🔎Article 4 Goldmine: Turning Planning Restrictions into Premium HMO Opportunities w/ Thomas Stratton

Welcome everyone to this week's Dealfinder Corner. So this is your weekly property talk show brought to you by Property Filter, hosted by myself, Guillaume. And really the idea here is to give you access to, you know, as we empower our member to. Oh no, sorry, I'm going to start again, you know, so hosted by myself Guillaume, your favorite Frenchman, CEO and co founder of PropsFilter and as you know it's the UK's highest rated platform to find guilds and we are here on a mission to empower our property investor members to find thousands of deals on the platform. And the purpose really with this dealfinal Corner is to give you more and the best of what's actually available out there in terms of inviting expert guests. We'll share with you the latest most current strategies, tactics and secrets but what actually works right now in terms of finding and doing deals and the reality of systemizing and running a high performance business in property. So it really is my pleasure to introduce you and every one of you to Thomas Stratton. So he's been introduced to me by Azif, one of our team members who so Thomas in the last five years has built a strong foundation of property investment specializing in property finance, renovation and portfolio management. He's really passionate about personal growth and our mission to elevate the standard in his area with all things to do with high end ho living and really focused on on investing in areas where it makes sense to do so where there is a high demand for those professional tenants. So partnering with industry experts pursuing is really really clear. Working on a five year vision to scale his business and redefine modern shared living in the areas where he invests and not only with the portfolio he does but really setting a standard for other people to emulate and follow what he does. So really looking forward to hear more about this. Thomas been on propsfutor for quite a while. He's a yearly propysutor member and really walking the talk when we talk about all these things about deals are made not found and really understanding tactically how this works. So we're going to cover why you should not fear Article 4 restrictions and use it as your advantage and leverage these to get higher returns. And I know it's a really hot topic in Northwest and other areas where they've popped up everywhere all of the sudden. So we're going to talk more about that and the exact criteria you can use to identify opportunities inside Article 4 area. And you know where you can see that there are massive demand for quality HMOs and how can you position yourself where others fear and follow trends, where you can get premium rent, where other don't even start looking at it, you know. So I've got very, very similar stories where you'd look, you know, people will look at the average rent on spare room and say oh the deals don't stack. But there's so much of an arbitrage you can have with HMOs where basically your rent can be double the rent on the street that you can really make them work really well. So we're going to talk about lessons learned from the trenches, the wins, the setbacks, the good, the ugly as well as going into the blueprint you can emulate and follow to create a high end luxury HMO that stands out in the market where you get sold out rooms before giving it to the market. So very much looking forward to it. So Thomas, over to you, thank you.

Very much and yeah, firstly really appreciate, kind of honored to be asked to do this because I'm not coming here as multi million pound property investor or citing 25 years experience in this sector as as I say I'm kind of five years into my property investment journey having owned a kind of selection of buy to lets and now very very focused on HMOs. But what I think I have done very successfully today is find a property investment strategy that matches my kind of life goals. Really focused on that in terms of being incredibly diligent about the process that I've followed and I am continually making that a success by continuing to apply that framework by the way I go about that property strategy. And for me I have picked one very specific strategy within HMOs within almost a subset of HMOs and just rinsed and repeated that strategy and that has been very effective for me as I've become more and more expert within that kind of sub sector. So yeah, today I'm going to talk a bit about various things but really focused on what I've done to make a success of investing within with an HMO sector but within areas where there are restrictions, that is Article four and I'm really going to kind of focus on the process that I followed and how I came to conclusion that that was the right model. So I've got some slides I think I can see when people are raising their hand. So please if throughout this you have questions, either raise your hand or just speak up and I will endeavor to answer them as we go through or if people want to wait till the end, please also do that. I'm just checking if people can see my.

Screen.

I need to just flip it, don't I?

Yeah, perfect. Yeah.

