UK Property Rant Podcast – 7 Dec 2022 with Brett Alegre-Wood, Ryan Rahnavard, Ritesh Patel & James Cox

Full Transcription

Brett Alegre-Wood 0:05
Hi, guys, and welcome to another week of property rants, UK property rents for the what is the seventh of December? And welcome, guys. So we've got Ryan, Ritesh and James for today. And yeah, today so what we're gonna cover today is, yeah, where to invest in 2023, obviously lots of talks about recessions and lots of talks about unemployment downturn, all these negative things. And they seem to be everyone's pointing towards 2023 to happen. And, yes, I will tell about what are the areas we think you should be looking at? And the reasons why behind that. And in particular, obviously, one of things we do well, is regeneration. And before we get started, there's a more serious note that we need to get ahold of, which is none of you guys are dressed in red outfit, what happened?

Next week, next week, so yeah, so guys, what's um, what what are your thoughts on 2023? What what's let's start with not necessarily areas, what do you think goes into making an area, a good area to invest in during a recession or during a downturn? What are the things the key things? Let's kick things off.

Ritesh Patel 1:25
For me, regardless of recession, or London recession, it's always fundamentals. In so we, you know, I'm a believer in sticking to cities and surrounding areas, then the surrounding areas around cities. For the simple reason, if we look at the simple economics of property, it's all driven around supply demand. So you've got concentrations, but concentrated areas where there's too many people, not enough places to live, that ultimately, you're always going to find that prices, and rents go up as long as you hold it over a period of time. And that's very much reflected in the sort of property that I've always invested in myself. And what I've always recommended my clients to invest in as well. Because it's very much not just about, you know, the good times, because let's face it, when the economy is good, there's lots of certainty around you can buy pretty much anywhere and everything's going up. Okay. But it's a case of where do I buy so that regardless of recessions, or you know, wherever we are in the economy, I know that my property will always stay rented. And even if prices aren't shooting up, to be stabilised, so it's just getting a grip of my demand and a bit through buying when the fundamentals are.

Brett Alegre-Wood 2:45
Yeah, okay. And 100% I think we agree with that. What about you, right? But we were gonna say something that

Ryan Rahnavard 2:52
follow regeneration wherever has the biggest regeneration plans the most amount of money and I'm talking real regeneration, not these places, like what I hear the other somewhere up north near Newcastle. That the there's parts of Inland Revenue or something or the other moving 600 staff there. So some companies out there pushing it as a as a big regeneration story 600 staff isn't going to bring you anything. What you need to follow is where's the real money being invested in regeneration? So you know, for the past decade, it's been a lot in Manchester now. You know, Birmingham has really started to kick off Liverpool, you know, it's, it's, you know, it's a tough one with Liverpool because Liverpool has all the fundamentals there to be a great city, unfortunately, it's full of scousers.

Now, but it also has Liverpool I think now that they're starting to show some clean up in the political world with the counsellor getting taken out, you know, getting done for fraud and stuff like that, that seems to be going out and you've got some big players it pill group, if I'm not mistaken, gone into the area, you know, you can start seeing that potentially, it's an area that that you can start focusing on a little bit more. You know, and of course, London, you know, London will always have this, there'll always be a pocket across London where where there'll be a huge regeneration, planning and regeneration in both formats of the private sector and sort of the public sector investing in the area. I think as long as you stick to that, then then you should be okay throughout any recession, because now all we have to do is look at Hackney in Brixton, do it and you will Hackney especially during sort of, I think during the recession, it continued to grow because of the investment and it only saw saw its first slowdown in property price growth and like 15 years last year, which wasn't even a massive slowdown. So that's why it is very, very important. And to sort of step away and also step away from the thought of this thought process of, if you know, I would live there, I would live live there to be quite frank, it doesn't matter where you would live, because of course, if you're the guy with 100 200 300,000 pounds, there's a lot of areas you wouldn't live because you don't need to live in those areas. But those areas, that you're going to invest in areas that are going to be of huge demand for a big workforce, because, you know, inflation isn't stopping any soon out the actual sort of real wages as an increase in the fast paced. So a lot of people that earn below 50 60,000 pounds a year are not going to be living in your best of best of areas, however, they are going to be living in areas where there is regeneration going this the area's going to be changing. They're either going to buy their first property they're to live in, or they're going to rent there with, you know, given them the ability to save a bit of money to go and purchase their property. So for me fundamentals, yes, of course, you know, that's number one across anything, but during a recession, I would purely follow regeneration.

Brett Alegre-Wood 6:08
Yeah, I think one of the other things too, and I agree with all those points. One of the other things is I talked about the every person house, you know, and every person houses rather than buying where rich people live, or where poor people live, you buy where the every person is where the vast majority of the population. And when you do that, you see that there's a robust market there, because the high end of the market, you can suffer void periods, because there's not a huge population of people, when one person moves out, the next person can't necessarily move back in straight away. I mean, we've seen as watching the stats in New York, the top end market in New York has already dropped 28%, which is a huge drop now, albeit it probably increased that much pre, you know, over COVID. But the reality is, is that, you know, buying in an area where the every person invests is a great opportunity, you know, now the every person is changing, obviously. And this is where noticing this in the lending side, where we're raising the rates to meet the RPI, but that rate is too much for people to afford along with the other cost of livings. And so they're having to move out. So it may be that, you know, and this is how inflation rubs people. But I think the reality is, if you go for the every person house, if you go for the regeneration, if you go for the fundamentals, the shops, skills, transporters, major players major investment, that's certainly the big picture stuff you need to look at. Yeah. So yeah, I think that's good. Anything else is there? I just say, Good morning, Kevin. Kevin's joining us, I think you must have as on, on the little bell, reminder, because we're sitting here every time we jump on to jump on, which is good news. So hello, Lakeland, Florida. Actually, I've been chatting about Florida today. Amazing things go Florida, right now necessarily property side of things, but from business and entrepreneurship. And, you know, seems we'll say that California is now a bit of a dump, compared to what is now you know, really Texas, you know, Austin, Texas, that sort of thing. And Florida seem to be the two places over there that are really doing well. But anyway, that's not the UK. That's us. Yeah. So is there anything else that you guys would would say?

