring them into the family business.”

SELF-DEVELOPMENT

Self-development seems at the heart of Kathryn’s mission and something she’s passed on to her girls. As a result of dedicating her life to raising her kids, she hadn’t got a handle on the financial side of things. So she dived into learning.

“I was fascinated by the self-development, reading, watching, I was like, ‘Wow, who knew? You know who knew this stuff?’ You don’t get taught it at school, you don’t get taught it. So I have made it my mission over the last seven or eight years to really guide them (her daughters) in that sense. It doesn’t have to be property. Although to me, property is a no-brainer. Something running in the background which, with the girls being so young, it gives them a huge head start. They know as much as me, whatever their future holds, they are so much more financially aware,” explains Kathryn.

“And if I can help them build something in the background as they grow up. Let’s say in 10 years time and they’ve managed to get a handful of buy to lets, well what brilliant choices they’ve got when they have children, they will have an income they could refinance those and take some money out which would allow them to take time out of a job without having to worry. And if they’re in a relationship and that relationship doesn’t work out, lots don’t, then they’ve still got that financial independence and properties."

GRACE STARTING

Grace (22) was the first of the daughters to roll up her sleeves and get stuck in. It started as a part-time job but turned into working full-time when she finished her schooling.

“I was 16, and I started off just doing bookkeeping, I was at Debenhams parttime as well, so I just used to do that on the weekend. When I left college I came on full-time, we had a tiny little home office, vision boards everywhere and I’d be looking for properties, ringing for viewings, going through the figures and seeing if they work. Mum would chase the more important stages, the builders and teams, I was quite scared back then!” she tells ON THE HOUSE Magazine.

Fast forward a little to the midst of the COVID pandemic: “House prices had gone up a lot, so our previous strategies didn’t work as well in the market as it was the other end of COVID, but we did end up getting our own office.”

She continues, “Probably 95% of my knowledge has been from mum, everything has come from what she’s learned through seminars and training courses. Literally everything, the amount of value that she’s given me doesn’t even come across in the wage I was getting. It’s 10X more. It was so good. And you just can’t get that anywhere else. Being in a family, you can ask a question whenever you want. She’s always there to help. I mean, her office is in her garden. So, if you need to get anything, it’s all there.”

GRACE AND IZZY’S FIRST HOUSE

For their first house, the girls decided to buy one together, it was something they were looking at, but like their family investments, the plan was always to buy and then add value.

Grace sent a possible house to her mum who asked ‘what strategy are you thinking for this one?’ Her response, ‘I was thinking about it for me and Izzy’. They worked out they could get it and fund the renovation. Izzy hadn’t been to the viewing but Grace had run the sums. And it was on!

“Offer accepted in the January, I think, and the process of actually getting the property took months.” Grace explains, “It took about six months in the end but that was a learning curve for us because obviously going through solicitors, going through brokers, speaking to estate agents when it’s regarding your own house sale or buying your own house is different to when you’re buying it on behalf of the company or sourcing it onto someone else. So we learnt a lot through that. But we were always going to mum, ‘Mum, please can you help?’

‘What does this mean?’ ‘What are they actually asking for?’ And so that went on quite a while and then we got the keys. And we all came

round sat in the garden had a glass of Prosecco talking about the big job we had to do.”

Learning from the family business clearly left its mark.

“I think because I’ve been in the property business for nearly six years now, I don’t think I could ever buy a house already done. I just don’t think it’s in me when you see the profits, you can make by just adding a slight refurb and then getting the money out the other end. I don’t think it would ever be an option for me,” Grace says, with Izzy agreeing.

“But overall it’s turned out really nice and we’re really proud of it. To pull it off in two months as well. We had a lot of trades that we already knew from being obviously in the industry for a few years, which helped quite a lot with little bits that just crop up when doing a property up. But we had good fun,” she adds.

Of course, we had to ask - in every work environment there’s always going to be tension, frustrated words but also a lot of laughs - how do they find working together?

“I’m just going to say I think it’s very bittersweet because with families you can be much more upfront about things than you would

not be with anyone else, you’re not afraid to say something when it comes to family because you know nothing will get between us,” says Grace.