Right. Okay, so I'll just start off with a bit about like kind of why we exist. So I certainly set out very early in my HMO journey really by investing in education. And that was kind of critical for me because there are so many intricacies in HMOs investing. So many of you on here I'm sure are deal sources and also know about HMOs. But in terms of particularly the identification and the subsequent development of them, there are a number of details. It's really important to invest in your education to know how to do that successfully. So as I said at the start I was very focused with my property investment goals like any business in creating a high cash flow portfolio portfolio. And there are of course various models to doing that. But the conclusion that I came through to through my own kind of education was that HMOs were the best model for me and the strategy that I wanted to enable me to deliver on that. So that's what brought me down the route of HMOs and probably slightly contradicts with some property experts or investment experts advice. I was very clear from the outset on the type of HMO product that I wanted to create. I know many people will tell you to base your investment strategy purely on the numbers, but for me I have to be emotionally attached to something. I have to be passionate about what I'm creating. And so I always knew that I, I was not interested in following the route of kind of the asylum seeker contract model or, or the kind of social housing model. Initially I wanted to create a brand that represented kind of a high end product, product offering. And so I designed my kind of area analysis and area identification strategy to enable me to find an area that was, had a demand for that type of product. And that's probably the first mistake that I've seen people make is that they, they create a great product. The numbers from a return on investment perspective look really strong on paper. But what they haven't done is the sufficient due diligence on the area that they're going to be creating that product. And therefore they create a product and then the rooms don't rent and telling people to suck eggs here, but you don't yet. There is no point having an HMO where there isn't demand. And this is probably one of the other reasons that kind of eventually landed me within the restricted areas or the areas where there's an article 4 Direction. So we've created this brand collective living. Maybe some of you seen the, the video we did of one of our projects. So we were trying to create that real standout brand, brand professional look and feel and we really found a gap in the market in the area we predominantly invest in which is Newport for this type of product. So there wasn't many people creating this more luxury products and there was also a high demand for it. So for us that's kind of led us into that area and then just introducing the people who, who run the company. So myself and my uncle Stephen Stratton and myself Thomas Stratton. So I actually and I'm still full time employed, I work for a very large UK bank in kind of coverage sales. I actually head up the real estate and public sector teams within there. So I've very much worked in corporate life most of my career. But I guess what I have learned particularly looking after corporate real estate clients for the last five years while we see a mass exodus from the domestic market, from domestic landlords, hedge funds, private equity funds, insurance funds are buying domestic rental property on mass following a buy refurbishment, refinance model or a build to rent models referring to in corporate world. So for me that started to spur my interest as well. They clearly know something and are playing a long term game in property. So if anyone's a landlord and thinking get of getting out because of the tightening grip of regulation etc, I would urge you to really reconsider that because the big players are coming in and they have lots of clever economies, economists and people crunching the numbers that clearly see a very positive future for UK domestic property. So that's kind of my background and my uncle significant time in business more on the kind of contraction side. So he runs a commercial plumbing and domestic development business. So he's been a great help in kind of overseeing the the development side of the projects we've run. So again I don't want to touch on this for too long because I'm sure most people on this call are experienced enough to know what an HMO is just but just that at a high level this is where you have three or more tenants from two separate households in a domestic dwelling often categorized as a C4 property. From a planning perspective I guess why do people like HMOs or investors like HMOs in today's current climate versus a typical buy to let they often generate significantly higher yield because you're renting each room of an individual basis. It also mitigates the risk when say somebody doesn't pay, you got a five bedroom HMO and one person doesn't pay, the commercial impact on your bottom line is far less than a single tenant in a property not paying their whole rent for the month. So it's, it kind of mitigates that risk from a cash flow perspective. You know, and again I talked about this at the start. The cash flow that you can generate from HMOs is much higher within your property business. And again that's what's led me down to this model. And then again, people will be familiar with this. But if you do HMO investing correctly, in my opinion, you are going to try and strive to deliver those commercial valuations. Actually in Article 4 areas it is easier to obtain a commercial valuation on a smaller property, five beds and upwards. Sometimes outside of article four area free areas, five and six bedroom HMOs are hard, are significantly harder to get a commercial valuation on when it's in a restricted area. Lenders will look at that as securing and future proofing the demand and therefore will be able in most cases, particularly if you're doing things like all on suites, to offer a commercial valuation. And that's important as a property investor looking to scale because you can recycle your cash quicker. And I've also put on there the kind of target market, there's so many different markets for HMOs as I said, for me, I'm a big advocate for mastering one strategy and mine has very much been professional end, professional blue white collar market for high end HMOs all on suites. And then a bit about what is Article 4. So as I said, the Article 4 essentially removes the right for you to convert a domestic dwelling into an hmo. So that means if you want to house, as I said, more than three people from two separate, separate families, you will have to go through planning permission within Article 4, where there are many areas where it isn't in place and you can, you, you don't have to go on that journey. So I guess why, you know, why is it in place? I get, often it's very political. There's been, I think particularly with the rise of things like asylum seeker accommodation, a dispute rightly or wrongly within local communities about that kind of housing strategy from the government. And there's been kind of political uproar from councillors up to politicians, but often it's done to control HMO concentration levels. So you often find that the restrictions are based on a kind of circumference, an area and a volumetric based assessment. So there aren't more than a certain percentage of HMOs within a certain area. The implications are it is significantly more difficult to obviously develop an HMO because you have to go through a full planning process. On the flip side, and why it attracted me because of the approach that I kind of touched on earlier in terms of finding an area where there's a demand for a high end product that wasn't over concentrated is it puts off a large majority of investors. And for that, that for me helps future proof the demand and certainly with the developments we've done, that theory has been put into practice and we've very successfully rented out our HMOs very, very quickly in the areas where we've developed. Just want to pause for a second. Is there any questions on any of that? I can't see actually your hands raised because I've got the presentation mode on my screen but just wanted to check there's nothing else. Nope. Okay. So on the kind of sourcing framework that I've followed and one I can kind of recommend, this is obviously very, very high level. But in terms of, I think for a deal sourcer or even an investor, being able to be a specialist in kind of in