Transcription
What seems to happen when you run a business is everything that could possibly go wrong at the worst time does go wrong. Investors pull money, investors lose money, and they need it back. Your deal gets down-valued. Your JV partner has a CCJ at the end of a refinance. You only find out like, absolutely everything.
People go into property and think, "Oh, this is absolutely risk-free. There's no..." You know, the property trainers make it sound easy. Whereas, like, property is extremely risky.
Every building I look at, I fall in love with and imagine myself living there, and it's my portfolio, and my great-great-great-great-great-great-grandchildren have it. Like, I'm an absolute fool for it. But when I go back and do the numbers, I, I then get brought back to reality. So I understand why people are like, "I want this deal, give me this deal."
Welcome to another episode of The Property Developer Show, the podcast. Today, I'm joined by the finest gentleman in property, Mr. Daniel Kennedy. He's a developer, ex-military, and he's certainly someone that I look up to for inspiration within this sector. Dan, welcome to the podcast.
Thanks for the introduction. Pleasure. So obviously, come over from Birmingham today. Podcast studios in in Liverpool. So, big warm welcome to the Liverpool way of life. It's a beautiful city. Very unexpected, to be honest. A lot going on here from the property side of things, and, um, certainly a good area to look at for investment for those out there, anyway.
Um, so I know you've been on a fair few podcasts, and I know a lot of people do know you in in around the industry. So, just very briefly, who is Dan Kennedy, and what got you into property?
So, I started, uh, coming up to 10 years in November, I'll be in the industry. I started out sourcing, uh, then went into trying to buy my own deals. Initially, I started with no money, so I had to source. And I then, when I started buying my own deals, which I sourced, I made like a conhon of failures. Like, every mistake you could make, I was... I didn't take to property investing like a duck to water. So eventually, I had to sort of take control of different companies in-house because I just kept getting absolutely shafted by all the service providers. Uh, and then kind of year five, learned, learned how to do it properly, got out of the holes that I was in from doing bad deals, and it's just been absolutely exponential growth from there. So I've got a build company, a lettings company, a sourcing company, a planning company, and it's all in-house.
Brilliant. Oh, and also an education company.
Nice. Yeah, yeah. So you're covering the wide spectrum, then? I mean, in terms of like the property journey, I guess people sort of often, I speak to people that are always looking for the perfect timing. And obviously, by the sounds of it, there was no perfect timing for you. No money, no experience, just wanted to jump into it. How did you sort of find that process initially? Obviously, must have been quite painful, miserable. What kept you going?
I have not enjoyed one day of this journey. It's only year five onwards that I've enjoyed it. Um, I came from a very stable job being in the military. So I had my, I knew my paycheck was coming every month, like without fail, regardless of my performance. And that creates a sort of complacency within you. And then when you have to actually work for it, the, even though it's like everyone else in Cby Street, they have that similar stress, they can lose their jobs. You're not going to get fired in the Army unless you get injured. So there was a very different level of stress, and I did not handle it well. I crumbled like a crouton when I had my first bit of stress. And only by sticking in it and really just persevering through it is, you, your tolerance to stress and problems get more and more and more.
And what seems to happen when you run a business is everything that could possibly go wrong at the worst time does go wrong. Investors pull money, investors lose money, and they need it back. Your deal gets down-valued. Your JV partner has a CCJ at the end of a refinance that you only find out. Like, absolutely everything. And, uh, it's, it's, I'm very happy, really, really happy that that happened early on with lesser sums rather than the sums that I'm dealing with now. Because if I had one of those problems, there's no way I could work myself out of it. I'd be joining the rest of the investors that seem to be going under at the moment.
Well, that's a quite an interesting topic, isn't it? That whole investors going under and struggling. I mean, people go into property and think, "Oh, this, this is absolutely risk-free. There's no..." You know, the property trainers make it sound easy. Dan makes it sound difficult, but he's probably, you know, just had a bad, bad experience with it. Whereas, like, property is extremely risky in some cases. And obviously, we find that out. I'm going to go out on a limb. I reckon more people lose money in the industry than make money from it.
Okay. Yeah. If we include those who pay for education.
Okay. Yeah, yeah. I probably agree with that. Because there's a lot of people that do pay a lot for education and then never, ever actually do anything with that. I think that's probably... I don't think education is an issue. I think it's what you do with that education. It's how it's sold. I think that's where the sort of underlying issues. Because I think, you know, if, if, and often training companies, they find like these individuals that do, were going to be successful whether they trained with them, whether they trained with you, whether they trained with me. They were always going to be successful because that they just have that in blueprint already ingrained in them. And I think they sort of leech on to these people that they've so-called mentored and invested in and, you know, showed how to invest. And then they put them, those individuals that are destined for success anyway, in front of people that aren't necessarily geared towards, I suppose, business, the stress of it. Because not, not everyone is cut out for business, in, in my opinion. People might disagree with that point. And I think that's where the underlying issues lay. So I probably do agree with that point that people do lose a lot more than they gain in this.