James Cox 8:21
Just to add to your point, about the other day person. I had a had a call with a guy a couple of weeks ago, and he was bought property in Harvey four years ago, and he bought it was cash is 45, grand or whatever. And the last six months, he's had a tenant who's not been paying his rent. And it's turned out to be a bit of a rogue and is trashed the place and cost him all sorts of issues. And, you know, it's kind of the sort of I told you so sort of argument where he's like, look, this is why we've always said to people apply in city centres, because that is where you're going to attract your highest calibre of professionals, because that's where the biggest importance, you're always going to sit. And that will bring in the best, you know, height most highly skilled, qualified people. And those are generally the people that are going to be your best type of tenants, they can pay the rent, and look after the property. And look, even if people aren't buying and they're not able to buy there still always going to be competition for rental properties, you'll find that the rental competition gets stronger, and rents go up. So even at the very least, if you're not getting the growth you're getting, you're getting good rents, and you're able to sort of stabilise and cashflow and hold that property when the market does. Good. Again, those are areas

Brett Alegre-Wood 9:34
because one of the things we're gonna be chatting about next week is the state of letting market and that's one of the issues we had with this and one of the suggestions I'm making to any landlord is that if they can't afford to go without the rent coming in, and they can't afford the legal process to evict somebody, then pay you two or 300 bucks to get the insurance coverage for the property because we're heading into a recession people can I lose their jobs and so lose their jobs, they stop paying rent, and the way the government protects them, you know, means that effectively, you could be massively, and it affects your life, and there's nothing you can do about it, you know, and you know, if you think four to six months is what it takes now to evict a tenant, if they want to be silly about it. So if you can't survive that four to six months, then you need to change that. Anyway, we'll talk more about that next next week. So I think, you know, with this whole thing, where to invest. So, you know, there's some really good points there. And I think that's key too, you have to start off with those points in your mind, or you go into an area. And actually, if the area doesn't tick those boxes, you probably best to leave it alone, over the next couple of years. Because it's interesting, our own story realistically, as you know, we started out selling everywhere around the UK, you know, if we could get a deal, if we're going to do discount, if we could get regeneration fundamentals, whatever, we do a deal there. But we, after the GFC, the global financial crisis, we stopped doing a lot of property. And there's a lot of opportunities that we pass over now. And we let go a lot of our developers that we're working with, because even though they weren't good areas, the fact was that the investment wasn't there for the future. And those good areas became an overtime of just degraded and degraded, degraded, which hasn't necessarily affected the rents, the rents have sort of crept up. But the capital growth hasn't happened. And I think, austerity, and I think all these sort of things with gov, which governments can do have affected those areas. So you've got to be really careful. And I can't stress enough that, you know, if you invest in good areas with fundamentals, and all these elements were talking about, then you're more likely to get a capital return as well as an income return. So yeah, absolutely. So then we're, so let's just go around, where's your place to invest? Do you think, if you had to? How much money? Were you gonna invest for the best return you reckon over the next few years?

Ryan Rahnavard 12:09
That question is, is, is massively dependent based on the capital that someone comes to the party with as well? You know, if you've come to the party with 40 50k, then, you know, you're looking at probably Liverpool and not much further, may come to the market with 234 100,000 pounds, then, you know, I would say London and the commute about and look no further.

Brett Alegre-Wood 12:35
Let's say you're just basically just basic, pure and I agree. 100%. That is true. If you're taking the money side, what's your pick for the best place across the UK?

Ryan Rahnavard 12:47
during a recession? Yeah, for next

Brett Alegre-Wood 12:49
year, you've got to buy something. Let's say in June next year, middle of the middle of the year, where you're gonna buy what area? What? Okay, yep.

Ryan Rahnavard 13:02
Transportation, track transportation links, 15 minutes to get into central London, your rent to the average renter will be a lot more affordable. Your owner occupier market will buy hugely. They're the amount of money that's been invested in that area, the proximity towards London and all the fundamentals are there. So the risk that you're taking is massively reduced. So I'm going to invest in one place for next year would be Watford. Okay,

Brett Alegre-Wood 13:31
cool. And obviously, one of the things we have got is this, you know, what's the river well area, which is you know, 15 to 35 has got a massive plan, you know, regeneration, the whole lot, funnily enough, it was on one of my list of things to do, and obviously, it's, it is a great area. And you took you mentioned the, the where it is, you know, it's commutable here's London, that's Big Ben in the middle there. And if we follow up here, that's what foot here so it's 15 minutes isn't 15 minutes more fashion training?