a sub area within HMOs will really help you stand out. I've spoke to many sources who, who kind of claim to be specialists in all things HMOs but I think it's very difficult to be an expert in finding social housing, professional asylum seeker accommodation because each of them are a very specific and different approach. And therefore being able to stand out as an expert, for example in sourcing HMOs and article 4 years I think is a bit of a, a niche model that people could follow. And I'll touch a bit more on where I think there's a gap in the market for that. One of the things I, I really focused on was around the area analysis piece and this is where I think if you do nothing else in your kind of initial due diligence, people should focus their area on. I'll talk very high level how I did that. And this is where you know, this is about using data analytics and a methodology to ensure that you go into that property investment journey going to that area knowing that you have the evidence to back up the demand. And so I just picked 10 areas, towns and cities within four hours of where I lived in London. And I did this all very manually initially. But I can talk about how property filter now refines that shortly. But I, I went through 30 properties in each town and city, 2 bed, 3 bed and 4 bed terrace. I looked at the the top 10 priced ones, the lowest 10 priced ones and the middle middle price 10 ones. I then applied a kind of rough metric for developing those from a two bed to a three bed, a three to a four and a four to a six bed. And that gave me a reference table of the achievable return on investment and an average figure that helped me discount a whole load of areas where I didn't have. I wasn't hitting the return on investment figure that I wanted to deliver. I then started to contact agents within each of those areas. I think I was left with four. From the agent's feedback I was able to get more specific in terms of the postcodes that would be attractive for the professional model that I wanted to follow. I then took that detail and then visited three of the areas where I knew this would work. I met agents, I met tenants and that helped me whittle down further again the area that led me to Ultimate Newport where I invest now and then I actually started the real demand testing using things like dummy adverts, etc. And having tenant conversations. Now that all of those steps meant that I could go into my property investment journey knowing very confidently that there was a demand for the product that I wanted to create. And I'm all about mitigating risk before you make any big decisions. And I put know and love your area, but if you can, if you specialize in one area, whether it's both the product you're selling but also the area investing in you are going to be more appealing to people as a property sourcer and be more successful as a property investor. Not being too diversified and being a specialist I think is always advantageous and then that also helps you build your network. And this is again the point I wanted to make about deal sourcing and where I think there could be a bit of a gap in the market. I've got very good at finding properties working with kind of the power team that I now have in place that I know will get planning approval. And I think if you can, if there's sources that can get projects through, planning approved, rubber stamped and then sell them, they are, you can charge a significant amount more particularly when those deals are in Article 4 areas because they are few and far between. And I, you know, as an investor would definitely be interested in that kind of model if people were taking it through that piece because it is quite a long process. Yes, it presents more risk because there's a cost associated, but equally it's, it's definitely a kind of model I think is attractive. It's a bit like people who get planning approval on land. There's definitely a market for that I can see in the property sourcing world. And so I did all of this kind of area analysis and upfront due diligence manually and I think there is some merit in doing that in understanding your kind of target market and how things work. If I had had Property Filter, I wouldn't have done it all manually and some of the features that would have significantly been refined had I had Property Filter. And what now use Property Filter for today is that unified database piece. So not having to go back and forward through rightmove and other platforms, reviewing properties I'd already seen three times and being able to discount those in my pipeline, but also some of the smart filter. So as I got to grips with my area, I knew I needed over a certain square meterage in a terrace property of three beds or more to work and deliver a five or six bed all on suite hmo. Again, using Property Filter I can refine the list that I presented to me so that again cuts out a huge amount of manual time that I was spending going through those platforms. What I use probably most now, particularly at offer stage, is the comparable data metric. So I can see within, particularly going in with like data to back offers that I make, I can confidently go in and see where other properties, what other properties on that street have sold for use that as part of leverage in discussions either with agents or direct to vendor. Again, that's been incredibly helpful for me being able to actually we just acquired a property that's kind of in a very state of disrepair, but it has an HMO license already and that was flagged through some filters using Property Filter I would probably never have found that or certainly not found it before somebody else that had that not been through having Property Filter. So these are kind of the tools that I use within Property Filter today extensively. But I think the bare basics of it and probably the bread and butter is again just having that organization, that ability to manage your pipeline effectively, remembering and being able to sort what, what you've done with each of the properties in your pipeline. So for me it's been such an incredible uplift in the efficiency of the way that I go about doing things. Having said that, I do think there's definitely some merit in doing some of these things manually the first time you do it, because for me it really did help me understand and know my area, know the housing stock and just learn how investment models work for, for HMOs. So the other bit I use regularly now is, which I think is excellent, is the deal calculator. Again, I was plugging in numbers manually on hundreds of properties when I first started and now I have templates that I can just run at the click of a button on property filter to look at properties and look at that return on investment to kind of bring in those properties or discount them and then in terms of the project delivery. So I'll just touch on a couple of these areas so get, you know, a project delivery framework. I've put 10 steps in here for delivery within an article for four area. So I touched earlier about building a power team. I now have a relationship with my planner, with my architect, with my developer where when I'm considering making offers on property that I know meet the requirements from a size, shape, space, design perspective, they will now look at those and be able to give me a confidence rating as a percentage of being able to do that. Whether that's the developer saying the structure works, whether that's the architect saying the room sizes are going to work through to most importantly the planner doing some high level due diligence on things like HMO concentration levels in the area in an Article 4 area which is typically the blocker and the other things that they can pull on is things like parking surveys. It's a big thing in Newport where I work, the locals uproar about parking or the, the impact on parking on the streets where HMOs are developed. Even though I don't think any One of my HMOs has anyone who has a car in them. So it's a kind of more of a political thing than anything. But they, you know, there has to be a parking survey done when you do that due diligence. So they can give me a kind of upfront confidence rating as to how I was able to whether, whether that HMO is going to be approved. Now I, looking at stage three have always submitted offers that are subject to to planning. Again, I have gone into this with a very risk adverse mindset. I know people that have bought stuff and taken the chance that they've got planning. I guess the count, the downside of doing subject to planning offers is