My goodness. There's plenty of people that I've had on the phone that have been like, "Right, I'm, I'm buying this deal. This is how much the build cost is going to be. Uh, this is what the end result is." I'm like, "But you're buying it more than what the GDV will be, never mind the stamp duty, the, the interest, the legals, the interest that you've got to pay the investors, the build cost. How, how do you expect to make money? Are the markets going up? Are you absolutely insane?" There's, there's so many things.
Um, that people want to do a deal, want to be in property, and they often are blinded by the numbers. Like, you should have absolutely zero attachment to the numbers. You should work out your GDV, work with your desired profit, and it has to be a minimum, really, of 25% of your associated cost. And that should be your offer. And very often, you'll have deals that are on the market, or the vendors want, and say, let's use a nice round number, a million. And it only stacks at 400,000 for you to get that margin. And those are the type of drops that you need to be go, need to be getting.
Like, I've done a bit of consulting for others. And I'll, I'll talk about this deal. It's on City Road, where Rotten Park and City Road meet. And it's an, an auction house. And we, we did the due diligence. 860,000 was the max bid. We said, "We do not go over the max bid." And there's a, we'll talk more about the reasons how we get to the max bid later. And the first bid this consult, this consult did was 920,000. And we were starting the bid at 650. And she came in over 900. I was like, "Had to call her husband off." And I get off of the computer now. And it, it did actually sell for, for more. But I know that person took a bath with that deal.
Wow. Jesus. So even with me saying, "Do not offer, this is the reasons why," explaining the whole reason why, because we don't put any value on any hope. We don't put any value on any planning. We only value on what it is guaranteed to have. And first bid over the odds.
So I, I also struggle educating because I don't necessarily have the empathy that you, you need, really. I think people take to that though. It's a black and white, isn't it? Of that sort of approach. And some people just aren't willing. They think they know best, I guess. As they say, you can lead a horse to water.
So, in terms of like, what a good property deal looks like, I know you've sort of alluded to it there. What sort of things are you factoring into, obviously, GDV, planning in place, you know, what, what sort of, what's the ideal deal for that?
So, we've just slated education. Now, this is where I'm going to speak of it in a positive light now. The more you learn about different strategies, different things that you can do to a building, so permitted development rights, which is guaranteed, various strategies that you can employ to get more money out of that property. Your GDV is going to be different from other investors, depending upon how experienced and how knowledgeable you are. So we would always work out the maximum GDV, because that means we can offer more. It means we're more likely to have a deal. For example, let's say there's an office building. You can put two stories on that, depending on what class it is. Maybe it's a Class E office building. You can split those units up to resi, and typically resi is more valuable per square foot versus office. But then you have to build, build in the build costs. So you get to the maximum GDV, then you have your desired profit. Now, I, I do 25%. It's not greedy. It's, it's what gets me all my money out. Then I take off the stamp duty, the legals, all those costs. And then that will determine my offer. And what that does, it's, it's a real wonderful exercise because it takes all emotion out of the deal.
Every building I look at, I fall in love with and imagine myself living there, and it's in my portfolio, and my great-great-great-great-great-great-grandchildren have it. Like, I'm an absolute fool for it. But when I go back and do the numbers, I, I then get brought back to reality. So I understand why people are like, "I want this deal, give me this deal." But it's got to be based in reality because you're going to have to raise money from investors. Now, the, the caveat of that is, many of those investors have exchanged time for that money. They haven't done what you've done where you've just played with numbers a bit, and it's just been generated through a bit of paper. They've exchanged 30, 40 years of their money in some cases, and they're trusting that part to you. So you have to treat it with the same reverence that you order own. In fact, even more. Like, they need to get paid. Like, you can't go into this business and be so loose with everyone's money that we just see all the time. Like, as soon as somebody's in property, in two years, they've got a Lambo. I know they're on borrowed time. Like, 'cause it's just not the reality. Every single investor I come across that has a substantial portfolio has none of that flashy life. 'Cause you don't make that much money from property. It takes years of good deals to compound consistently for you to have any meaningful impact on your lifestyle. You're not doing it in year one, year two, year three, unless you're selling a rent-to-rent course. Like, that just seems to be the, you, you'll see it. Somebody will get into property, then their bio goes, they'll go author, speaker, mentor, bankrupt. That, that seems to be the, the trap.
Yeah, no, I agree. I think, uh, the whole flashy lifestyle thing. I mean, you and I know we've been in property for long enough to see what the stepping stones are. And, and I sometimes see people that have, you know, had overnight sensation success. And I'm, I, I just, I'm like, "How, how have you done that?" Obviously, it never stacks up because it always comes out exactly the on the first gazette as you put out yesterday on that on social media post. Um, but I think that's, and I've had this conversation before. I think people compare themselves to those individuals. And those individuals are on social media are presenting 150% of what their act, their reality is. The 100%. And people then think, "Well, I'm not doing enough. I need to take more risk, or I need to do more, or I need to work harder, or I need to, etcetera, etcetera." And the reality of where that, the, the individual that they're looking at is, it's unattainable.
