INTERVIEW: Renovation success with Martin Rapley

The ability to improve, reinvent or breathe new life into the bricks and mortar of a property is such a key part of so many strategies. So ON THE HOUSE Magazine editor Julian Pletts consulted Martin Rapley – to many the foremost expert on the subject – to get a step-by-step blueprint for refurbishment and renovation success

Renovation expert Martin Rapley

Over the last few years, as the market has been climbing, the BRRR strategy has been buzzier than a beehive in early summer. But really, Buy Refurb Refinance Rent (or sell) and Repeat is nothing new. It was previously known as momentum investing and before that, well, it was most likely just known as adding value. And that really in a nutshell is the key to success in many property strategies – adding, manufacturing or forcing an increase in the value of the underlying asset.

In fact, that ability to add value is what attracted many of us to property in the first place. It’s pretty difficult to buy a share in ITV and then improve the quality of its programming. What’s more, in the vast majority of cases (except for adding paper value by gaining planning permission) adding value comes down to some form of renovation, refurbishment or redevelopment.

Unless you are buying a property that just needs the odd lick of paint and new carpets you will have to get comfortable with refurbishment – which includes everything from properly working out the costs and writing a schedule of works or hiring and managing tradespeople through to value engineering and knowing when to outsource.

For first-time investors or those who are looking to move from simple buy-to-lets to renovation strategies, it can be a seriously intimidating prospect. Get it wrong and – as we will see – the potential downsides can be pretty catastrophic.

To help you avoid that and start you down the right path we sought the expert advice of Martin Rapley of Refurbishment Mastery and refurbishment mentor and trainer, who has been interested in property since jobbing at his uncle’s building company in his school summer holidays.

Rapley then started in the industry as a trainee quantity surveyor after school, followed by working as a contract estimator and contract manager before switching to project management in 2000. He then set up a construction consultancy in 2012 and began his own property investment journey. Despite having his vast and varied construction experience – when it comes to starting his investment journey he was humble enough to know there was still a lot he did not know.

In fact, being humble to know you don’t know everything, and a willingness to ask important questions, are clear themes throughout our interview with Rapley.

“If you are blagging and not really doing things efficiently on the smaller projects and you carry on those bad methods all the way through to bigger projects, suddenly it hurts,” he warns.

For instance, Martin readily admits that deal-finding is not his area of expertise and says he is perfectly able to find deals that work on RightMove. His focus and strength are process-oriented tasks and this comes into its own when managing refurbishment projects, large and small.

If done correctly refurbishment can be the key to rapid portfolio building and creating profitable property projects which will ultimately lead you to financial independence.

BIGGEST STUMBLING BLOCK

Whether you find your renovation project on the open market, off-market or the black market – appraising deals is going to be something that you have to get comfortable with. This can be the first and major stumbling block for many an investor.

“The first thing they stumble into is they don’t appraise the deal well enough in the first place. So, they don’t understand what they’re buying, what the cost is to convert, refurbish - whatever they’re doing,” warns Rapley.

“Unfortunately, I talk to a lot of people who have probably bought the wrong property or paid too much for the property because they didn’t really understand what they were doing with it going forward.”

(For those new to property investment – start with our Beginner’s Corner series which can be found here and will include a new step for you to master in each issue of ON THE HOUSE Magazine)

Frustratingly, though for first-time renovators it can be a bit of a chicken and egg scenario – ‘How do I know how much it costs to renovate a property until I have renovated a property?’

“What I teach is to break the project down into manageable, understandable components,” explains Rapley, who works with newbie renovators to guide them through the process.

“If we’re talking about, let’s say, converting a threebedroom house into a five-bedroom HMO, I’m talking to them about the cost of rewiring that property, the cost of redoing the central heating system, the cost of the extension on the back, the cost of the new kitchen. So, from that, they’ve now got benchmarks… I’m cautious about doing any refurbishment budgets on a price per square metre because there are so many variables in what a refurbishment is.”

This still leaves the question open about how to be able to figure these out in the first place. Well, obviously, Rapley would encourage you to sign up for his masterclass which you can do here. But he also gives some insight into how he squared that circle when he started out investing - heading to networking events and open houses and asking questions, lots and lots of questions.