you do remove a large number of sellers because they don't want you to go through or they don't want to wait while you go through that process which can take as long as three or four months. I guess the Positive side is you can pull out the process if you don't get the planning. Now I not yet once touchwood don't want to taint it been refused planning where my planner has given me the confidence rating that I can get it that kind of meets my risk threshold. So I think for me subject to planning offers are the route that I will continue to follow within Article 4 areas. But clearly you probably can if you are willing to take a more high risk approach. Pick up things at auction and other channels if you are willing to take a risk. But for me subject to planning is always that the offer model that I have followed. Once you. When you submit your Planning in Article 4 areas there is quite a detailed list of requirements. So you need full architectural drawings, both layouts, electrical diagrams, fire safety system drawings. So there is some upfront costs with architects. And then you also need a full planning submission by a qualified planner, which includes lots of detail on kind of the tenants type that you're going for, obviously all of the design drawings, but also includes things like they have such a focus on things like bike storage and bin storage and where it will be located and does it comply with the street standards and the look and feel and things like that. So that all has to go into a full planning submission and there probably is on average about 3 to 4,000 pounds of cost in that by the time you've paid the planner, the architect and and councils have varying sizes of planning just to submit a planning request often can cost up to £1,000. Not quite sure why, but that's. Yes, there is some upfront cost involved in that. And then on the assumption you have that planning approval successful, sometimes it is. It goes through pretty quickly. Sometimes they have to take these things to committee and it does depend on what side of bed the lead planner has got from the council has got out of bed that morning. Because it chops and changes every time in my experience. And I've had ones go through in eight weeks and I've had ones go through in four or five months. So it is quite a varied process with little consistency. When there's a public notification goes out, you do have to expect some. Some outcry so that, you know, with the areas I've invested in within Wales, there's always a local press article citing the company and the planning request having gone in. But on the assumption you can deal with all of that, you, you know, once you have successfully achieved the planning, you very much move into a standard completion process and then onto the. The refurbishment and development And I'm not going to talk about how to contract manager development because again we'll be be here all day. But the bit I will talk about is the managing agent piece. For me as an investor I'm not so much a source or obviously but as an investor I've always thought about my investment journey as at scale. I want to be a scaled property holder and so I have created the, the kind of foundations, the network, the power team around me that enables me to do that. I have a very busy corporate life day to day and so I don't have the time to start self managing HMO room lettings or remedial works. I have done that in the past with a few buy to lets more within the area that I live but I just simply don't have time to do that. So I've tried to create a platform and a setup that enables me to scale and I've seen people give up on property and because they try to do too many things themselves and it's just not sustainable, you know, whether you've got a family situation, children, full time job, etc. You need, you need to outsource stuff in my opinion to scale properly. And then just to conclude, I'm a big advocate for marketing. I think marketing can really help sell what you've done. Probably the reason I got asked to do this because of the fancy video we did which Asif asked me to share. And so I think you know, if you want to create your own personal brand, your company's brand, investing a bit of money initially in you know, having that fancy videos, that social content can make such a difference. I'm, I'm on a journey myself with social media. I've only just started going on Instagram and things like that. So I'm just trying to build my followings. I know some of you will probably be much better than me at that, that kind of thing. So yeah, that's what I'm trying to work on at the moment and then just to wrap things up on the last couple of slides. So this is just the case study. This is my first ever project. I did went into this with the kind of fear of God within me in terms of what was I doing putting all this money into this project. But I had done so much work up front in planning for this and this is just an example of what the site looked like at various stages. I think some of the things that came out in the development were that the drainage that we needed to connect to for all of the en suites because there were so many en suites going into the property was actually three feet under the ground under the living room. So we bought a property that was actually in, you know, an almost from a buy to let would probably be almost ready to rent with a lick of paint. As you can see we ended up tearing the whole thing apart, fully rewiring plumbing and I think the first time I went around to the property there was a digger with a three foot trench in the living room. So these are the kind of things I don't think you can ever teach anyone. And again if you're just in the deal sourcing market, I encourage you to go and visit sites of your investors, your clients because you learn so much from seeing and development unfold and there are things you just can never really anticipate. So yeah, we learned a huge amount about that and that's kind of a breakdown of the costs involved in the project. And then with that time and effort we created what I think is quite a compelling end product to 5 bed all ensuite HMO. And despite some unknowns we appropriately accounted for risk in the development in our financial models. And I was delighted with the end GDV that we achieved but also the end return on investment of 28%. I went into this hoping to get as a measure of success 20%. So being able to deliver that for me was a whopping great success. On project one we had a bit of a scare at the end where we got a. Our initial valuation was at 260 and despite I tried not to panic too much and we ended up having to pay a bit more from a new lender and a new surveyor but it came off in the end and we got the kind of number we were looking for. So yeah, that, that actually let within two weeks of being advertised fully and we have the same tenants in there to date and we were within about three weeks with our second project as well. And we've got two more that we'll shortly be completing on over the next couple of months and hoping to achieve the same within Newport. So again all with a very similar look and feel, high end premium product. So that really kind of wraps up all the kind of content I wanted to go to, I guess. Yeah, for me, just to conclude, I don't think people should shy away from Article 4. The reasons I've kind of touched on today are there is a path through it. I got told with the first few agents in Newport you'll never get anything through the council, they hate HMOs. The politicians will stop it and you know we've just had our fourth soon to be fifth one get through planning permission successfully and all of them to date have let very, very quickly and continue to be let fully with no void periods. And so for me, yeah I'm not coming here as 25 year expert but I have followed a very specific model. I've been incredibly diligent in following a process and a data led process to kind of mitigate the risk associated with property investing and that has worked. And so yeah, if I kind of leave with anything, I do think don't discount article 4 me. It's a very attractive area. It's more and more common nowadays as we see council switch on either in specific areas or kind of blanket application of it. So I think to be a player in the HMO game you're going to have to get okay with it if you're a deal sourcer or an investor. And getting in early will help secure success versus waiting till too many people are in there. So that's what I'll finish with. Keen to know if there's any questions, comments, etc. Yeah, there will be.

