9 minute read
SCALING UP: Adopting a property business mindset
Are you in the business of property?
Or are you more of a part-time landlord? Alex Daley explores the difference and what mindset you need to adopt in order to scale up…
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Do you treat your property business like the fully-fledged business it is?
Property is one of those things, I think likely because of the word ‘invest,’ which feels less like an actual business and more of a passive income source for many people. Which is absolutely fine, but if you’re really looking to grow and scale this income source, can you afford to have that mindset?
For me, when I sat down and looked at my goals, and how property would serve as a vehicle to achieve them, I realised I had to treat it like a business. I didn’t want it to be a ‘side hustle’. From the small things, like having a dedicated email address, including a specific property domain name, to the big things, like systemisation.
This is doubly important should you look to take on investor money (from family members to others). If there’s a lot of money on the line, you need to be investable, and that’s only ever going to happen when you have a stable, predictable business.
Bronwen Vearncombe (pictured below), Director of Property Investing Foundation and author of ‘Building Your Dream Life’ helped provide some commentary on a few ideas on the why and most importantly, the how.
Ultimately, how you build your business will depend on your goals, Vearncombe’s goals were to exit the nine-to-five corporate job, to not manage her properties, and instead to volunteer in Africa.
SYSTEMS OPERATIONAL
Systems are the lifeblood of a scalable business and property is exactly the same. Set-up and managed correctly, systems can allow more time to focus on the business and less time fighting fires. What are systems?
A system is a defined procedure or practice that is applied to a specific scenario or activity, to achieve a specific result. You’re basically creating a bunch of processes to make sure something gets done correctly and efficiently. Systems to consider:
Maintenance - Seeking permission from your tenant to give their number to contractors to arrange times for them to come around rather than you being in the middle.
Late rent - I have a pre-written chaser email for rent that’s more than three days late. You could have one for day three, seven etc.
There are several software services to alleviate some burden. Some are free - like Lendlord (which is one I personally use and enjoy), and some, like Hammock and COHO for HMO management.
Inspections - I have a pre-written inspection notice email Start and end of a tenancy (especially key for student HMOs) - I have a fairly extensive email, pre-written, which I know covers all the key info they need.
“For us, we have HMOs across two different cities, a guest house business, holiday lets, small development projects and a coaching business. It’s important to be clear about our own skillsets too because some things we love doing and are good at, are things that we don’t always want to stop doing,” adds Vearncombe.
“Asana is a web-based task management tool which helps eliminate the email mess and brings all tasks together. By getting into this we’ve been able to keep track of tasks, prioritise and delegate to others, exchange related files, keep certificates safe etc.”
“Another key system we use is LastPass - a secure way of creating and storing passwords. We can even allow access to just some to our trusted partners in a controlled way. This has given us so much more confidence and reduced risk,” Vearncombe says.
DELEGATE TO ACCELERATE
Delegation is the only way you’ll scale your business effectively, but not everything can be delegated.
The key here is identifying what work to delegate, when and to whom. Sometimes delegation isn’t the right thing to do, even if it can be done.
Factors to consider initially:
1. Can this be delegated?
2. Do I have the skillset to do it myself to a high quality? Do I have the time to do it myself? Is my time better spent elsewhere?
3. To whom can it be delegated? What quality of work will I receive? What timeframe can I expect? How much will it cost?
If you barely have any time, you’re likely looking at delegating full property management. If however, you self-manage and receive an email, for instance, from a tenant saying the downpipe on a single-storey part of the roof has come off and water is going down the wall, that’s something that could go either way. It may take your handyman five days to get out there and he’ll charge you £40. If you’re just around the corner, is it worth you going round after work and sorting it yourself?
If I’m nearby, and I can fix it with no real issue, I’d rather not delegate, wait days for it to get done and get an invoice. That said, my skillset is limited, and there’s no chance you’re getting me up to 2nd storey gutters. That’s money well spent to delegate! Equally, if your goal is zero involvement, you’re obviously not going out to fit or reconnect a downpipe.
The second I’m too busy with growing the business that I can’t go and do that simple fix, then I’m delegating. So the question is, is your time best spent elsewhere? As Vearncombe says ‘how much is your time worth?’. There are however, certain tasks, I just don’t think I’d want to delegate (call me a control freak) - property inspections being one that comes to mind.
Vearncombe’s strategy was to delegate management right from the start.
“Unless managing properties is your dream job and you continue to absolutely love being ‘in the business’ then there is no point getting great returns. Investing in property can be a means to an end - for example, being able to leave a corporate job, being able to have time back to spend with loved ones or volunteer for that organisation you’re passionate about,” she says.
“If investing gives you cashflow (and long-term capital growth too) it does need to be managed well, otherwise that cashflow might be at risk. Even if you feel you are essential in the business, I think you might be surprised that there are others out there with many more years of experience. Of course, you need to pay them, but how much is your time worth? If you add up all the hassles, time taken and inconvenience of managing, how much is it worth to you to offload that element?”
KNOW THY-SELF-MANAGE
If your plan is to have an agent manage your property, many suggest a bit of time spent managing the property yourself and learning what needs to be done, so you can know whether the agents are doing a good job when they take over. At the end of the day, if they don’t do a good job, it’s you that it’ll hurt.
Vearncombe isn’t as keen on that idea: “It depends on what your strategy is. Sometimes it can be useful but it does mean it’s harder to let go later because you have a particular way of doing things. You’ve also got used to the income without fees to an ‘agent’. [We’ve changed] our agents from ‘high st’ to other property investor experts who are local and manage their own properties too. They truly know the issues and are much more focused on tenant management in my experience.”
DON’T RELEGATE REGULATION KNOW-HOW
Ultimately, as a property business owner, you need to understand the regulations around letting properties. Ignorance of the law is no excuse, as they say. And this is the case even if you have your property managed.
“It’s a minefield if you don’t keep informed or have others to support you. Starting out I learnt from the Property Investors Network (PIN) locally and the NRLA National Residential Landlords Association - which have a great website and good training courses too,” says Vearncombe. “I’m a good networker and have a number of people I stay in touch with, my professional experts, of course, which led to my ‘expert panel’ who gets together regularly. We even hold a live Q&A online.”
MAKING THE SHIFT
Ultimately, as you grow your portfolio, there will come a time when your day is taken up almost solely working in the business that you have no time to work on it. If you’re self-managing, that’s you doing tenant viewings, arranging fixes, and responding to a mountain of messages. That’s where growth can stall and you may need to be able to step back. If that means bringing in part-time or full-time help to manage aspects, then that’s what needs to be done.
There are options - it could be hiring a good virtual assistant (VA), it could be bringing on a property manager in-house to handle all of the management. Whatever it is, the objective is to get you out of the trenches, to stop fighting fires (even if it feels productive) and to look at strategy and big decisions. In our world, that’s likely new property acquisition, attracting and bringing on new investors and solving crucial issues that require you and you alone to fix.