Yeah, it's just complete smoke and mirrors. You articulated that perfectly. This is why I hate the 12-month mentorship because it isn't long enough. You ain't, you're only just going to learn about what property is in that 12 months. You may understand conveyancing, you may understand vaguely what planning is. You are nowhere near going to be in a position where in a year's time, you're going to be on a beach in Dubai with a Lambo. It's just not going to happen. I've never come across anybody who's done it genuinely without shafting a plethora of investors.
So what does that process look like then for someone that's just starting out? What can they expect to put into property to get to where you are today?
Well, let's use an example of the worst case. You've got no money, got no experience, you've got no education, you've got no ability to get education. So I can't really think of a worse position than that, right? Yeah. You have to become valuable to people who are already in that industry. How do you do that? You go to networking and you offer a service. What service could you offer that you don't have any training for, that you could potentially learn off YouTube? You've got gardening, you've got tenant finding, you've got building, like building initially. Like, there's loads of builders who aren't very good at the business side, but absolute artisans with their hands. And that's what, what we did. You've got cleaning, you've got SA management, you've got, you've got so many services. Like, work for a company that's doing it, or set up on your own and do it yourself. And start networking and offering services. Be really valuable. I've sold my biggest HMO deals to the person that finds my tenants. He's bought every single one. And it's just because it's easy. We've got a relationship, we've done business with each other. It's very difficult starting from a fresh. It's so much easier to raise money from people who I've built for, from people who I've sourced to, and vice versa. It's so much easier to sell to people. Even if I'll get a higher offer from somebody else, if I get an offer from this person because I worked with him, I'm more likely to go with it. And that's, that would be the best advice. Don't pay for education because you might pay for it, spend 10 grand on it, and decide, "I don't bloody like this industry." It's miserable. And which it is in the beginning. It is. It's absolutely miserable dealing with tenants, dealing with the wider public who think you're an absolute shaver when really, to build houses, you have to go through so many hurdles. Everyone seems against you. There should be L statues of people who go and build houses because of how hard it is, how many hurdles and barriers are put in front of us. Um, but you're going to get hated for it. People think you make way more than you do. Um, and so I would get a job in the industry and, and decide if it's for you. Then I would start immediately sourcing. Because when you become a sourcer, you are like the pretty girl in a nightclub. Everybody wants your contact, everybody wants your deals, everybody wants to work with you because you're the gatekeeper. That's very difficult. And it takes years and years and years to build up a good pipeline. But I would invest in myself and learn about sourcing. And most of the stuff you can get online. And, and I would ask yourself the question like, if, do, if I have to pay £10,000 to this person to tell me to go out and deliver leaflets, is this the right industry for me? Like, if you need that, you're not going to make it. You need to be self-motivated because the vast majority of the time, 99.999% of the work is going to result in nothing. These leads, these marketing, you're not going to get anything from it. It's that not, not, not, not 1% they'll get one or two deals and then that'll slowly build up over time. It takes years to build up a good pipeline.
Yeah, it's definitely worth that process though, if you, if you've got a passion for property.
Yeah, get in the industry. Exactly. Like, the, the people who have, and they haven't paid for any training. There's a gentleman that runs my construction company now, who he's taken out over. And I give him the work. There's somebody who's running the lettings company, and no doubt, once he proves himself, he'll be involved in the business and he'll, he'll get a portion of that. There's people who bring me deals as well. So they, the sources who bring me deals, don't know how to execute on it. I have JV with them. Now, there's a great deal that we got in Cornwall where that has resulted, and it will do when we build it all out and asset manage it. His first deal will will resulting in being a millionaire after he's finished on paper. Like, that's why he won't have a Lambo.
Yeah, makes sense. So, in terms of like the deals you've done, the most impressive one that I'm aware of, I know there's a few, but the one that I'm aware of, it has to be the farm. Yes. That's really good. So let's delve into to that one.
So, a long, long time ago, I romanticized the idea of owning a farm, living in the countryside. And it's, it's proven everything and more than I thought it would. It's absolutely brilliant. It's so much better than any other deal that I've been in. So I drew a circle around Birmingham and I contacted every farm. And the first initial contact is always, I go knock on the door. It's just, I've never been able to do a deal over the phone. Like, I, I've tried and tried and tried to improve. Like, I'll record my phone calls and be like, "Flipping nail that call! I am top dog! Yes, that's a deal!" And then I'll listen back to it and I'll be like, and I sound like such an amateur. Where, face to face, I, I obviously seem to be more comfortable. So I go knock on the door. And all I do is I just give them a card, say, "If you ever want to sell, give me a call, and we'll have a conversation." I'm not making any offers, I'm not doing any due diligence, I'm just prospecting to see if they will sell. So I, I did that. I had about 3, 400 leads. Nothing. The circle went a bit wider, went a bit wider, till I was about 40 minutes, 50 minutes outside Birmingham.