Thanks so much. Do you ever got a slide with your details or.

Yes, if I just stopped sharing the screen.

If you want to just leave it up and just. You, you made a passing comment at the start about you working for your institution and your corporate career and things like that and how you see those big corporate players actually filling their boots with, with residential properties. You want to tell us a bit more about what you've seen or heard on about that?

Yeah, sure. So I can't disclose too much information. Yeah, I, I look after real estate within a large UK well known bank and certainly over the last two years in particular particularly some large insurance providers and two in particular large asset managers and private equity funds have invested substantially in UK real estate but particularly in kind of existing dwellings and, and refurbishing them and student accommodation admittedly. But they are, you know, investing on mass, I'm sure you can Google it, chat GPT but they're setting certain insurance company that I think is the current biggest property investor in, in the UK today. So they are buying domestic UK property because they clearly see a gap in it, but also there's a plethora of IT available as a result of domestic landlords exiting the market. So you know, I'm not saying that's, that's just in isolation so a reason to invest in UK property. But for me if people like that are buying it, that's a sign that they see a very, very bright future. Maybe not in the next three to five years, but the long term because they tend a mid to long term mindset. And that's, that's kind of. Yeah. What I would say on that.

Yeah. Certainly all the regulation has been happening in the last few years are just, just, you're just pricing out all the, you know, as a country there's, there's been this culture of buy to let you know, since like 20, 30 years and there's a really high granularity of ownership and then this is all being pushed away by the, you know, like the section 24 to start with now the renters reform bill and then the idea, you know, there's going to be just a huge consolidation and it'd be, you know, we are going, you know, within like 20, 30 years this whole country is going to be owned by a big corporation, you know. So yeah, really is an arbitrage to play for, for us, you know, SMEs and small landlord developers to actually not give up and grow and then we can get, we'll be, when it's our time to exit, we'll exit to the, these big players, you know. And I think for me there's also the urgency of doing property now because we will, we will not sit, you know, we, we, you know, in five years from now we'll sit through having the same meetings and we look back at 20, 25, you know, or, or, or how great and easy was, you know, we are going to be priced out, you know, the ordinary people investing in property. For me, if you don't put a shift now to grow your portfolio within a few years this whole opportunity is just going to close on all of us because you'd have to be, you know, have so much credit lines and basically be a bank if you want to own property. So yeah, it's really, really interesting. So there's a question on, on about Article 4 in the chat here from shame. So what are the main issues with Article 4 and how do we go around it? So basically what Thomas explained is there's a. You have permitted development rights nationally to turn a normal house into up to 6 bedroom HMO. But this right is removed by some council in some places with this article four direction. So you don't have the rights, you need planning basically to create an hmo. And this is pushing a lot of people out of looking at it in the first place because we don't want to go through what Thomas explained to basically go and get it.

So.

I'll come to you, Thomas, but usually the criteria are you, you need to have a certain number of HMOs within 100 meter radius. You can't have side by side properties being HMOs or properties being sandwiched between two HMOs. And so long as you, you respect the criteria, you're okay. So do you want to talk more about it, Thomas?

Yeah, typically so, yeah, those are common things. Yeah. They don't like in terrace properties, semi detached, them being side by side, as you say, there typically is a half mile radius with a certain propensity that they don't like to see in terms of the number of HMOs versus domestic dwellings as a percentage. And there is a strict set of requirements that you would need to meet, whether that's things like parking volumes, parking spaces at peak times, whether it's the location of storage of waste and things like that. Now in theory, if you meet the requirements, they should approve it. That isn't always the case. They do find ways. I haven't experienced it yet and I've been, but I've been incredibly diligent in the approach that I've followed as hopefully I got across. But, but I know people that felt they had complied but still got rejected. And so this is where you just got to be a bit again, all about the power team. All about working with a planner that's demonstrated success in getting this stuff through, who can demonstrate knowledge of a specific area, ideally has relationships within the council's planning team. All these things are things that you should really, you know, build yourself or work on and build the right team around you. Because, you know, my planner knows the people that council, he's friends with them. I'm not saying it's underhand or anything but, you know, having a relationship is, is critical to any business and having the right people that know the right people is often very helpful. And the other thing I would avoid is if an area has just had Article 4 applied to it again, that will most commonly be as a result of public uproar because of the volume of HMOs. It's probably not the wisest area to then go and try and get planning approval in because they've just applied it. So maybe kind of discount those areas where they've literally just had HMO Article 4 applied.