“When anyone at a networking meeting ever stands up and says, ‘I’ve just finished a property. I’ve got an open house on Saturday afternoon.’ I’d always say, particularly for anyone new or inexperienced, get yourself around there, see what they’ve done. Look up what they bought it for, consider how they converted it, what the numbers were. Most property investors will share all that knowledge,” says Rapley. “That’s how I learned in the first place. I knew construction, but I didn’t know anything about HMOs. I didn’t know what the inside of an HMO looked like.”

You could also consider joining a mastermind group with more experienced investors who can help you thrash out the details of your deals – such as the RoundTable Mastermind run by the Buy to Let Property Group’s founder Wes De Leur (Find out more here).

Largely, most builders are good, but there are the wrong builders for you

CHECK, CHECK AND CHECKLIST

Then when you start to feel confident you can price things up a little better you will need to build your ability to spot issues at viewings –and you will need to do a lot of those too.

Martin says don’t be afraid to take a checklist along with you to viewings to note the issues that are going to cost money to rectify along with wielding your mobile phone for pictures and video referencing later. When you do lots of viewings they tend to blur into one so you will thank yourself later for this.

“The key thing is the issues you’re looking for are beyond the horrible carpet and wallpaper. We can change the carpet, we can change wallpaper. We’re almost certainly going to put in a new kitchen. So, and it doesn’t matter that the toilet is bright pink because we’re going to put a new one in. What we’re looking at is the structure. What is holding this building up? Are there some structural cracks?

“Does it look like the ceiling’s about to fall down? Are the floors all irregular? Are the electrics old-fashioned rewireable fuses?”

Rapley’s ‘Refurbishment Handbook’ offers up a checklist with 130 possible observations you can make at viewings ranging from the state of door frames and windows through to the wiring and the levels of the floors.

This sort of eye for detail can take time to develop and come with practice if it is not something you are good at or used to. So, don’t be afraid to take someone who is, advises Rapley.

ON THE HOUSE editor, Julian Pletts, learned early on in his investing career that he loves the people side of property like talking to vendors and negotiating deals but that it was his wife’s eye for detail that could potentially spot flaws in properties at viewings and help with the vital elements of the deal appraisal.

SLOWLY DOES IT

Once you are comfortable with appraising deals and have secured a solid renovation project you’ll need to write a specification of the work that is required which can be done by referring back to your notes and hopefully a thorough inspection of the property after you have the keys (or even before if the vendor allows).

At this point Martin’s advice is clear and concise: slow down!

“You’ve probably seen it on social media, you know, you see people with the keys on a Friday and they’re saying the builder starts on Monday. That is possible. I have had projects where you can pick the keys up on Friday and get the builder in on Monday, but that is really hard because often yeah, you can’t get builders and architects and people around there to look at a property until you actually own it. And I meet a lot of people that say ‘Well, I’ve just put the builder in there, I’ve got him started, and I’ll tell him what he’s going to do and he gets going.’ That is just a license for the builder to print money.”

“I think slowing down [is important]. If you slow down two weeks upfront, you will definitely gain four, six weeks at the back,” advises Rapley.

This lead-in time needs to be factored in as part of the bridging finance costs in the appraisal. Also, when it comes to your availability you have to be realistic – if you are working full time you are going to struggle to be a full-time project manager.

“If you know, you can’t manage the project without a project manager, then when you are appraising the deal before you even buy it, factor in a line item for a project manager to come and manage it for you,” he says.

When writing a specification – a step Rapley says you ignore at your peril – you can either choose to do it room by room, trade by trade or a hybrid mix of both. Once you have a detailed appraisal and fully fleshed it out with all your requirements for the renovation, it’s time to look for tradespeople.

BUILDING TRUST

“A lot of people say to me, how do I find good builders? Largely, most builders are good, but there are the wrong builders for you. A wrong builder is a builder who perhaps only does new builds and you’ve got them in to do an extension. Or the builder who is too big for your small project or it’s just one guy and his mate and the project’s far too big for him and he’ll still be here next year finishing it off because it’s just the two of them and they can’t do it any faster.”

Again, this is not a process to be rushed but do it properly and you will start to have trades you can add to your list for future projects. “A lot of property investors will only have spoken to two builders and one of them has now got too busy and can’t do the job and they don’t like the other one. Whereas, I teach, you should have a long list of builders, 10 to 12 builders, and whittle that down to six or seven that you get prices from. So, that if the one that you want to use suddenly can’t do it, you’ve got more that you can talk to without being up against it.”

With a solid specification of the work that can be shared with each builder, they will all be quoting from the same information so you can easily compare quotes, of which, Rapley advises obtaining at least three from your shortlist.

