Throughout my nine year investing and Landlording career, Iâ€™ve always believed that quality doesnâ€™t cost â€“ it pays, but Iâ€™ve never really thought in any detail about why that should be the case.
But today I am.
This blog wasÂ prompted by a couple of posts on theÂ Property TribesÂ forum and they haveÂ inspired me to put some thoughts down.
Why I will never buy another flat outside London again.
Myself and my husband Nick have always favoured buying quality new build houses in the South East.Â They come with a ten year NHBC guarantee, they are fully compliant with Building Regulations, and they have low maintenance costs for at least five years, sometimes more.
Additionally tenants love them and I find them easy to show and quick to let.Â They photograph well, and thatâ€™s important, as tenants â€śbuy with their eyesâ€ť.
All of the above reduces your maintenance costs and voids, which increases your net cash flow.Â This can have the same net effect as increasing your rent by 25%!
When out and about at property networking events, I hear many people and wealth creation â€śexpertsâ€ť boasting about how many millions their property portfolio is worth.
I simply cannot abide this culture of â€śI own X million ÂŁâ€™s of propertyâ€ť as it is not a true indicator of wealth.
There could be two property portfolios both worth, say, ÂŁ5 million.Â One could consist of numerous run down terraces rented out to LHA tenants up North and one could be a couple of high end properties in prime London andÂ few couple of family houses in the South East.Â Â They are no way comparable.Â One is quantity, one is quality.
The first will most likely be high yielding but suffer from low, no, or even negativeÂ capital growth.Â The latter will most likely have a lower yield, but have a higher chance of capital growth.
To apply a methaphor:Â One is a Lada, the other is a Ferrari.Â Iâ€™m not suggesting that one is better than the other.Â I am suggesting that they are different animals, and need to be handled and managed accordingly in order for either of them to achieve success.
The key question is how much money you are making month on month, not how much your portfolio is worth.Â It could be worth ÂŁ5 million with ÂŁ6 million of debt and negative net cashflow.Â Thatâ€™s nothing to shout about.
Further down the line, any resources spent on improving quality will also have a very positive return on investment. Basically, whatever you spend on improving quality will be returned to you in decreased costs. Â Also, when it comes to pushing a portfolio growth strategy, quality really makes a difference.
It is expensive to fix problems after the event
This applies to any type of portfolio.
As a Landlord, you need to have a fundamental philosophy of stopping problems when they occur rather than postponing dealing with them.Â A problem in a property can escalate quickly if not dealt with promptly and costs to fix it can rise dramatically.Â Unattended problems also mean an unhappy tenant, and that is somethingÂ none of us can afford.
When we createdÂ Yulpa, we recognised that it was important that Yulpa support you in keeping up the quality within yourproperty business.Â To that end, there is a tenant communication tool that allows tenants to report an issue, such as a leak in the bathroom or a broken window.Â This is then added to your Yulpa â€śtask managerâ€ť on the dashboard to list this repair for you to deal with/action.
Any business that wants to succeed needs every part of its organisation to be working efficiently if it is to flourish.
I also believe that â€śquality stands the test of timeâ€ť i.e. quality properties do not date, age, or wear as quickly as poor quality or poorly finished low spec properties.Â This means that when you come to exit your investment, quality really will pay, rather than cost you.
To go back to my car analogy:Â In the context of quality â€¦ The Lada can still get you from A to B, the same as the Ferrari.Â The Lada is cheaper to run, and you perhaps have more chance of getting from A to B.Â But if you do get to B in both of them, then the Ferrari is the better way to arrive.
Property is the long game, so, in my opinion quality is going to win out every time.Â Maybe you disagree?Â Or maybe each Landlord shouldÂ build a portfolio of Â both quality and quantity?!
Follow me on Twitter:Â Â @4_walls
Vanessa Warwick is a former TV presenter, turned professional residential Landlord, consultant, and speaker. Along with her husband Nick Tadd, she foundedÂ Property Tribes, which is now the U.K.â€™s busiest on-line Landlord and investor community. Nick and Vanessa have just launched their new tech product,Â Yulpa, an on-line â€śproperty office/filo-faxâ€ť that helps you organise and manage your entire property life in one place. It comes with an iPhone app that does auto due diligence on any property being considered for purchase.
Vanessa and Nick advocate the use of technology and digital and social communications in property, and speak at events all over the U.K. as well as consulting for the BBC on property. They invest mainly in flats London and family houses in the South East and are also big advocates of holiday lets, having two upmarket holiday lets on the South Coast that achieve above-average occupancy thanks to the coupleâ€™s web efforts and vertical marketing strategies.