Yeah. Because Wales got a blanket Article 4 right now.

Yes, yes, the whole of Wales is article four. Yeah.

So it's very mature in that, you know. Yeah, it's not a New conversation. It's. Or in the press or whatever that people don't want HMOs, you know, it's just been years and years. So this is not as politically loaded as other areas we're just turning on.

Yeah.

You know, some areas around the. In the Northwest where it's just like no notice. Tomorrow you have an article for ara, you know, so. Which is a bit of a disaster. Right. Have you got any stories of going to committee and did you, you know, describe the bit. The game?

Yes, I mean, I. I can share a link to a few of the news stories, but I actually haven't. I actually was nearly got taken to committee. I think it was on the week before Christmas last year and actually the committee, about 24 hours before, just decided to cancel because. Probably because the Councillor couldn't be bothered to come in before his Christmas holiday. So I've never actually had to go to committee as of yet. Everything has gone through first time or it's been represented without myself having to be present. I think if you ever face a challenge to that planning application and it has to go to a secondary committee, you often are asked to represent the application alongside your planner, which I'm sure is quite an experience, but I haven't been through that as of yet.

You understand the. The game people play, right? It's very political. You know, people want to be seen as against something, you know, it's just. There's no logic in it. But, yeah, I've had a few times. And then the press article is quite funny. You know, they really, really don't understand what you are trying to do. Right. So it's just the reputation the HMOs have. I'm not too sure why. Because we live in this world where, you know, all of you know, it's me and Thomas and like the likes of us, you know, we want to build good stock for good ordinary people. But, yeah, neighbors don't see it that way all the time. So. Yeah. So if you want to comment on the.

I think these games, I can see a hand up. Is Abby. Abby.

Yeah.

Yes. I'm mute to face.

Yeah. But in the meantime, I've got Tony in the chat saying, if you can able to share the floor plan of your 5 build. The 5 build.

You.

You were sharing the case study. You were sharing. If you have an image, if you're able to do a screenshot, put it in the chat. That works.

Yeah, absolutely. I've got. I'm happy to share some of the architectural drawings of our projects if you'd like to see those again, just again, very high level. But for me, all of the properties that I've invested in to date have been kind of 1900s to 1930s traditional build properties. Higher ceilings, bigger floor area, always over 100 meters squared. So I've done three to five, four to six. I've never done any kind of structural extension work. I've done steels and opening up spaces, but never extensions to achieve my property types. And I've always gone fully ensuite because of the kind of high end model that I wanted to create. So that often involves things like taking out chimneys, etc. To meet square meterage requirements. Again, once you start to know an area and this is why again I tried to get across being an advocate of just picking up one area and being a specialist in it, you, you can very quickly start to pick out just looking at an image if that property is going to work without even looking at the square meterage. But yeah, I've always got very traditional build properties and I also like traditional build. I think they, they have character, they look better. Personally that's a subjective opinion, but that's just kind of in line.

They usually work well. The layouts work well to do like multi rooms and stuff. Yeah, more than more recent build, that's for sure. Question in the chat for the wines going through, going through the planning process or do you secure the deal? You know, when you offer subject to planning or does that sort of work? Have you got an option in place or is just a common agreement or.

So as said, I agreed, all of mine have been agreed on something called an stp, a subject to planning offer. So you agree purchase price and with the, with the agent and the seller, you agree that that is subject to planning. So in every case I've got them to take it off the market while we go through planning. So again, as I said, this does discount many potential purchases. I know people that aren't transparent on the fact that they're going through planning and they do it, they do it without telling the vendor and just kind of delay the process while the planning flows through. Again, that's a personal choice whether you want to follow that approach. But I've always been transparent with the seller and agree to subject to planning offer, which is the security I've agreed with. And I've never done things at option agreements or anything.

Would they work away from it? You know, it's like oh yeah, we accepted this but now that we've got planning, not anymore. We, we want to Sell it with planning.

Yes, yeah, you could. I mean that's why from a deal source's perspective, I think you could, you could secure these subject to planning offers, get the planning and then if you packaged up a planning approved HMO in an Article 4 area, I suspect you could charge quite a sizable fee for that.

I mean the vendors themselves, you know, could they walk away?

Right? Yes, yes, yes, there is that risk. I agree. I didn't have anything legal to mitigate that. But often when you're buying these properties it's, you know, you can quickly ascertain whether they would have the knowledge to, to do that themselves and, or why that would be attractive. You don't, I don't necessarily disclose what we're trying to achieve through the planning process. I just say that we need some planning to get, convert the property for our kind of business model and that's all I disclosed to them. I think if you're silent on it, the problem I found, or I can see is you've got to get access to the property in the period to get architects in, planners in surveys done. Probably more than you would if you're just buying a house for your own purposes. And so you do need to have that. And that's why I was transparent. You, you probably could just cite delays with solicitors, etc. While you get that planning. It's a potential model that you could follow.

Yeah, yeah. Question here from Caesar. What do you, what do you see is the main, has been the main criteria for, you know, to get the planning approval? I think you did say it's, it's the sum of many things, but yes.