“I know nothing that’s said would be that long-lasting, but with other people, if it was a company and someone who wasn’t in our family was involved, you would. You would probably restrict yourself and not say those things of maybe sometimes they could have been said a bit nicer, but I think I definitely think that anyway. It’s easier when it’s your family I think.”

Izzy (20), who seems to be a bit of a whiz using CAD (computeraided design) designs the mock-ups but was slightly less enthusiastic about working together.

“I don’t have the patience, maybe I’m not the best at delivering when it came to the family business. It can be chaotic at times but also can be so rewarding, the fact we can do it together. If one of us learns something, we all learn it.”

Mum says there was also a bit of resistance from the girls at first.

“At first they were really not interested, Izzy used to say used to say ‘ohh everything that you get involved in is just dirty and old,” recalls Kathyrn.

“I was a bit upset, but then weirdly, as often happens with children. You just kind of drip-feed these bits. So I largely left them and then they come to you. So at first, it was really lonely. And it felt like, you know, here I am working really hard at these and nobody cares and nobody’s interested… And I so wanted to share the amazing things you could achieve. Weirdly, it just kind of came about, and the next thing you know, they both come forward. Grace first, being the eldest, and then Izzy, you know, and then suddenly they’re really interested in it. And actually, they have been listening. And there have been, kind of observing.

“We’re all quite big personalities, there are a lot of females, a lot of hormones and a lot of opinions in the household in general!”

“I’m honest, brutally honest sometimes with the girls and myself sometimes. But if someone’s telling you something, it’s their truth and maybe you have to self-reflect on it. So they’re awesome teachers to me at times because they do reflect, they’re not frightened to say things to me,” adds Kathryn.

KEY LEARNINGS

We asked the family what important lessons they have taken on board from working together and they provided some great insights.

Izzy - “I think one thing is that obviously when you’re working at home and you working together as a family, it’s really hard to differentiate, between work and not work. If we’ve been talking about it in like the office, then we’ll go have our dinner, talk around the dinner table and there’s no break. We could all talk endlessly about property, couldn’t we? So we have to kind of put in boundaries.”

Grace - “If we’d had a bad day or maybe one of us had slipped up and that issue was within work, we’d have to ensure that as soon as we left the office, it doesn’t affect our family relationship. It’s solely in the workplace, will deal with it as a professional at work. I went through a phase of calling mum Kathryn.”

Kathryn - “Keep being honest, let them be themselves and use their own skillset, everyone has their own skills, I think it’s key each individual has their role and you all know what it is.”

And the final question, will this family business continue for future generations?

“Yeah, absolutely,” beams Izzy. “I think I would definitely start putting preparations in place for my kids to be able to see the same [building of a portfolio], obviously, depending if it still works at that point. But I think it’s in our genes and it would be hard not to really carry that on.

GO BIG AND GO FOR A CARE HOME!

Enter our second family making moves in property. Mother and daughter duo Paula (55) and Natalie Bailey (31). Natalie is based in sunny Majorca and the two of them run a property development company as well as a mastermind and retreat business. Alongside that, Natalie also runs a very successful, Confidence Mastery podcast - quite the busy ladies!

In recent years they’ve refined their business, previously it was both development and serviced accommodation.

“We used to run service accommodation together as well and so we had a number of properties in York. It’s a business we’ve now shut down. The serviced accommodation route was just another job and neither of us really enjoyed it,” Paula explains.

Natalie picks up the thread: “It didn’t suit our personalities. It’s a great tool. It’s a great model. If you enjoy that kind of thing. It’s not a property business, it’s hospitality. And I do enough kind of hospitality in terms of running the mastermind and stuff and I enjoy seeing the success that people have, but neither of us enjoyed setting up and running that service accommodation business. Life is too short to be miserable. Do things that you enjoy that give you joy and make you happy, as well as make money.”

So the pair have decided to go big, or more accurately, go care home.

“We’re currently developing a decommissioned care home and have made 30 new homes out of it. A mix of one, two and three beds to cover a lot of the market,” says Natalie. “From first-time buyers to downsizers and investors. As a scheme, it’s huge, it’s a multi-million pounds scheme. It’s a 20,000-square-foot building, in fact, it’s bigger now and with land around it.”