Ryan Rahnavard 14:03
Yeah. And the trick but Brett if you zoom in towards Watford I'll tell you another great reason why what for the spot to invest in? You look at that next city. You got an area to zoom out a little bit. Zoom out a little bit. Okay, next to that area. You've got an area called there Richmond's worth million millionaires, millionaire dream land over there. acres of land, massive houses, so on and so forth. Above it. St. Albans again, another sort of big players. They're pushing just underneath it again. Dreamland. Yeah. So you're sitting in the middle there, those areas around you maintain the desirability of someone who's starting off to want to live somewhere like Watford and stay there, the schools, the shops, the transport links, all those sorts of stuff is is centred there. transportation makes it a great sort of investment I said 15 minutes on the train, it's quicker to get to central London from Watford than I think it would be for black zone three or four that sit in on a on an underground because it's when London national rail and it's one or two stops and you're directly into Kings Cross. So if you look at it, not only does it have the transport, it also has the infrastructure around it with with the areas that are surrounding it. And this is why what food is going through regeneration because of the areas around it far ahead, and what foot needs to catch up.

Brett Alegre-Wood 15:39
And it's interesting with this place, I know this place really well, I used to Elstree aerodrome which is over here. That's where I used to fly my helicopters out of so I've flown all around this area, I know it from the top down. It's it's an amazing area, there is huge houses, there is, you know, lots and lots of stuff. But actually, there's also green grass and space. So when we talk about the race for space after COVID, this has been fantastic. You know, there's been huge opportunity for that, you know, and I think that's one of the key here too, is that when you start looking at places like Watford, you could be living in central London, you walk out of your office, you do a couple of tube stations, and then you catch another train straight out 15 minutes and you're in Watford and then 1015 minutes you replace. So in under an hour, which, you know, is not a long commute by most standards. You can be you know, outside the city, you know, and you know, you're just randomly be a 11am 11 to the to Luton, you've got Stansted, you've got everything right there, you know, and I think that's where, you know, when we talk about buying in London, that's great. Some of the London prices, you know, toppity But actually, there's a lot of places outside London that are even better. Yeah, so yeah, you know, you don't just sort

James Cox 17:00
of get from the from the perspective is very self contained in the sense of, you know, if you look at a lot of areas, which are comparable to London, they only really rely on that computability factor to London, there's not much else in the area, whereas a place like Watford because you've got you've got KPMG in the area, you've got other big finance companies. So not only does it keep people who want to live and be in the works, but you've got the computability factor added to it. So that is just the you know, that just adds to that sort of gravy if you like

Brett Alegre-Wood 17:30
and it really it's interesting we there was a false started what for what for Luton sort of had a bit of the faults that we're looking at those sort of areas. And certainly what for did there we will get it, you know, there's a three or four developments that we're gonna go ahead, then they got stopped in and now they're going head again, you know, and I think now is it's a great time to, you know, look at that sort of stuff because there's so much money getting spent there it is so commutable it's so easy, and a lot of people have to COVID are happy to get out of the city and live out of the city, you know, suddenly you know, if we get locked down again, you know, which I just heard something too in Oxford's Oxford shear they're talking about and I haven't verified this. They're talking about apparently practising shutdowns like COVID, where they're restricting access to people that come in or go out of areas, which I thought was what the hell if that happens, you certainly don't want to be. But no, I think Watford is a great example. And it's one example of a commuter town, because obviously we've said, you know, the ripple effect pentagon, which is actually just behind Ritesh his head there. You know, we talked about London, zone one and 2345. You know that you are commuter towns, major cities with universities. And we used to talk about major towns with more than 100 people a population. We sort of don't do a lot of that now. Because to be fair, the fundamentals just aren't there as much. But you know, certainly community towns have been one of our favourites for a long time. What about you, Ritesh? Or James, what are your what's your pick?

Ritesh Patel 19:09
I see. London, London, I always thought of that. My picture for the next couple of years where I think there's going to be some real performances Birmingham. Yep. Because I just look at the last sort of five, five years or so five, six years and you sort of have Manchester Birmingham, Manchester has been marketed really well. And price for Manchester really gone? I mean, I remember 2000 2015 It was when we were getting into zone one equivalent of Manchester Northern Quarter, you know, once 60s 170s I've started development sent to me in the Northern Quarter last week. I mean, it is a very high end development, but we're talking 300k For one base. So it's give you an eye do that, but Birmingham has grown. But because it wasn't marketed as well for me, is now starting to come to the forefront. And you had this huge big city plan in Birmingham where they want to grow the core of the city by 25%, creating four or five different districts. So you've got, you know, did birth, south side, east side, and then we've done projects in all those areas. And that is now really starting to gain momentum. rents have started started to go up, prices are starting to go up. And as they started to go up, because they still haven't gotten to that stage where Manchester went, which is pretty crazy. But it's now now's the time, I think you can definitely catch that wave. That's going to happen in Birmingham, the HS two, which is signed off and sealed now which 2029 or something around then that's gonna take into Birmingham 45 minutes. I mean, the guys always guys in the office, always, always have a laugh because I live in an area called exonym. Yesterday called YouTube. They say I don't even live in London. My G Ryan put his bar so he can't talk. But thanks me, orifices, environment, it takes me door to door one hour to get into to effectively London, someone's going to be able to live in Birmingham or London. And within 45 minutes get from there to there, which for me is an absolute game changer because transport connecting people to massively changes, you know what the property market does. You've already got big companies in the area. So that whole big, big business pool that we talked about, you know, KPMG, PwC, HSBC, Goldman Sachs, then now as well. So you know, that's already there, that that that will only get bigger, because let's face it, London will always be the face of big businesses, but when they're looking for in a third offices, and they're looking for more value in terms of the office, space, etc, that these places do offer it. And you've got graduate retention now as well in Birmingham, so the poor five universities there, you know, back when I was growing up, showing my Asia, you might go and study at a university campus outside of London, as soon as you graduated, or put your masters or whatever, you'd come straight back to London, because it was the place to, you know, best place to live best place to get a good job and money and all that. But now, graduates are choosing to actually stay in places like Birmingham, because they've got the same sort of lifestyle that they can have in London. Property is more affordable, rents are more affordable. So all that demand pool is massive. So for me, Birmingham is absolutely going to be the spot over the next couple of years to get involved in.

