Do Property Shares Require Ongoing Management?

Do Property Shares Require Ongoing Management?


Rob Jones: In today’s question we are going
to be looking at, what does investing in property with shares, via crowdfunding, look like and
at how much ongoing work, management and maintenance is required, from the end investor? Is it
hands-off? Is it hands-on? What’s it look it like, once they have made the decision
to move forward? Robert Weaver: It is
totally hands off. We do all the heavy lifting. So, for example, when we are acquiring it
and launching it on the platform we put on the valuation report, the floor plans, the
solicitor’s report, a report on the title, we organise the debt and that’s all up and
ready. A lot of people think, great, sit back and
relax and pull the income in. Far from it. We employ third-party managers. We’ve got
two, key managers who do work across the portfolio. You can’t leave it there. You’ve actually
got to manage the managers and that’s been a job of mine for many years and that’s been
Jim, my right-hand man’s speciality. That’s what he did at Bradford Property Trust, he’s
done it, man and boy, collecting rent by cash in a satchel, going around the Ealing Estate.
So, he has seen it all the way through. So, he manages the managers and they enjoy
it because they’ve got somebody who actually knows what they are doing, to ask one what
is reasonable. The way I see it, is we have a number of levers.
One is the rent review. One is voids, repairs and maintenance. And you have got to maintain
these properties otherwise they will fall down and you will lose capital value. An example is a portfolio I took over from
a previous fund manager. To get their performance fee they had minimised expenditure to generate
the net income. And when I took it over, for these funds, we, actually, couldn’t let the
properties, they were so redundant and rundown. I finally said, as a stop-gap, get the students
in. No, we have been letting them to students and they do not want to rent them anymore.
They had taped up all the vents, the showers were black, the cooking areas were black,
the floors had started to melt because of chipboard floors. There was a massive need
for expenditure for the little bit of rent they had saved over here. So, you have got to look at that. And, if
you think about it, one week’s void is 1.9%. So, if you’re hanging out to get a 2% rent
increase, well, it better not be void for more than a week. People don’t think about
it in mathematical terms, two weeks void is nearly 3.8%. So, really you got to be managing and being
really realistic on rental growth, keeping tenants there, having no voids or at least
being realistic about getting it to let. Because one of the biggest killers of performance
is void. Rob Jones: Definitely. And being a private
landlord I know, it’s never set-and-forget. There is always ongoing management required
on any property, whatever the tenant profile, unless you have something very nice, from
a lease perspective. So, it’s important to know that is, when they make the decision,
that there is a team that is following up on all those extra elements, making sure that
management, maintenance, refurbishment, everything is taken care of. Robert Weaver: We have a weekly void call,
a monthly meeting with them and we run our own reports which we’ve developed over a number
of years which will give us clues as to what’s going on. And to give you a little anecdote. Back in
the day, we noticed that when a flat was vacated and under new rent, we compared the new rent
to the last rent and that was down. But the ones that used rent reviews were up slightly.
So, what that told us was the rental market was going down. So, we did a moratorium on
any kind of rent increases, kept all our tenants in place and we outperformed all the residual
funds in the UK, just by being able to spot that and do that. Rob Jones: Because you costed the deals. Robert Weaver: And the information. You’ve
got the information but you have to actually see and understand it. Rob Jones: So hands-on for you guys but hands-off
for the investor. Robert Weaver: Very much so and also we flatten
it a bit because we will get lumpy costs where there are voids and there is no income coming
in and there is expenditure and expenditure takes out the income for that month but when
we do it, we put a contingency in there. We collect the right operational costs, every
month. So, there’s no problem with a repair. We’re still collecting a piece for it. And
so, when it does happen, it’s all smoothed out. So, actually, it’s a nicer way, a more
comfortable way of doing it. Rob Jones: Fantastic. Thank you very much.

Leave a Reply

Your email address will not be published. Required fields are marked *