Now, this farm, it was in the middle of the farm. So I actually, to actually go on the land, pretend I was a rambler, and then knock on the door and be like, "Hey, if there's anything." And they initially had a pretty hostile response. They were like, "Get off, what are you doing there? Go away." So, yeah, fell on a couple of months later, get a call. Um, yeah, we're interested in selling. There, there's been a terrible accident. So the husband had a real bad fall, accidentally, I'm sure. Um, one day his wife came back and found the husband had fell into a secretary. So she was now very, very bitter about that. Then had a conversation with me and was like, "I want to sell." They bought it for 1.9, uh, two years prior. And then I asked, "How much do you want?" And they were like, "1.1." Done deal. Went and got it valued. Viewed the property. And what they had done, they'd got planning, stripped it out, made it unmortgageable, which left themselves in a real sticky situation. Which I would have stripped it out anyway. So it was more of an advantage. It saved me a couple of K on strip out. Um, it got down-valued to a million 40. So I dropped the offer, and they, they accepted it. And then it, it went through.
Now, whenever I look at a deal, I put zero value on the hope of what I might get. Zero. Because I need planning. I need to wait in planning. It needs to stack on its own. And I need to get off a bridge. Um, and I'll tell you the reason why we have that rule because it's a very good one. The main house had been stripped off. There was an office to the side of it. So Class E. It had planning for a service accommodation bungalow. And it had a lodge. And it also had a B8 barn, which is storage facility. M. So that was in phase one. So we developed the, uh, developed the main farmhouse, built out the SA unit, turned the Class E into a second unit. So now we've got one, two, three units. And the lodge is also in SA. So we got four units now. Um, we had that revalued as a collective, and that got valued at 1.2. We spent about 350 to get it there. M. Spent a million 40. So we're all in for about 1.4. The land now, which is basically 11 acres, 'cause we also sold off two parts of the land to the neighbors, was valued 800,000. So a pretty good deal. M. It just washes its face being an SA, and it's, it's limping. But now, what that allows me to do is I have this development plot where I can get eight, seven barns, planning dependent. Each barn is going to be worth circa 550 to 750. And I've got it for nothing on the balance sheet. There's no cost for it. And now I get to take my damn sweet time getting planning, getting pushed back. And I'm not going to have that initial stress of, "Oh my God, I've got a bridge." This is four years now, which has happened in the past.
Yeah. So that one's going to be, we've got the main house valued at 1.4, sorry, 1.2. The, the storage facilities is valued at 200,000. And then the remaining land is valued at 800,000. So essentially, we got, we paid for what we put in for the phase one, which was the storage unit and the SA unit, which is essentially five. And then the land is 800,000, which is free. And then we'll build that out and then probably sell it all off. Now, that one will generate, I reckon, because we're going to spend about 300K per barn, it's going to generate about 1.4 million gross. Yeah. Which, which is pretty good. And no money in, right? It's, we got the money back out. The investor who put the money in initially is fully paid off, but they've still got a 50% interest in this, in this land. So it's going to be pretty good for them. M. Um, and we've got free deals like that where we've got really great plots, absolutely paid nothing for them. And it's just going to be pure uplifting value, pure asset management, pure, like, hopefully profit. Because developing is so risky. M. It's where everyone comes unstuck. Like, whenever I look through the administrations, it's always pre-build. It's never post-build. When it's stabilized, it's always pre-build. They bought it, things are costing too much, they maybe didn't realize they had to do soundproofing, which bumps up the, the build cost a couple of bases points. And it's an absolute catastrophe. Uh, they can't get out of it. It gets repossessed. And then the administrators whack on their fat fees. And then the company comes under. Um, so I know that I'm going to not be aware of some things, even though I'm constantly learning, constantly on YouTube. I know I'm going to come across something and be like, "H, what do you mean I have to spend 100 grand on that?" Like I did with the farm. I didn't know when you build out new units, you have to have a new sewage system. Didn't account for that in the slightest. But thankfully, because I knew that I myself am a risk in any deal because I'm, I don't know anything. You don't know what you don't know. I have like a real big reserve as a risk sort of buffer against my lack of knowledge or incompetency. Spent, we had to spend £10,000 on a sewage system for a barn that was going to be worth 70. So it was, it, it stung. Oh, however, we were able to make it bigger. So now we have the sewage system for the whole eight, like, put, 'cause it wasn't too much to upgrade it to future-proof the whole site. M.