Brett Alegre-Wood 22:59
What about What about you, James? Oh. Your mics gonna crap? Oh, no, you're back? Yeah, okay.

James Cox 23:12
I said, I'm gonna I'm gonna be the the anti Ritesh. And I'm gonna go the other end of the Northern poster boy argument, which is obviously Manchester. I truly believe and I know, Rick made a few good points about, you know, when we were getting involved in Manchester, and how we've already seen it grow. And I believe that that is still going to continue to massively grow. For me, the biggest or one of the biggest factors that I've seen, I'm actually reading through a jailer report, which we might come to at some point in the in the stream, but that Manchester population has grown, I think the last 10 years faster than anywhere else. And that is kind of just a testament to sort of what one, how many people do want to live in the area, but two people that are staying in the area as well. And I think alongside Birmingham has a very, very high graduate retention rate. So this is all just adding to what we would say as the demand call for property in the area. The other thing I like about Manchester and one of the things I saw as well, I read about the on the report was that the prices obviously have have reached a certain level and new builds in the area have the highest demand for property anywhere else. So you know, it's we've always said that with new builds in these areas, it's always about setting the bar for where prices can reach and the longer the animal that that continues to go. The more that we can continue to see that growth kick in. There has been a lot of major regeneration that's taken place in Manchester. We've obviously had the Salford keys, which I think was also pilgrimage of doing the waterfront in Liverpool. Now that's added Massive employment into the area with Media City, BBC ITV there, you've got the central business district in the city. I think that's got sort of around 100,000 employees just in that immediate vicinity. Again, so this is all adding to that sort of supply and demand equation. And there are still more hubs around Manchester, which have been earmarked for major regeneration. I think the other one, which we've been looking at recently is the great Ducey street regeneration project, which is, it's going to be 2.8 million square foot of commercial and residential redevelopment. And that's actually just next door to Manchester, Victoria. So this is sort of north northwest. Yeah,

Brett Alegre-Wood 25:45
I can't see the

Ryan Rahnavard 25:47
thing. Yeah, I think it's above the Gay Village.

Brett Alegre-Wood 25:49
I'm on the wrong.

Ryan Rahnavard 25:52
It's around there somewhere. But yeah.

James Cox 25:56
So that's going to be one of the sort of next big capital projects taking place in Manchester. So yeah, 2.8 million square foot commercial redevelopment, and we know that with regeneration, and actually that the good thing about a lot of these cities, especially Manchester is that it has so many people, and there is not enough land available that they have to start investing into these infrastructure projects to kind of unlock this land to then allow and supplement this demand for people. Otherwise, it will just be you know, like what London has got, which is a housing crisis in the sense there's just not enough property being built. And that kept crisis stable. So yeah, for me, Manchester is definitely the one that I'm vouching for.

Ritesh Patel 26:42
Actually, what so it's interesting, for those of you who remember, who had invested or around that property investment circuit back, when the when the global financial crisis happened, Manchester prices, dived, pretty bad, a lot of developments stopped, and all those things happened. And there's a key, there's a significant difference this time, I think that is back then what you had was how people property being built, you know, when there was that building, boom, in property, boom, going on. Infrastructure and employment, you know, all that wasn't quite set up. So you ended up in a place where, you know, you had all this property, but not enough jobs, you know, the sort of the transport wasn't that good. But now, it's very, very different. So anyone worried that, when Hold on, we've had this on Manchester story before, back in, you know, 2000 2000 789, whatever. And look what happened, then, it's very different this time, because now the actual infrastructure in terms of the employment, the amount of businesses, the population, the graduate retention, is very different. And Manchester is a very much a global hub for investment. Now, the amount of money that comes in from the Asia, the Middle East, it's crazy, you know, and that's not just the Man City owners, you know, talking about investors, you know, so it's in a very different place for just any of you might be a little bit concerned for what happened back then.

Brett Alegre-Wood 28:10
Which it's interested in the Manchester thing, because so I was selling in Manchester back in 2003. You know, so we were selling, and we were doing literally hundreds of units back then, you know, we're running seminars, and there was, you know, all sorts of things. And back then Manchester, in my take was sort of this quirky little town that I couldn't believe what poor people were going out with no jumpers or anything on and short skirts, and all that sort of stuff at night. And it was if it was freezing cold here, I am all revved up, and I'm an Aussie. But the reality is, back then I used to think, you know, oh, yeah, this is just like a northern town. Now, when I go there, and I see the shops, and I see the technology, and I see the the town, the city, and the bars and the restaurants, it is the same on par as any other city, whether it be Singapore, whether it be Sydney, whether it be you know, wherever it's on par with that, and I think that's the big change has happened now. And I think now, you know, which it is, it is its second largest sports is the second largest city, you know, depending on what grade you you look at it, but the reality is, those opportunities, and those fundamentals are there and it really has asserted itself as an international city, not just as a, you know, a northern city of the UK, you know, more or less a city than London, it now is really on its own. You could go there and invest just in Manchester and be very happy. You know, because the market is that broaden. There's so much happening there. So I think both I mean, in some ways, you know, saying Manchester and saying Birmingham is a bit of a cop out for you guys, but we'll let it go.

