- Introducing Robert Weaver
- Which Property Asset Classes do Property Partner Work With?
- What is Geared Property? Investing in Property with Debt
- How does Property Partner Select their Properties?
- What Due Diligence does Property Partner do when Selecting a Property?
- Do Property Shares Require Ongoing Management?
Rob Jones: In today’s question we are going to be looking at the due diligence that Property Partner does when selecting a property. There are going to be a whole host of things that people are going to be interested in when they are looking at a property. We’ve touched on discount and yield in a previous video but there is a lot more to a property deal, isn’t there, Rob? So, what you tend to focus on when you are looking for the perfect opportunity?
Robert Weaver: For me, it is best described as a filtering process and so, we will get a whole raft of properties coming through to us and we can assess these very quickly. We’re bringing all the years of experience to bear, so, from even looking at the photograph, we can get get a very quick feel of the condition and what the on-going maintenance is going to be.
We still see properties coming through which are non-standard construction. It’s just un-mortgageable.
Rob Jones: Straight away, that’s not happening.
Robert Weaver: No, those are, straightaway, out.
I have a sweet spot. I like properties which been built between four and ten years. Before 10 years because they have still got an NHB certificate on it. Four years… Because it takes about four years for the problems to reveal themselves and be dealt with.
There are still quite a lot of snagging with new-build construction. I’ve seen a lot of that, from my days at RBS. There are examples of developers struggling, they start cutting corners and it reveals itself, pretty quickly.
So, that’s really my sweet spot. Or, I like older buildings that have been recently refurbished. Because I’ve got one eye, all the time, on repairs and maintenance, the expenditure and the net income, coming out of it. So, that’s why we look at those.
And then, we have got a very good portfolio, here because we’ve been running around the country. My portfolios have been UK-wide. Jim’s private property trust, he was the largest UK landlord, at the time. He was up in the north, so, he’s got a very good handle, up there. I know the southern markets.
So, we get a very good feel, straight away. If something comes up in Manchester, we can say, these are good areas, that’s the wrong area, don’t worry about it.
We are filtering them down to a very small selection of the ones we actually do want to go and spend time looking at.
Rob Jones: Your wish list, ultimately.
Robert Weaver: Yes, because we don’t have a lot of time. Time is the enemy, here.
I went to Sheffield, yesterday and that was the entire day, to look at one student block.
Rob Jones: Did it work out well?
Robert Weaver: Yes, it is a good block. It is priced where it needs to be. It is what it is.
Whereas three weeks ago, I went to Sheffield, again, another student block, a bad conversion, narrow corridors, narrow common rooms and I thought ‘no’.
Rob Jones: You wouldn’t get that information on a picture or on a description on a listing, would you?
Robert Weaver: No, you have got to see it. And it looks like a sensible, nice-sized deal, a sensible deal. But on the ground, it just didn’t feel right and the old adage, ‘you can’t beat kicking the tires’. And we won’t buy the thing without having looked at it and pouring over it. And that’s the first phase.
So, we go through all that. We do the numbers and make sure the numbers are right and that actually gets us to the offer stage.
Then also, take, for example, student accommodation. We then get our block managers to go round and do a health and safety assessment because that is one of your biggest levels of expenditure. If windows don’t have proper limitations on them, you have to put those on. There is signage and so on, fire alarm systems. What the vendor might be doing isn’t what we will do, as a proper landlord.
So, we do an awful lot before we get to that stage and then, after the deal is agreed, then you get into legal due diligence and actually verifying what they told you, to make sure that it is right.
We have actually done some deals where we have agreed on the price, put them on the platform, fully funded. So, all ready to go. We have gone to do legal due diligence and, for example, there is a block in Southhampton. In between agreeing on the deal, funding it and getting it to completion, he has gone and let a number of flats to a…
Rob Jones: The agreed owner had?
Robert Weaver: Yes… to a third party operator, which is almost like holiday lets. For me, when I stood back and thought about this and thought, ah well, I can’t get a rent review, the reality of it was that I can’t control the people who he’s putting, on a weekly basis, into these rooms. And this is for student halls.
For me, that was a deal breaker. Not the level of income or whatever. It was just the sheer use he’d turned it to. It was no longer a student deal. So, we walked away from that and that is the sort of thing we will do if they don’t pass muster.
One we are looking at is the Covenant and if they don’t pass muster, we won’t do it.
Rob Jones: Fantastic. So, a lot more due diligence than your typical buyer might be able to do, from a physical time and not knowledge perspective, when they are considering deals.
Robert Weaver: And also, sometimes it might not be a deal breaker and there is a solution to it, so, we might have a rent underwrite. And actually, there are nuances after nuances and if you come to this from fresh, you think, right…
For example, we had a rent guarantee which said, it grants a lease and pays the deposit, that’s in occupation. And I said, no, no. Put that in the clause. I am taking actual occupation of the flat. So, actually, we are in there. Because people can manufacture these sorts of things.
Rob Jones: It’s the nuance.
Robert Weaver: So, it’s actually just being able to put extra wording in, to protect yourself. And again, that is what we do. Years of experience to bring to bear on the whole process.