It'S, I mean the main thing is making sure you do your due diligence on the, the volume of HMOs and surrounding area. The planner, there are data sets and stuff you can I think join and buy that, show that. But you know, you have to pay the planner anyway so I get him, him to do that and having all of the details covered. I would say. So talking a bit about your business, your business model, who you are, your background in the planning submission, that you're not just some kind of crook looking to buy property. You know, you, you have a very clear plan and vision of what you're trying to achieve. But also, you know, showing through the layouts, I, I included even things like design schematics, like what the rooms are going to look like in there. They may not look at them, but it shows. You know, I think if you can show a level of diligence and thought into this. It. It shows that you're not like a cowboy coming in to develop substandard property or you're trying to create a housing stock for the local community or people coming to work in the local area. That's attractive and adds value to the community. Because that's the political uproar, as they, I think, often have, you know, rightly or wrongly been tarnished because people don't particularly like things like asylum seeker models in domestic dwellings, rightly or wrongly, and therefore everyone assumes that that's the model landlords are going to bring in. And that's what I would say. Don't, you know, make sure you cover the details, give background on yourself. And the planner will, if they're good and they know the area, will know exactly what the council want to see in detail.

So there's one thing for. People might get caught up. I got caught up with this in Birmingham on the concentration assessments, is you got all the public data of license properties and you can look at things like Royal Mail databases and you can look at different things to do this due diligence. On the concentration assessment, I even asked the planning to confirm, are these. Are there other properties than these that will fall under your definition of hmo? And for concentration assessment, for planning, they said no in as a, you know, 28 days to them, 28 days to respond to this because it's their statutory period. Then we go for planning and they're like, oh, yeah, there's all these exempt accommodations that are also HMOs that I can't give you the details of, that makes your 8% assessment go into 12% assessment. Therefore you can't get planning on this. And so, yeah, it's just one thing to be mindful, because some of this data is not available, but also it's just some councils are a bit more aggressive with these things than others.

Yeah, yeah, exactly. And speak to other. If you can speak to other investors. I mean, I work with a managing agent who's an HMO investor themselves. And that for me was a big confidence boost, both in them knowing how to manage tenants successfully and give them a good experience, but also knowing and hearing from them, you know, their journey and their understanding and who to talk to. And again, network. Network in any business is key. Exactly the same in property.

And people ask me all the time, you know, oh, you know, like, what's the. What's the GDV of my. Of that property? Can't proxy to give me the value of that property, etc, and then you Talk about power team. And I find when I'm, you know, hunting for, for hmo, the two people I speak to every day are, one, the mortgage brokers, which is going to give me the commercial valuation yield multiplier and secondly, this specialist letting agent in there that is going to be able to tell me how I can break the rent, you know, break the ceiling of the rent in that, in that street.

Right.

And then the maths, just give me the gdv. Do you, do you have a similar process?

Yeah. So the gdv, actually I learned the hardware on the first one. In terms of the lender, I went with the cheapest surveying company, etc. Always when the difference in valuation from one to another, I think with me was £65,000. So in hindsight I should have paid the extra thousand pound for the different surveying company. But you, again, that's experience. You learn through experience. And I think for me, I did, I invested in two or three GDV assessments of projects pre purchase when I first started out with a professional surveying company to give me a kind of range of different GDVs that would come out from different agencies to give me confidence that I could hit what I thought. I mean, I obviously did the maths and you can use chat GPT now to give you a view, you can ask. But I found speaking to these surveying companies was, was the best bang for its buck. I mean, you can get ones for 3, 400 quid each, so it's not, it's not insignificant, but it's not kind of break the bank money to get these assessments done and it gives you that confidence going in that you can, you can, or, or the ability to challenge GDV outcomes that aren't within what you wanted to get to. So that's, that's how I did it. But I also, yeah, my managing agent was kind enough to share some of their valuation reports with me as well, which gave me confidence. And also the things like the yield calculations and stuff that the surveying companies used as well and how they came to that conclusion. So that was helpful as well.

Yeah, yeah. And then it goes to show the importance of the right power team, you know, the right, the right mortgage broker, the right lender. Yeah, the right surveyor. You know, I want to save 0.2 on the, on, you know, to work with another lender but, you know, you're not going to get the valuation. So yeah, you know, what they pay for sometimes.

So, yeah, yeah, I mean, I work with the same surveying company on Lento now on all the projects and it's not the best rate, but there's actually.

Not two grand for some, some valuations, you know, because I know I'm gonna get not what I want, but I'm going to get the best possible. Right?

Yeah, exactly, exactly.

There's one question from Agni. How do you achieve EPCC on old houses with such single glaze windows? Do you insulate externally, single brick? How do you manage this without wall insulation?