Ryan Rahnavard 29:56
Let's ask a serious question. Now there were wouldn't You invest.

Brett Alegre-Wood 30:02
Where wouldn't you? And what?

Ryan Rahnavard 30:04
And one why? And then let's not hear no borrowing for the nation easy copper, good. Where wouldn't you invest? Do you think is

Brett Alegre-Wood 30:13
straightaway wrong and I wouldn't be touching Scotland because even though I hate the the politics that's going on in Westminster, the politics that is going on in, what's it called? Holly, Holly, whatever it is that politicians the political place there is even worse, you know, they're talking about, you know, restricting rents, stopping evictions, all this sort of thing, which is just devastating to a market, and will backfire. So I wouldn't be touching Scotland at all, ever, you know, as much as I'm actually 25% Scottish, you know, so that's where my heritage is from. Out to Paisley. But that's it, I wouldn't be touching that. And I think this is one of the big problems right now. And, you know, it's, it's, I had, I was having lunch today with one of my mates. And I was chatting about my frustrations, we're sort of, we're basically, you know, he's, he's in a similar situation where I am where we're sort of pivoting the business because of the recession. And, and also, because of where we are stage of life, all that stuff. And, you know, we want to go to the next level of growth. And it was interesting, because he was saying, Well, you know, what's your biggest frustration? You know, you still got passion for property. And, and I, you know, I said, Absolutely, I have a passion for property, that that's not a problem. The thing that pisses me off the most is these politicians that don't know shit, that, you know, just jump in, and they just need your reaction, make changes. And I think the biggest risk in property now is not rising interest rates. It's not, you know, capital value is dropping or anything like that. It's political intervention, where it's not where it shouldn't be going, you know, and that sort of screwing a lot of things over and certainly in the last 56789 10 years. And even since the global financial crisis, it's been what the politicians have done, which has caused so much heartache and pain for mums and dads who are just trying to sort out their pension, you know, and it really hasn't made it equal. They tried to level the playing field that hasn't happened. They've failed in virtually everything they've attempted. But yeah, that's my little rant for the day that got off. So it's interesting, because in terms of where I think I'm going to invest, that I may, you know, as much as I think there's opportunities everywhere, and I agree, Manchester, Birmingham, Watford, level those, I'm still London person. I love London. And I think as much as London has London stopped growing and 16, you know, still had a little bit of growth, but you know, big growth. And then realistically, we would have seen it stopped for a couple of years, and probably around the Brexit time or the COVID time, we will have seen the market start kicking off again. But because we had COVID that extended it for another two years, and because we had Brexit that sort of extended it. So actually, it's been sitting in limbo for quite some time. But I still think the fundamentals are bloody fantastic. And I don't think that has changed. So for me, London property is is where to go now, where do you go? Well, obviously I love regeneration. So you know, for me places like and if we just go to let's say, for me, you know places like Lombard square, which is in Plumstead. So this is the back of the house website we you know, we sell this one you know, the website selling while arsenal for quite some time. done really, really well. And now you look at the prices there in royal Arsenal compared to Lombard. Huge value. And this is heading out towards what's called the Thames Estuary, which is a swamp and let's call it for what it is. So Ryan, I've got your face on here, not mine. Somehow you stole you stop my picture. Anyway. Look, so the reality was with a place like this is that I think there's huge opportunity for these type of places because the Thames Estuary now you know, we're running out of land, government's releasing land, governments forcing What are forcing, because actually, the one interesting thing which is going to play into our hands as investors is they've stopped having targets. So local councils can say we don't want more construction. Now the problem with that is that's going to drive up prices are going to drive up rents. Because anytime we restrict the supply, you know, and we've got a supply problem that's going to further drive up prices, which is good news, if you're an investor. Really bad news if you're trying to get on the ladder. So that's really, but that whole Thames Estuary, it was a swamp. But these days we can deal with swamps, we can get the water out, you know, we can raise the levels we can put, you know, barriers in all sorts of things like that. Would I want to buy add ons to our walls for plant? No, probably not. You know, it's one of the things that we check when we actually do stuff and we generally don't touch. Our rights are given up on as he's leaving. He doesn't like my opinion. But But it's interesting,

Ryan Rahnavard 35:22
I just realised my Bachelor's, sorry.

Brett Alegre-Wood 35:25
So one of the other areas that I actually think, too is this Brett cross sort of area. And it's interesting, because when we talk about what fit, you know, if we go back to that original map of what fit if we come out with the if we come out, whereas, so this is what fit here, hold on. Yeah, they're the bases as you come out, and go into town straight down. And this is basically in one down here. Straight down. This is Brent cross here, essentially Cricklewood, this whole area is being regenerated now. You know. So it's massive regeneration, and then you go into the city, you know. So that's another area that I think, you know, these are major, major regeneration areas that I really think have got potential. And even if we see dips in house prices, we're likely to see it come back pretty quickly, because the sheer scale of the regeneration that we're seeing in those areas. So you know, so for me, I love London, you know, what area do I live in London, I love lots of areas in London. And where that depends on where the rent regeneration is. But you know, there's major major regeneration happening in a lot of areas across London. And for me, if you can find that area and find the right deal. And one of the good things I think, for next year, and even now we're starting to see it now we're starting to do it, is when we talk to developers, we're actually going to them with a ridiculous offer. You know, it's almost like the offensive offer where they're basically right now, saying, No, you're ridiculous, you know, how dare you even offer that. But what I know from experiences, they rejected today, but in three, six months time, they come back and go, Hey, Brett, hey, read, Hey, Ryan, you know, Hey, James, you know, that deal you put on the table? Can we read Look at that. And the great thing is, that's when we go even further down, you know, because, you know, that's what's happened, that's where we're at. Now, how far we can get it down, depends on what happens over the next year or two. But you know, I think 2023 What is what it holds is when I see unemployment increase, and once that unemployment increases, and that cycle starts, then it's a two year timer starts, because what happens is, we shed off the jobs, and we have to get the jobs back. And once we get the jobs back, then we have to train the people up to become productive. And until those people are productive in their new jobs, the economy doesn't fully get back to recovery. So it could be six months, it could be 12 months, it could be two years, you know, unless they really screwed up, in which case, you know, we could have a depression event, which could be four years, you know, and really, that's kind of unknown, you know, but there is a deleveraging, I think is going to happen. But I think UK because we have been so self harming since Brexit, since COVID. Since all these things, actually, we're not likely to see the drops that we're likely to see in the US and other places. You know, we don't have