We have a talking about another one, the Cornwall deal. This was brought to by somebody who came on the sourcing course. Said, "I've got this portfolio lead that's come in." We, we came down. It's 11 units, planning for three more, and a car park. So in total, I suppose you could say the planning for three units is a site. So let's call it that one. So in total, twelve, 13 units. Three houses, seven flats, two development sites. We put the value at 3.5. We initially went down, and the vendor was like, "We've got a value of 3.5. We'll give it you to 3 million." Then we did a viewing without even talking. The person that was walking us around said, "Ah, I know they'll take 2 point, uh, 2.8." So they dropped £200,000 without us even having a conversation. Now, obviously, we couldn't offer that. We, we offer certainty of completion over price. Now, if they can put it on the market and they can wait, we say, "Go do that, you're going to get more." We offered 1.6 with them lending us the 1.6 to buy it. But how, we didn't just say, "You need to lend us the money." We broached it in a couple of ways. We gave them three options. We gave them a cash offer of 1.2. We didn't have any cash to buy it. We were never going to buy it at 1.2. Uh, if they would have selected it, we would have sourced it on. We offered a part now, part later for 1.8. And then we offered vendor finance 1.6. Now, they said, initially, they're like, "Get out, you've wasted your time, our time, everyone's time." So we left for 24 hours. Then they said, "Let's come back and have a chat." And, and they said, "We need 400,000." So then I thought about it. I was like, "Okay, what we'll do is we'll buy two of the units at full market value, putting 25% down with a mortgage." So we had to put in 50,000. And I think it was 52,500 'cause we bought one at 210, one at 200, or one at 225, one of the two. We completed on the purchase. We got a lease option for the 1.2. Then the problem came about is that they wouldn't have enough money to pay the capital gains. So they said, "We, you need, we need to buy another three." So we're buying those on a 100% bridge. So essentially, no money in. M. Um, and then the remaining, I think it's five, will be on, no, the remaining six will be on vendor finance over 5 years. Now, what we were able to do, we had to put the initial money in for the stamp duty and those deposits for the two. So within week one, we sold our 50% of the car park, or the uplift of the car park, for £250,000. So we got all our money out in a week. Uh, we've got the three development sites, sorry, the three units on that development site. The sale went through on those at a pound each. So we bought three, they're not built out, they'll cost about 80 grand to build out, they'll be worth 250. We bought the car park for a pound and then sold it for 50% of it for £250,000 in that same week. But that's still a good deal for that prospective investor because we've put the pre-app in. They're very, very pleased with what we're putting in. We're going to build four houses and three flats. That's a GDV of approximately 5 million, hopefully, depending on, uh, how high end we go. And they'll get 50% of that uplift. The vendor is really, really happy because the properties hadn't been managed very well. There's some of them had like live wires just hanging out. There's some of, not a lot, a lot of them didn't have EICRs. A lot of them didn't have their, the correct certifications. And they weren't really maintaining it as well as they, they should. There was problem tenants within the property as well that weren't paying. So initially, when we bought it, it wasn't making money. We're actually having to put money in. But now it's ticking along like a dream. The planning app is in. We hopefully get planning for that. And then we'll go down and build. And this was a portfolio that we got the vendor to lend us 1.2 by sort of lease option. M. Um, we got the over 400,000 from a mortgage. And it's going to be worth probably 7 to 8 million. Wow. Yeah. And it's just a paper exercise, really. Amazing. And that came through a sourcer that had attended one of your courses. Yeah. Just put a post out in the Facebook group, 500 quid to anybody who knows somebody who's selling. You put us in touch if we come to a deal. And the son-in-law was like, "I know, I know a portfolio." And we gave him, gave him six grand 'cause it was 11 units. Geez. Fair play. Amazing.
I mean, that's why it's sort of, and that's, I suppose, the pipeline that you're, you're talking about. It's the years of prospect. I've got one landlord that has gradually started to sell bits out of his portfolio to me. And he, he feels comfortable coming to me because I'll find the best solution that works for, for the both of us. And he, he'd rather deal with me than an estate agent because he knows that I'm gonna hopefully either buy it myself or find someone else that that can potentially buy it. And I think, you know, that was leaflet in K.I. five, five, six years ago when I first sort of started to take property seriously, investing in myself, uh, investing in my own projects. And, uh, yeah, obviously that's paid dividends over. It's the pipeline. Whenever I chat to somebody, it's how you get that lead isn't really too important, right? Marketing is marketing. It's following up with the pipeline. The deal is always in the follow-up, always has, always will be. Now, people can look at that type of deal and be like, "Oh, I could do that for my first deal." You're not going to do that for your first deal. You're access to lenders that would accept that level of risk. So you have to build up to it. And the only reason we were able to do that deal is because of the absolute cock-ups initially that I learned and built up a portfolio over the long term to be for us to be able to execute that deal.