MATERIAL DISADVANTAGE

One major hurdle that Rapley has seen in recent years is the fluctuating costs of materials and labour.

“The biggest challenge has been how volatile [materials prices] have been. I’ve been seeing builders pricing things and saying, well, you know, I’ve priced it this week, but now you want me to buy it 12 weeks later on, it’s just skyrocketed. And so, we’ve had builders come back talking to us about, you know, how we can work with that. Whilst everyone sets out to have lump sum fixed prices for their works, you know, with a builder that’s given a client a lump sum fixed price, if they genuinely can’t make it work for that price, we’ve had to get around the table, negotiate and really work out how can we make it work?

He recalls the example of one client who was carrying out a renovation project for £750,000 and was alarmed when his builder came back and he couldn’t honour the quote, saying to Rapley - ‘He’s trying to rip me off!’ But after the trio sat down to look at the challenges the builder faced the difference turned out to be just £3,500 – hardly a dealbreaker on a project that size and certainly not worth going through the whole tender process again.

Rapley goes into much greater detail about appointing builders, setting key timelines and contracts as well building rapport with them in The Refurbishment Handbook – all of which are beyond the scope of this article, but he does advise that new investors should start with small projects and work their way up.

He warns of “inexperienced property investors that have sometimes, sadly, been on a training course at the weekend, are suddenly out on Monday buying a half million-pound complex schemes with little or no experience and not knowing who to turn to and muddling their way through it, and therefore continually finding themselves out of their depth.”

“If you start off with relatively small projects, working with relatively small builders, doing relatively straightforward projects, you will ease yourself into it and so that by the time you come to the bigger schemes that are more complex, have more challenges, you’ve cut your teeth on relatively straightforward things. On every one of those smaller projects, you’ll learn some stuff and then you’ll go on to the next one. You’ll learn some more.”

REMAIN HUMBLE

If you are diving into renovations for the first time Martin returns to the perspective of being humble enough to know there is likely to be a lot you don’t know.

“One of the biggest mistakes I see them making is not talking to, not asking questions and not talking to their builders, their tradesmen, even their consultants and not asking questions and drilling down with the builder. They will say to me on the phone: ‘The builder sent me this and said it was ten grand more.’ Well, did you ask where ten grand came from? How did they build it up? What’s led to it?” Ignorance or lack of knowledge can be a plus – you can ask frank questions says Rapley.

“I think one advantage that some property investors have got is that they don’t know. They genuinely don’t. So, whilst I can ask strategic questions to try and tease out the right answers, I say to some of my clients, look, phone the builder and say. ‘Look, where did this price come from? I don’t understand where it came from. I expected to do this for, you know, this element of the work for £5,000 and you’re saying it’s £10,000. Help me understand why I’ve got it wrong.’ I can’t have that conversation because it’s like, well Martin, you should know. You should know it costs £10,000 to do this because you’re an expert. Property investors can say, look, okay, I’ve got it wrong, but help me understand, you know, help me make sure I don’t get it wrong again.”

As with any relationship, and Rapley is very clear working with a

relationship, communication and compromise are vital. By asking questions and being open and honest about what you don’t know, once you have appointed a builder you will feel more confident to put together an informed and detailed schedule of work (if you are project managing yourself).

DO DEAL DEBRIEFS

So, you’ve followed Rapley’s advice, found a small deal to cut your teeth on, created a useful specification of the work, appointed a builder and worked through the project together maintaining that working relationship – once the dust has settled and the tenants installed – it is time to do a project debrief.

“When I get to the end of the project, I want to know where I went wrong. And largely that is financial issues. You know, if I’ve spent more than I was intending to spend, why was it? You can’t get the money back, but you can learn and take that forward to the next one.”

ENGINEER EXTRA VALUE

As a result of your debrief you may well conclude that you need to keep a tighter reign on costs in future projects. One way to do this is value engineering.

“Value engineering is a process of working with your team which could be an architect, structural engineer, other consultants and a builder to find a more economical way of delivering the same product or this same project,” explains Rapley.

It helps if you already have enough rapport with your builder to be able to have these conversations.

So you might say: “Mr Builder, we’ve specified this product. Are you

aware of a cheaper product that’s perhaps unbranded that does the same job? We do that all of the time in our everyday lives. For instance, we might say, right, I need a new vacuum cleaner. There’s the Vax. So, and if someone said, go out and buy me a Vax, you know, you’re going to spend more than if you go down to Argos and buy something that hasn’t got the label

“Value engineering is something that, for the inexperienced, is not natural and will take longer to get into. I guide my mentees into it slowly,” adds Rapley.