Ryan Rahnavard 38:35
you know, maintain pretty well, even during self sabotage,

Brett Alegre-Wood 38:40
we have but what we haven't seen is the prices, right? I mean, I'm looking at I'm in Australia right now, and, and I look at some of the prices here, and I'm just like how they're friggin how like, wow, now, we haven't seen that in the UK. And the same thing happened in the US. Now they've got up but they can also come down. And so whereas UK hasn't really gone up nowhere near like it has in those sort of places. And so it may not come down as far as well. Plus, we've also had what's called the mortgage market review back in 2014, which meant that you had to affordability and restrictions and that's all been piling on which has been keeping and suppressing the ban you need more money to bind to a property you need to have more affordability and that allows a lot more gap in the market before people have to sell. So I think all these things play now and you know as much as had been painful the last 10 years. You know now is when hopefully they benefit us so anywhere else you think guys

James Cox 39:47
to invest in? Yeah.

Ryan Rahnavard 39:50
I think it because we started off with this as well. Would you invest you're in a recession, you know, it will. You're not going to be massively spoilt for choice because any other place you're going to pick is going to be a bit of a gamble. You know, a bit of a might work and might not. I think, more important, though, than than area is strategy of how, how and what do you invest in during the recession? You know, so for example, a lot of people are naturally driven to towards high rental yields, not knowing what is what are you sacrificing for that high rental yield? And it and it's more than just growth? In my opinion? Yeah. And I think when when you when you chase things like high rental yields, or high yielding investment opportunities, you're risking way more than just your growth. You're risking your entire capital, to an extent you're risking a lot of things. I think, the question for me more than Arias is what sort of strategy do you follow during the recession? Do you go do you go in into the second hand market? Do you start doing refurbs? Do you start doing HMOs? Do you start doing student accommodation? Do you start doing this? Or that? What is that strategy follow? And everyone has their own sort of opinion and thoughts on what the best one is, and some are valid, some are wrong, and some people are just absolutely crooks, the ones that try and push your student pods, for example. So for me, I think if in terms of areas, there aren't too many that you can, you should picture in a junior recession, you should just be city centres, strong fundamentals, follow the regeneration manner, money, that generally gives you two, three places, maybe for a push. Next step is, what do I invest in? Do I go down to secondhand route and look at the second hand market and pick any secondhand property and just go and invest there? We're talking London, Manchester, Birmingham, and even Manchester more. So Manchester and London, do I just go and invest in any area in any part of Manchester or London, you know, picking that the specific pocket within those areas, and having that right strategy that will work for that area for that market, you know, in this current property cycle, which is a which is a is a lot harder to sort of answer. And it's a lot harder for people to actually get their head around, what is the best investment to go down? Because it doesn't necessarily mean just because you've been doing for example, regionals for the past 10 years, and it's done really well for you is going to continue to do well during that recession. You know, what is the strategy to go on. So for me, it would be Off Plan is a massive strategy to look at, during during the sort of these these sort of markets because to an extent, you're maximising your leverage, you're looking at that long term, sort of growth in the property. And you're hedging your bets against sort of the regeneration of the developer without checking all your money in straight away, leaving the liquid to be able to take advantage of more opportunities that kind of in the market. And I wouldn't go beyond that those three, three sort of areas that we don't have mentioned before areas that were mentioned.

Brett Alegre-Wood 43:07
Yeah. It's, it's interesting with the one of things I find is that through recession, is that when you talk about strategy is a lot of people all of a sudden, they go, I've been doing this, I know the rules of the game. I know this strategy, I know how it works. And then all of a sudden, what happens is we hit a recession. And they forget everything they've learned, they go, Oh, I'm gonna go do this now. And they start a whole new strategy from scratch, we got to relearn all the rules of the game, or less, as tough as the biggest mistake possible is interesting, because we saw this play out in the last recession with the global financial crisis, we had, I don't know 50 competitors. And what we saw was in the space of about eight months, 10 months, 12 months, we saw it go from 50 competitors, down to very few left, you know, let's say five or 10. Guys, and a lot of them, what they did was they go, Oh, this, you can't make money in property anymore in the UK. So we're going to go sell Bulgarian property, we're going to do Spanish property going to ABCD, whatever. And they change strategy. And all of a sudden, when they change strategy, they didn't understand the rules of the game, the market, the clients they didn't have. And by doing that they almost compromised the existing database I had. We stayed on that point. And I say, as a business, that we stayed on that, but it's the same as an investor. But I think the worst thing you can do is you're going, Oh, the markets change. I'm now going to change strategy as the market moves because when the market moves, it moves relatively quickly. It will have periods where it does bugger all and it stays pretty stagnant. You know, for a long time, but then all of a sudden, it'll change. And if you change your strategy at the same time, you can end up with real problems and then you don't if you don't understand the game And the rules, then, you know, you end up losing money. And that's what a lot of people and I guarantee a lot of people do that they will try and find the biggest sales hype, you know, the biggest commission that's been offered, I'd say their biggest discounts being offered all this other stuff. And the reality is the reason they're offering big commissions is because it's a shitty area, that's going to drop even more, and then the left holding the bag, that's not what you want. So stick to your fundamentals stick to every person house, stick to the original fundamentals, we talked about that sort of thing, and actually stick to what you know the rules of the game. And the relationships, you've got that you know, work. And I think that's one of the best things you can do for investing next year. Yeah. Any other thoughts on that? Guys?