I'll talk on some of the cock-ups. So I sourced for a year, eventually got my first deal. And because of that, I had an investor. They came, gave me 180,000. And we were letting our roofer do our planning apps 'cause he knew CAD and we were getting them. So we did, we did one 8-bed HMO, did a second 8-bed HMO, did a third one. They all sailed through planning. And we were like, "Hold on, I think we might be onto something here. We, we're going to be billionaires. We might be the UK Donald Trump. This is fantastic." So then what we did is we raised more money and put three apps in. And what do you think happened? Refused all three of them. Got refused. Then we were on bridges. Previously, we were doing it with cash. And then we split the cash up and did it on a bridge with private investors. And all three were like, so that, that's what started the slow decline of was trying to unpick those deals because one, on one of them, we stayed on a bridge for four years. Jesus. We put in for 16. They said no. Put in for 14. Planning officer changed. We had load, loads more fees. Plan officer has changed again. When we put in for 14, go to 12. Right. Plan officer has changed three times. Go to 10, and we'll give it you. And we, the same planning officer, different, no, the same, same department, but the plan officer changed. Yeah, they left. So the new person was like, "Nah, change this, change that, change this." So we eventually said, "Now, we'll go to appeal." Went to appeal, and the appeal rejected it for a reason that the council made us put in. They made us change something about the plans. And the appeal rejected that, but not our principle of development. So then put in another app. And bearing in mind, during this, we were like, "We're just going to have to accept this loss." This was four years in. And we were due to sell the plot for 300,000. We bought it for 300,000 like four years ago. Planning came in. And we on the T. No, it didn't come in. The appeal came back on the Tuesday saying, giving us information or data that we could get the 10 if we put in another app. But that, obviously, involves more fees, more planning fees, and it's going to take three, four months. And we were due to complete an exchange on the Friday. So we back to that person. We're like, "Right, we want £100,000 more." "We know we're going to get 10 now." They were like, "Nah." So we sold that to somebody else for £400,000 on the premise that we build it out. So four years into this deal, I then had to build it out for somebody. And now it's a great asset for them. And all we got to do was just walk away and not lose anything. And so that was essentially five years of blood, sweat, and tears, putting everything, all our IP, into this deal, only for us to walk away with nothing. Now, another deal, we had to sell on because we butchered that in this process as well. And then the third deal, we kept. So out of the three deals, at one, we had to sell two. And we kept one. And yeah, that was, I would never, ever, ever, ever go on a bridge again to get planning. It has to have planning, or I can have it for nothing. And that's the reason why now, when you look at the property industry with those lenses, you'll, you'll begin to see some of those deals. It's very, very difficult, and they don't come around often. But as you educate yourself more with the planning system, with the PD rights, and what's possible, you, you'll be able to spot them, sure, and de-risk it for yourself and your investors.
So when you sort of looking for deals like that, what are you, are you kind of looking for, you know, the, I, I guess with the, the farm deal, there was so much flexibility in the deal, you know, we could have gone that way with it, we could have gone that way. This is how we do risk it. This is the side hit, you know, the extra additional land in the barn, that's extra to this over here. You know, how are you sort of looking at deals and approaching from that kind of perspective?
That's a very good question, and I'm going to look forward to answering it. So, what it has now, concrete, in writing, in planning, that's the only thing I afford value to. That's it. Anything else is is zero. M. I, I know that I can maybe get something, but it doesn't matter if I don't. I'm not going to be having receiverships and coming into the office and take, take all the assets. Um, so that is the key thing. What has today with PD rights, what it has today with its current planning use, is the only thing I afford value to. Now, what I'm trying to do is get an ROI of 35%, which isn't too greedy. It's not like I'm not trying to get all my money out on phase one. I'm happy to leave a lot in if it gets me the 35% ROI. Because that leaves me enough to pay an investor, say, 12%, 10%, and also pay down the investor with the remaining 20, 25%, depending on how much I can raise it for. If that, that's what it means. Because then it means three, four years, it's paid off. I get the income then. M. It may look fabulous like this great deal on on Instagram or on Facebook, but the reality is, I don't make any money from them in the first couple of years because I borrow 100% of it. Um, and then I hopefully make my money on the back end, which is the, the value of the land. And if that doesn't happen, and maybe it won't happen for any of these, I'm still okay. M. That, that's the important thing. So phase one, I only afford value to what is actually already currently in place. And I'm looking for bigger stuff now. When you do it like that, it's easier to buy these bigger blocks because you can parcel it off. It's easier to buy massive portfolios. Um, and because you don't do it with any money anyway, you just raise it. Um, so I'm looking for the bigger the better, essentially.
Absolutely. So obviously, when you come into like the negotiation stage, then, and let's say you've got a vendor that, well, a Cornwall investor or or vendor, for example, obviously from their perspective, they perceive the value of what they've got in a certain degree. You know, in another example, you know, you've got, uh, a house with a plot of land off the side that's got no planning in it, it's just a big plot of land. There's, you know, grown vegetables on it for centuries. How do you sort of approach that then in terms of like the negotiation side? Because an estate agent go along, "Oh God, yeah, you can get seven houses on that," and all this, you know, song and dance.