Yeah, so actually, do you know what, despite them being older, I think mainly driven by them being terrace, there hasn't been a huge amount of environmental upgrades we've had to do. So we in every project have ripped out heating infrastructure and put in new, much more powerful but efficient heating systems. All gas powered to date. And we have a hybrid of. We almost always have a hybrid of gas and electric and tend to have one off suite that's different to the rest of the properties in case there's a problem. So there's still showering and water facilities in our property. So that helps where you install a new upgrade the boiler, because they're typically old ones. And properties we bought, we have had to change things like windows and stuff, one from a fire safety perspective, but the other have been to help uplift the epc. And then we've done things like fairly cheap stuff, like up the loft insulation to regulation and things like that. So we've never had to go down the route of EWI or internal wall insulation or anything like that. The only type of insulation we have put in, and we did this actually not out of requirements, but out of respect for the neighbors, neighboring properties with children and stuff, is put in additional sound insulation between the property. Because again, the last thing you want as a property investor is a neighbor constantly kicking up a fuss with you, with the agent, with the tenants. You want a happy experience on the street, not just your property. So, yeah, for a small uptick in cost, we've. We tend to sound insulate between our properties adjoining to others as well.

How do you go about managing the project remotely and then how do you go about finding and selecting the correct builders and contractors?

Yeah, good question. Again, a critical part of being a property, the investor is getting a developer you can trust because it takes so much stress away of that side of things. I mean, I visit my sites now once a month when they're in development at most, because I've got such a strong relationship now with the developer and I've helped him with business stuff with my financial banking background, you know, and he obviously does the developments for me. So we've got more of a friendship than a contractor relationship now. But I started that journey by running a bunch of RFPs tenders however you refer to them for. For specific a specific project. And I think initially I went and had coffee lunch chats with about 20 different developers. Again you can see I always do things in a very detailed way but I think it's paid off. And then I kind of refined that list both from a commercial perspective. By then I also went with the kind of three I nailed it down to. They took me around a number of their in development sites and completed sites. And I think alarm bell one is always if a contractor says I'll not get approval to take you to one of my completed projects, it shows they ended the relationship on a bad note. And so I a big advocate for going and seeing sites and projects that a developer has done and people that can attest to their capabilities and how they worked with them on the project. So they're not the cheapest developer. I could have gone with a lot cheaper company I think one of the companies that bid for my work, I'm a big Oasis fan and their company was called Wonderwalls which attracted me initially but they had only ever done internal stud walls and we're trying to bid for. For a whole project which. And they were asking if I was willing to go on a journey with them. And as much as I appreciate their ambition it's I. You've got to get to working with someone that's got experience and, and can and demonstrate that. So I guess that's how I would do it. And then you know you have things like milestone based contracts, use standard industry contracts. I know some people will push your own T's and C's that are drafted in your favor. I'm more of an advocate of having things kind of reciprocal and I think there's various different domestic development contracts that you can download off the Internet, jcts and things like that. Make sure you have proper contractual provisions in place before you start to protect yourself but also to protect the builder as well and check things like their insurance certifications as well. You know, do do your due diligence. This whole I'm sure there's training on here or other areas on kind of contract management and tendering and so yeah true, you're right.

And a lot of it is the right size for the right project, you know, the right builder for the right site, you know.

Exactly. Yeah.

It's not true or wrong. Someone would be great for you to do certain things but not so great to do another project. So it's matching this. Absolutely right. Doing the due diligence beforehand, having these conversations even before you have the property. And then you know, you mentioned about them being not the cheapest but in my experience you have this triangle of refurb, you have a price program or quality, you pick two. Right. So you can't have everything.

Yeah, exactly. And the product I wanted to create was high end and therefore I was happy to pay a premium for something. So yeah, that's kind of the model I. And they're happy to chat to people offline or whatever about. Bit more detail about that, how I ran the tenders and things like that.

But yeah, yeah, that's great. Thanks so much for that. Thank you also for the updates you are putting up in the props security. I really appreciate it and I think people do as well. So yeah, that's really, really helpful and thanks so much for, for today. Do you have a sort of a closing sentiment for. For us, you know, something to leave us ponder on.

Yeah, Gosh. I'll say the thing that my first ever property mentor told me which was that the path of most resistance often leads to the greatest rewards. And kind of in the context of Article 4, yes, it's a lot more, it's a lot more process and there's a bit of a journey to go on to obtain those properties. But I do believe it's an area that people shouldn't discount particularly because of future proofing that demand, particularly because of the valuation aspect with HMOs. And as I said, it's becoming more and more common. So I do think it's going to continue to expand across towns and cities across the uk. So you know, if you want to stay in that kind of high cash flow business model of HMOs, I think it's important to start to get to grips with it.

Yeah, thanks so much. Thanks a lot for that. I think it's eye opening as you say, most people shy away from it. You know we are pro problem solvers. We are in the business of cross creating value by solving problems like just don't run away from the problems. This is what all your competition is doing, right. So learn to solve them. That's a really, really world class example here and I should have mentioned earlier as well, thanks a lot for the explanations of how you use Prof. Tilted Find your deals, assess your deals, etc that was really useful. I think people are tired of hearing me, hearing me show them where the buttons are. They want to hear it from real people. Right. So. Which was really cool. So thanks a lot for that.

Great.

Yeah, it was pleasure to have you today. Appreciate thank you everyone else for joining us on Today's the Final Corner. So look forward to seeing all of you next week. In the meantime, you know where to go. Propil uk, log on to your Prop Filter account, have an endless supply of deals, join the 1%, you know, deal makers out there. And I, you know, I'll see you again next week on one of the many calls we run. Thanks so much, Thomas. Thank you, everyone.

Thank you.