That is majorly impressive but let’s rewind. How did it all start for the Baileys?

Paula was the initial driving force in the property side of things, with the mastermind and retreats coming later in their property journey being very much Natalie’s ‘baby’.

“We decided we wanted to get involved together in the property

business. It was about five years ago, it started out off as my baby entirely but I wanted Natalie to be involved. I didn’t quite drag her in, but it took a bit more convincing,” Paula laughs. “We wanted to do things on a bigger scale.”

Natalie continues: “We don’t do mediocre and [on the larger projects] there’s an economy of scale as well. Honestly, you know you can go through as much pain, refurb in one house as you can do in a development that size.”

The duo also wanted to make an impact: “It’s more about the fact there aren’t enough homes being built and we really need to build homes. So you know one here and one there and being a landlord in one house wasn’t as appealing,” explains Paula. “That wasn’t the legacy we’re looking to create. You’re only going to meet housing needs if you actually build new houses!”

BETTER TOGETHER

“Property is a pretty lonely business and a hard thing to do by yourself, when I left the corporate world and I started to work at home by myself, I found myself literally looking around kind of like where is everybody? I mean it is really lonely. I didn’t want to just create a legacy to leave, I wanted to build the legacy together,” states Paula.

Natalie’s take on it: “Mum’s important to me. So, us being able to create stuff together and do this together, it’s nice because I’m not gonna get to the end of my life and think I wish I had a better relationship with my mum.”

So, what advice would you give to families considering working together?

Natalie: “Setting some boundaries on business and family time in the beginning because, I mean, ultimately we will sit and have dinner and we’ll end up talking about our business because that is our life that’s part of our life. But then we also have set times where we’ll do it purely just for work. So if we’re going and having some fun, if the conversation comes around to work, that’s fine. For me, I’m very much cut off from work in the evening because I don’t sleep well. So we’ve had a few issues as Mum works very well late at night cause it’s quiet so that suits her.”

Natalie says it did take some adjusting at the start, as you’d expect.

“We both can tell each other what to do. That was fine. So understanding that I’m not a child, I’m not being told what to do in that way. This is for the benefit of the business. And the other way around, when I ask mum to do something, it’s not as a daughter, it’s business.”

Paula: “I like working late. When I’m working at midnight, I’m happy, my mind is like ‘ohh I’ve got the silence now.’ I haven’t got emails pinging through annoying me and getting in the way I can concentrate on stuff and Natalie’s like, no, I’m going to bed and I’m an hour ahead. But the benefit is we know each other, so we know the flaws, we know the benefits, we know what’s gonna work, and we trust each other.”

STARTING HIM YOUNG

ON THE HOUSE Magazine Editor, Julian Pletts writes:

“An asset is something that puts money in your pocket. A liability is something that takes money out.”

So parrots our nine-year-old son back to us when asked as I smile to myself with a sense of pride and a little hint of smugness.

Like many in the property investment world and everyone’s favourite money-saving expert, we feel that to not teach the next generation about finances and investing and to just follow the status quo is to do them a major disservice.

That is why I’m proud to say we practice what we are preaching in this issue and our young son has been actively involved in portfolio discussions and even a little bit of low-level on site renovation work. (Here he is happily ripping up old flooring and painting at one of our most recent projects!)

I’m fascinated to hear about the success and personal stories of the families that are sticking together through the ups and downs of property projects and it only makes me more enthused about getting our son further involved in our business in the future - if he want to be.

Kathryn, is right on the money when she says you have to drip feed kids the information and can’t expect them to get excited about it all at once. But if you are willing to put in the time and explain the concepts to them I can’t see anything but upside in the future for the next generation of property investors, even if they do have to work within a broken housing system and a more challenging regulatory environment.

For now though, I’m just happy when our son asks to come and look at our latest property and continues to work on the greetings card business that he set up for charity during lockdown. I know property may not be his bag when he gets older but for now it’s great that he’s taking an interest. I would absolutely love to hear from more investors who have taken the family route or those for whom their children don’t want to get involved and how you plan to manage that, so feel free to drop me an email at julian@onthehousemag.co.uk

For expert advice on setting up a family property business for success check out our 'Accounting for Family' article