For me, I am fully, totally open and honest. I, I don't try and deceive them at all because I'll forget that I've tried to do it and I'll, I'll tie up. I'll say to them, so with a Cornwall, what I'll say, "If you put this on the market, you're going to get near enough double that what we're going to offer." Like, we tell them that. That there's because what happens is they'll go to the market and they'll get messed around. They get messed around, they get messed around. Now, what had transpired is that some of these units had been for auction, and no one had bid on them because it was during the height of COVID, where the rates were going up. So the market, it was very much a buyer's market. So they had no buyers. They tried that. So when I was saying, "Listen, you could go on the market, you're probably going to get more if you could just wait for a longer period of time, you, you're going to get substantially more." What turns out, the reason why they needed the 400,000 is 'cause the daughter and the son were going to get repossessed. And so that, that was their motivation. Right. With, but because we were completely open, that they knew that they were going to have to take a haircut to be able to sell it all, all at once. Um, and same with the, like, that my first deal. I was when I was in the Army, there's a real fabulous part of our culture where people, or old ladies send us socks and Haribo when we're away on tour, and letters. So I got these letters from the Susan, wonderful lady. And this is why I'm in Birmingham now. So I went back on RNR just to say thank you. And, you know, when you chat to somebody, and you can, you can just see that they're burdened by something. Like, there's some, they're not quite there in the room, they're not present, there's something wrong. So I, "What's wrong, Susan?" And she goes, "Oh, I've inherited my friend's property." And then obviously, me coming in the property world, I was like, "Surely that's a good thing, right? You should be happy." What she was worried about is there was a property that had a mortgage on. And when it goes into probate, mortgage payments compound. So they just get topped on top of the mortgage. Now, she was really nervous about that. Turns out the property was worth £210,000 and the mortgage was only £60,000. So she was going to be fine. But the idea of debt accumulating terrified her. So she was using her state pension to pay that mortgage, which left her destitute. And that's, that's how lovely this lady is. Right. Still sending soldiers stuff. So I said, "I, I'll take a good look at it." Um, then I did my due diligence. I said, "How much do you want for it?" And what do you think? She said, "£60,000." Yeah. She said, "Just pay the mortgage off and you can have it." Now, that would be me absolutely royally shafting her. It would. It wouldn't be a fair deal. It's not valuable here. It's not valuable to her. And I'd be completely taking it all, and it'd be very unfair. So I said, "That's too much. It's worth 210,000. How about £100,000? So you've got money after this. I'll start paying the mortgage now so you don't have to pay it anymore. So that takes that stress off of you while the sale goes through." And what do you think a reply was? Absolutely snapped your hand off. It wasn't no. She was like, "How about 107?" I was like, "You cheeky man. You going to give it to me for 60?" Um, so obviously, I still agreed at 107. But I told her it's worth probably about 200,000. Turns out it was worth 210. Um, because I'd forget, I'd forget that I wasn't meant to tell her that. That's how incompetent I am. I, I put no faith in my ability to lie 'cause I can't. Um, so I told her how much it was worth, did the deal. And now she thinks the sun shines out of my bottom because of that. Problem. Some people put all their value on the price rather than the, the speed or the time. Like, property can be a liability for some. And bearing in mind, you might be the only one who can recognize that value because of your previous education, your, your ability to handle the subsidence or the or the reer. Yeah. And so I say, "Listen, if you do this, you'll get, you'll, you'll get this much." Because it's sort of like a consultancy, and you sort of work with them rather than against them. Now, if they go out and get that, brilliant. That's fine. Good for them. But if they don't, what tends to happen is, I'll say, "Can you go and put it on the open market? Don't like dealing with estate agents. Can you borrow any money from family to refurb it? No. Are you in the position to refurb it? No. I don't know anyone. I don't trust builders." And you get them to eliminate the other options. So there's only one option left. This guy. And you put your offer there. And you, you be very, very clear. I offer certainty of completion and speed over time. M. M. And that obviously works from a negotiation perspective. Or I guess when it, the, the circumstances of that vendor to fall into place to that kind of environment. I guess because that's their solution. Their solution is speed. We, I need this. I need the money yesterday. And you're offering that. And that's part of the negotiation. In the same way, you know, if someone wasn't rushing and they want to maximize the asset value, then they can sit on it and wait for the right opportunity. Whereas you bring that certainty and also time to the negotiations.
Yeah, exactly. And like, how, how you make your money is so much more important than how much you make. Um, like, if you're shafting people, it's going to come back in ways that you can't fathom. You're, you're going to need help at.
Some point 100% in the property industry. And if you've got there by shafting loads of people, no one's going to help you. And I don't know anybody who hasn't had a moment where they sat with their head in their hands and be like, "I had a stable job. Why did I come into this business? I'm an idiot. This is so much harder than I thought it would be." And like, they need, they need help. Like, there's been moments where stress has been so intense for me, it's changed my voice because everything that can go wrong, does.
Um, I'll, I'll finish on a, on, because I'm very conscious of the time, I'll finish on this. The story of another absolute catastrophe that happened. So I was sourcing a deal. Uh, I own this now, 12 Y Road, sorry, 26 Y Road, uh, nine units. I bought it from the landlord. Uh, we agreed 400,000. It didn't sell at auction. I, I went and found him, found out who he was and said, "Hey, I'd be interested in this." Uh, we built up a good rapport and he said, "Well, you can start work on it if you like while the sale goes through."
Now, I had a really low bridge on one of my 12 beds. The 12 bed was valued at 865, which is good, right? Really fantastic. Now, the planning use said, "Use is an HMO," but it didn't specify the number of units. Now, this had been used as a 13 bed for years and years and years. And I lowered the number, um, because I wanted to make the units bigger. So we refurbed it. It got valued at 865. We went to, went to the bank and said, "This is what it says on the planning. Is it okay? Can we place it with you? And there's going to be no hurdles?" And they were like, "No worries, absolutely fine." So that was going to release about 3, 400,000, which was enough to buy that one deal, MH, and also refurb it.