“Door handles, for instance, that when the [end user] has got to open a door, if the door feels chunky and the handle, feels chunky and heavy, then that feels like quality. We know most people go into a kitchen, they’ll open the doors and the drawers, if they’ve all got soft closers on that feels like quality. What a lot of them aren’t considering is the quality of the vinyl on the floor because they’re not looking down and considering whether the vinyl is two-millimetrethick or three millimetres?”

It is a balance that comes with experience and sometimes architects or consultants will specify higher-end products than are strictly needed to achieve the same result. At the same time, you want to be careful not to erode the perceived value of the property at the finished stage just to keep costs as low as possible.

THERE’S NO BETTER TIME

So, if you heed Martin Rapley’s hard-won words of wisdom and take it slow, start on small projects and build up, appraise carefully and write a detailed specification and then schedule of work, plus have quality and open conversations with your trades while building rapport, you will be well on your

Furthermore, now could well be a great time to start looking for great opportunities to add value and see a higher return on your property investments.

“I think the market at the moment is so exciting because we are seeing properties not selling. We’re seeing motivation coming back into the market. We’re seeing prices drop. We are seeing property investors running for the hills. And so, you know, we are running for the valleys, as it were.” As Wes always says – happy investing all.

‘YOU’VE GOT TO FIND ME £50,000 OF VALUE IN EACH HOUSE!’

“I was set this project by a developer I was working with seven or eight years ago now. He got planning permission for two, two- and three-bedroom houses that were big three-bedroom houses and he would only really just break even. He said to me; ‘We’re going build them out but, you’ve got to find a way to add £50,000 onto the value of each house. Do some research and come back to me with some ideas.’ So we sat down, I worked with the architect, I worked with an interior designer.”

“We took some advice. The first thing is we reconfigured the walls and created a little study. So now we’ve added some value with the study. Then we did some research on underfloor central heating system and realised that actually that lifted the value, but it also increased the cost. So, as we’d increased the cost we had to be sure the value would come up a bit more. We put in some nicer glazed screens. We spent a bit more money on the garden and we ended up spending about £20,000 extra per property. But the belief was we were going to add on £70,000 - the net increase was about £50,000. He said, ‘Okay, well let’s get on with it and try it and see what happens because this is good learning for the future.’ The problem was, the property market went on a real boom and he sold these properties for about £150,000 more in the end, so we never got to the end of the exercise to see if what we’d done really added on the value that we thought it would ‘cause the market just took off anyway.”

“It was those things that we could do that lifted our property from what was largely run-of-the-mill threebedroom semis. Yeah. To something that was just a bit grander than a three-bedroom semi that, you know, as a result [attracted] the next demographic up.”

THE GOOD AND THE BAD (THAT GOT REALLY UGLY!)

THE GOOD:

Martin Rapley recaps a true win as well as a woeful tale to learn from:

“There was another fellow who rang me. He said. ‘Can I pay for two hours of your time to go through my contractor’s quote?’ This wasn’t a refurb actually, this was to build two houses in an expensive part of London… We had a zoom call, we went through the whole schedule of works from top to bottom, including all of the contractors’ prices. And what came to light was the architects probably over-specified some things that weren’t really necessary. The architect had made some assumptions on things that weren’t right for my client and as a result, I gave my client a large number of places where I felt he could make some savings. That’s a prime example of value engineering that we were talking about… I didn’t follow up for a while until I received a video testimonial from him about three months later telling me that that exercise had saved him £120,000 and he’d just paid me for two hours of my time to get that back.”

THE BAD & THE UGLY

“There was a case study of two very inexperienced property investors who came to me to do an appraisal, a financial appraisal. The deal just really didn’t stack. Still, they decided to buy it. They fiddled the numbers to fight to prove to the finance company that it worked. It took a year to get planning permission on an 18-month bridge. They didn’t have any cash to pay their consultant, so they ran out of bridging time. The bridger then pulled the loan and they had to sell the deal in an auction, and they managed to lose £850,000. Now, there was an awful lot more story in there, but it all started from the fact that it wasn’t really a deal in the first place. These were amateur investors that jumped straight in with a really big project. I don’t want people to do that… it was just a disaster. So that’s, that’s the worst case.”