Ritesh Patel 45:46
I just said, Yeah, I just didn't recessions in general, flush out the crap. Look what happened during recessions? every business, every business gets lean as they can look at their productivity and look at, you know, where they're spending their money, where they're getting value for their money, what is really what is worth spending? What is it? I'm just starting to come up with investment strategies like people who you can sometimes make an investment, and it does well for a year or, or might work once for you get money and get money out quickly in a certain part of the economy fight. But the ones that stand the test of time, is what I'm interested in. So that means having an investment strategy, investing in property or whatever it is that you can hold through recessions, because if it can't hold through a recession, either, either that strategy is the short lived, there was a bit of hype that you got involved in. Okay. That's one of the things that can or you just haven't planned out your your end of the bargain very well. So property that might be Have you cash flowed? When you cashflow your investment every two years, have you factored in high interest rates through tools like mortgage cost averaging that we talked about working with a nominal interest rate, which is regardless of where the rate is to start capital aside for all these things. So in recessions, no one wants a recession, I'm not going to sit there saying it's a good thing, but up to a certain degree, you know, there's a school of thought, Wait, that's clean out the things which shouldn't be happening or shouldn't be invested in, or people with poor business strategies, all those sorts of things. And that's sort of going to be out over the next month.

Brett Alegre-Wood 47:33
I mean, it seems like I love our developers and I love who worked with. But you do get, and developers do get an arrogance about themselves, when the market is doing really well, where they're like, No, this is what it's worth, it's like, well, it's not really worth, you're actually pricing. And this is what happens when we start to reach the top of the market is they raise the prices. So even though it might be worth this now, and they're completing, then they'll get the price here and see kind of like I'm paying over the odds at this point in time. But there's no other choice, you know, and unfortunately, that's the new build premium, when that starts to blow out at a certain time in the market. The good thing now it clears that out, and it brings them back down to Earth where rather than us having to call them, you know, they start calling us, you know, we start getting free lunches and things like that. Not really. But no, it does happen. And I do as much as I hate recessions, I love making money, doing nothing. The reality is the recessions do clear it out. And they do help reset everything. I think that's that's what we're seeing now, you know, we're seeing the the reset already begun. And, you know, we play the game where we have to forward, anticipate what's going on, because we've got to go actually, this is how much discount we want to a property because I think the price is gonna come down this much. So we want our investors to be ahead by the time it completes, and things like that. And we've been very successful doing that. Certainly, you know, post global financial crisis, you know, since we moved into the places good fundamentals, you know, we haven't really had too many problems with that. That's not to say that prices don't go down, you know, but they do but oftentimes in those fundamental areas, when they do hit a recession, they go down, they come back up pretty quickly, you know, so Yeah, anything else guys, what any other areas that we should make a special note of anything that is there anything else? I think, actually what I was gonna say one thing, too. It's interesting, because a lot of people will say, Hold on a sec recession. I think, you know, everyone's sort of flight to space, quite quitting. So all these holiday destinations. I think I might look at Airbnb. Well, there's two things that are happening now with that Airbnb, the service accommodation that site number one Is that councils now putting in regulations that are going to actually really make that area a lot more difficult. And if you look around the world at what's been happening with those areas, either a hotel and the standard they have to be at with fire exits with all this sort of stuff, everything like that. That's where they're gonna put the Airbnbs. And the moment you do that, that takes away all this margin that you know you're getting. The other side of it is, is that the floating point now, so Airbnb. That will come back to me

Ryan Rahnavard 50:36
on that Airbnb quickly, Brett though, if you do buy, there are some developments coming online, which are purpose built for service accommodation, I think those are worth an investment in because if you're purpose built for something that is going to come across the board with everything else, I think long term new build, is going to weigh up perform the second hand market, because new build will always be in line with regulation, you know, across a number of things across a number of things in terms of materials, for example, a lot of the older houses, the new materials don't actually doesn't actually do the job on the older houses from condensation point of view, mould point of view, and so on and so forth. And a lot of the new installation, I heard the other day, something I had no idea about, you cannot put an installation. That particular installation that a lot of new builds use now in an older house in the in the in the loft, because it blocks up too much of the airflow, if and the old houses will get mouldy versus the new houses the way they build with that insulation, they put their dedicated airflow vents in there. So a lot of these things people don't actually know about and they think okay, let me step out there and buy a secondhand property, it's 100k, cheaper, not known away, hold on, yeah, up to standards is gonna cost you a lot of money. And I think the new build market is gonna will outperform everyone. And the same thing with serviced accommodation and Airbnb, you can no longer just go and buy this cottage and are making an Airbnb, I think service accommodation will be regulated and purpose. But service accommodation is not not a bad thing.