So we start working on it because I've got, I've got a build team now. We're stripping out. We take off the roof. Uh, and the vendor's like, "You need to purchase this." And the, the, the bank are just delaying, delaying, delaying, delay. Like they're waiting for a few weeks and then giving us one more question. Waiting for a few weeks, give us one more question. Waiting for a few weeks, give us one more question. Now the vendor says, "Right, listen, I'm going to take it back." Now he, he, he, he's off in Cornwall. He hasn't seen the property. The property has no roof on it because he's told us that we can work on it because we're so, it's been devoured in a big way because you need to, you need to exchange now and and complete. Your ass, I'm pulling out.
So I go to the, go to the solicitors, uh, and say, "Like, let, let's get it done." Really, really push it. The vendor, the, the lender solicitors say, "Yeah, that's good. We're good to complete on Friday. We exchange on the Monday." On the Tuesday, they say, "We're not going to do it because of the planning clause. We want you to get a cert of lawful use for the 12th." So I was like, "So it's got no roof. I haven't got the money to finish it. And the money's in that. And the banks just pulled out. And I've exchanged." So immediately I just go like, "I'm completely distraught. Completely distraught because I'm going to lose 40 grand for the 10%. The vendor's going to think I'm an absolute dog's todger because I've taken off his roof and stripped all the property down. Um, and I'm never going to get sort of lawful use in time." So I was like, "Oh God, this is terrible."
Uh, so 24 hours, I just did nothing. I just did absolutely nothing. I was just in my head. I've like, "I have [ __ ] it. I am [ __ ]." Like, just completely, "Woe is me. Oh, my life's so hard. This is so difficult." Um, and then I had a call from a broker. And she was my broker. She was like, "What are you doing? Go and sort it out. Stop feeling bloody sorry for yourself. You've got time here." And I was like, "Right, let's do it." And I called absolutely flipping everybody. Everybody that I knew. Like, like if you had briefly passed me in the corridor and I said, "Hi, I've got an opportunity for you." Um, and, and I, I nearly raised it a couple of times. And then like, I went from having no money and because of, I think I'm really, really open about mistakes and I think there's a lot of value to be had when people can see you're authentic. I went from having no money to having like 11 people wanting to invest. Having eight prospect, like packages that I could fund it to the point where I was like, "Oh, I might go out and buy some more deals here." And I was like, "No, no, no. I'm not going to do that." Um, and then we got it funded and we bought it cash with with some partners. Uh, and then got it built out. Eventually got it refinanced after we got the cert of lawful use. And I will never use that bank again. Um, because it was just horrible what they did. And again, that was another point where we nearly lost hundreds of thousands of pounds. Yeah. Absolute catastrophe. Property living life on the edge. Oh, it is. There's, there's no, there's no relaxing on a beach. It's you are constantly. Like your capacity for stress when you're in the property business has to exponentially grow. Like where previously I'd be like, "Oh, that's terrible. My life is over." Now it's just another Tuesday because it happens so often. Like there'll be a case. "Oh yeah, we got to spend 30, 40 grand now here because of this. We got to spend 30, 40 grand there because." And it usually it's because of other people's mistakes as well, but it's you that has to carry it and pay for it. That's the really frustrating thing. And you've got to get used to it because it's going to happen over and over and over again. Absolutely. Absolutely.
So to round the episode off then, just very quickly, what bit of advice, perhaps, would you give to somebody that's just starting out in property? Uh, you need to grow slowly. The first deal you need to do has to be one that you source, then maybe get a buy-to-let, then get a buy-to-let that maybe needs a bit of work, then get a buy-to-let that maybe needs an extension, then do your first HMO, then do a bigger HMO, then do maybe a conversion of two a house to two flats. And the rule that I'd like you to impose is, if your portfolio can't pay for the interest on this new deal, the deal's too big for you. You need to be able to have no money from that new purchase or that deal that's in planning or that deal that's undergoing building work and still be solvent. Otherwise, you're going to end up on the, the infamous wall of fame of people who have gone under. It's boring, it's slow, it takes a long time, but it means you're still going to be in the business in 20 years. Yeah, absolutely. I couldn't have said that about myself. It's a marathon, not a sprint, this game. And if you, um, if you embrace that, you're on for a rocky ride. An understatement. Brilliant.
So if people want to get in touch with, uh, yourself or they want to follow the journey, where's the best place for, for that? Uh, I'm always posting on Facebook what I'm doing and stories on Instagram. Uh, I don't really offer too many services for people to get in touch. It's just if you're interested in what I'm doing. Occasionally we do sourcing courses. Uh, but other than that, yeah, you can just have a gander at what we do. Cool. Happy days. Right, cheers. Thanks for having me. I appreciate it. Absolute pleasure. It's been good and lots of value for people, hopefully. Thank you very much for tuning in today. Obviously, again, if you're listening to the audio version, please do leave a review. It helps the podcast. And if you're on YouTube, please do subscribe and like, and we can continue to get amazing guests like Dan. So thanks again for tuning in and we'll see you at the next one. Take care.