Brett Alegre-Wood 52:10
And for those people that are sitting out there, I mean, we've had quite a few cases recently, you know, if you go back a year ago, we find out there was a service accommodation in there. And the block managers are then allowed to do that, we'll send them a letter, and they get a letter. And you know, what happened? Nothing. Well, now Block Manager, suddenly, I know, it's can no longer be done. So they're actually deactivated Forbes, their tracking forms, they do all these things now, to restrict that, because it's written in there that they can't be serviced accommodation, you know, so, actually, the problem is, we've had this recently with a new revenue property, but on, the landlord's come across to us, because he was doing service accommodation, he got totally screwed over. Because what happened was, he wasn't allowed to do it, somebody had signed a contract. And because that contract was there, they end up having to pay out the contractor get the person out, you know, because they had a contract that they didn't even know about, because they didn't carry out the checks they should have, you know, and the judge said, Too bad, you didn't carry the checks out, pay them out, you know, to get the property back. So we're taking property on obviously not on US service accommodation. But I think that's an area where, you know, a lot of people sit there going on making two and a half grand, and there's YouTube videos, this is, you know, retire in 60 days, I think a lot of that, you know, because I've seen regulation come into lots of aspects that we do. And as soon as that happens, the margins start to get pushed. Now, if you're a big enough portfolio, you'll probably ride through, you can probably afford it. But if you've got one here, too, you know, one there to there, you know, whatever, you know, that might not become viable anymore, or as viable. But yeah, purpose built fine. You know, I think short term rentals is a market for, you know, definitely. But yeah. What else goes anything else? Finish off?

Ritesh Patel 54:03
So, I mean, just just to finish off, from my perspective, is that so, you know, obviously, we mentioned a few areas there. But I mean, if we just step back from actually, the names of those areas, I suppose it's the key to suppose where you should be investing over the next couple of years. In this sort of cycle that we're in is where the best fundamentals are, you know, in terms of Make sure there's good school shops, transport, and diverse employment opportunities, as well, because we're living in a world where things change very, very quickly, you know, where one industry might be thriving. And then technology comes in and steals all the income at that at jobs that that industry offers. And all of a sudden, you know, an area just dies because it's reliant on that one industry versus being in areas which the ones we said earlier are, you know, you've got service Banking Finance, too. Tech, education, you name it so that if any one given industry in that area happened to take a bit of a dive, it's not another one. Because guess what you've got another 3456 is not just reliant on one or two industries. And that, for me, is very important in where we are and where we're heading.

Brett Alegre-Wood 55:19
Yeah. 100% It's such an interesting time now. It's allocated, I freaking hate it, there's so much compliance, there's so many changes, because really, to some degree, and who knows where this conspiracy theory or whatever, but basically, there's so much focus on, you know, saving the Earth, which look, I'm all for, if that's the reality, who knows, you know, whether it's real or not, or whether it's just one big cycle or we contributed to it. Let's not get into that here. But I think the reality is that we're heading towards that. So that's going to cost and the reality is the government's proven time again, that they're not going to pay those costs. We as landlords have to pay the costs. The challenge I have is where are we getting our profit from? With all these changes and that sort of stuff. It's actually Arsenal's just sent a quick thing. I need to change the colour of the bloody font here. But anyway, so passive house seems like an interesting Shout. Shout to futureproof compliance, environmental, social government, I think social governance ESG but but a passive house is effectively how do you build houses? It's a standard methodology, I think. But yeah, basically, you're right with that there is a lot now of standard methodologies. But technology is playing a huge part in you know, new build properties and that sort of stuff. Perhaps not as as much as I thought, I mean, but I think it is now starting to become commonplace and I think as that becomes more commonplace that but I think you know, the sort of the the this passive house principles principles have a, I suppose you call it principles it's affected a template on how to build an energy efficient home. And that sort of stuff is great. But you're not going to get that in a secondhand property. It's that's the new build stuff. And that's what most builders certainly your larger guys are building to these days. Those standards that are set are pretty sure they are standards. I'll look it up I will mention the next one anyway. But I was really I haven't read about it for a couple of months now. But yeah, it is amazing the technology that's going into stuff now. So yeah, you know, I think definitely new build from that perspective is great. And as we go and you know, towards more towards saving the planet, you know, they're talking about discounted mortgages they're talking about better rates. They're talking a bit like Evie vehicles, you know, government grants all these sort of things you know, so yeah. Cool. Anything else? I think that's pretty much it is

Ryan Rahnavard 58:06
that's pretty much it I think.

Brett Alegre-Wood 58:07
So well guys, thanks for today guys. any questions feel free to send them in you can send me the support glad and but otherwise we'll see you next week. We're gonna be talking through lettings next week lens market where we think we'll go what's going to happen what's in store for 2023 but obviously if you're interested in investing anything you want to know about you know where we think the markets going, whatever, give the guys a call and yet we're happy to chat through Darren just comment Thank you. Someone finally recognised I assume by Sikhi means good sick I was trying to find a Santa hat but I couldn't find it so anyway

guy that awesome, guys. All right. Well, thanks very much guys. And yeah, any questions, send them through support a clownfish talk comm otherwise, we'll see you again next week. Actually, I think next week will be the last to the last 20. But you have a good sick, he said, uh, Darren said. Thanks, Darren. I agree. Awesome. Thanks very much, and we'll see you next week. See you later. Bye.

James Cox 59:24
Bye bye, Mike. Is the

Transcribed by

Brett Alegre-Wood
December 7, 2022

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