Susannah Cole on how to build and manage a multimillion pound property portfolio, even in a pandemic

Q: Susannah, can you give us an introduction of who you are and what you do?

Susannah Cole: So, I'm in Bristol right now. I've been in Property for over a decade, and I really only got into Property to look after my family. I didn't get into here to do social media, podcasts, lives, education, or anything else. I just thought I'd buy some houses, and my kids and I will be safe. And as the government does, they pulled in some legislation.

I'd been flipping family homes every two and a half years, buying damaged houses. You could barely afford to convert it by the neck. I’ve done that three times over the preceding decade. And then 2008, I remember taking the day off from the day the Lehmann brothers collapsed and listening to the radio all day because, as dreadful as it was, it was utterly fascinating in a kind of mind-blowing way.

But also, interesting to see the resilience as we heard doom and gloom at that time. I literally listened to the radio all day, and we were hearing doom and gloom, but then when you look back a decade later, the resilience of people, businesses, Property is pretty cool.

I had and enjoyed a couple of director-level jobs, but I still wanted freedom. I didn't want to be stuck in a train coming back from a corporate meeting in London, thinking this wasn't much fun. So yeah, I would go ahead with Property in. We had the same day refinance theoretically, so I would use my little ￡60,000, buy, I discounted, go again and buy houses. And then, literally as I was starting, they pulled that opportunity, and I decided that the pace at which I'd decided to build a property portfolio was not going to stop.

So, if that's not going to stop, and the obstacles are like there, how do I get around them? Then I raised private finance, and I got ￡600,000 in 14 weeks. I was able to buy a property portfolio and then jumped out of my day job.????????????????

Q: Absolutely. And this was 2008. We're now 12 years on, and it took building this solid foundation of an investment portfolio. It does not happen overnight. Isn't it?

SC: No, it does not. And your cash flow is dead. So, I think it probably took me three and a half years to be officially on the balance sheet of a millionaire. But I was on beans on toast with a car that had a string round the bumper, even for me, who's not massively interested in cars. And I think it probably took till 2014, 15 realistically. So, you know, you're talking six years realistically before it was flowing beautifully. I mean, it was going the whole way. And if I had stopped, it would have flowed, but I kept putting cash back in, and clearly there was a need for money.????????????????????????????????????????

I only ever fundraised cash for me up to a million Quid, because I had this sort of paranoia that what if I can't pay it back? I have to actually go to a million. And that is on direct loans - at anything above that scared me. So, and then you would move to flipping, but joint ventures, but again, there's risk in that. Isn't there a risk? Does it sell? Does it not???????????

Q: But when you are talking about your car and eating beans on toast, you had two young children at home as well. Didn't you? So how old were they?

SC: When I started, they were 10 and 12. So they were out of a toddler stage, and they would just be in the "I'm gonna spend time with my friend's stage". And as long as you've made sure, they got there, and you picked them up. So yeah, I would make sure Sundays were our day. And then on Saturdays, they would like playing with their friends too.

Q: So, do you feel that made a lasting impression on them now that they've seen you go through this where you were driving this old car, and now you've come out on the other side? What do you think it is as far as shaping them?? ? ? ? ? ? ? ? ???????????

SC: It's about questioning. Where do people's memories start? So, what I remember from this journey was, I'm not trying to put people off, but in the early days, extreme tiredness, high risk and constant kind of being careful in a cash flow, like a bit over the antenna to keep it moving. I was all being on my toes. Okay. I remembered it was not easy in the early days. Then my son, who's now 23 and my daughter's 27. Both of them, by the way, have started their businesses, which I find really interesting.

My son, about two years ago, stepped down. He's got a solid Scottish accent, sat down at the kitchen table and said, "Mum, now I know I was born with a silver spoon in my mouth." At this point, I nearly spat out my teeth because he doesn't remember how difficult it was. And he's like, "I'm not taking anything for granted, Mama - I want you to know that."? And so, we had the whole conversation, which said, "Whoa, that isn't my recollection of that period". Because, of course, at 23, he's like, "Oh, my mom's got a shed load of houses, but mama, I want you to know that I'm not taking it for granted."

With the internet, they're now going back to maybe the seventies, eighties, childhoods that we had in a way. And there's nothing particularly wrong about that, but they are what they remember. It'll be interesting to see what your children remember in 10 years. They probably won't even remember some of the difficulties in the last couple of years.

Q:? Do you think we’ll likely have another 2008 crash at some point?????????????????????????????????????

SC: I think it's likely, but before we used the word crash, it was a highly emotive word. I took that day off as a holiday to listen to the radio because I was so fascinated. And then, I read the FT Weekends, which I think is a very well-informed paper. You can read economic trends from the FT. Let's not use the word crash as it brings fear. Let's just look at it. There'll be a change in demand and supply. So, what does that mean? And although that might mean across the UK different things, what will it mean for your local area????

So yes, identify that there will be a reduction of people having jobs and buying houses. Chances are, the people who have probably lost their jobs have more of the lower-skilled jobs. I don't mean that rudely, but waiters, waitresses, bar staff, you know, that they're in a tough place. Are they going to be buying houses anytime soon? No. But the people with higher-level skills are more challenging to enter jobs because they've had to be highly skilled and are likely to remain in demand. So again, how many redundancies do we see in those kinds of sectors? You might see some in legal sectors, for example.?????????

So first off, let's break it down to a granular level and then sit with customers and say if there's not going to be enough people buying or are there going to be more people renting? Okay - negative and positive for Property investors. And then secondly, what happened in your local area? So, I have a great friend of mine who's got three portfolios. One of those three is in the Northern area stoke. And that portfolio took about ten years to recover from the crash. Whereas the other portfolios really were hardly impacted at all. And for me in Bristol, what happened is it kind of just went frozen for three years.

Prices didn't really drop in Bristol. They just stayed very level. And then approximately around 2013, they started to climb again, and then they ramped up quickly.

Q: If you were going to start your property journey again with the current climate, what would you do differently?

SC: Oh well, it's hard to say because what you would do differently, knowing that you would succeed is different to what you do differently - no, you're taking a big risk. So, I agreed with rules that I only have borrowed, million-pound private finance for safety’s sake, and then any other lending went on to joint ventures. And that was because, if it went wrong, it could go horribly wrong. I would do differently now if I knew I could succeed by borrowing more money privately, but I don't think you should. I think you should always set a cap because beyond that; there is a worry, it might go wrong for you. And then you can't recover from it. What I'd probably do differently, I went in to deal packaging first, and then I did a joint venture flip. ? ? ? ???????????????????????????????????????????????

I did solo flips, and they built a property portfolio. I would probably follow the bank advice or the head of banking. I went to him and he said, "if you can find discounted deals, they were too expensive, I would tell you to buy and sell, so you have a major cash spot and then just buy for cash. Being head of Property banking, I didn't listen to him because my emotions where I wanted to own bricks and mortar. So, I then bought lots more properties, but I only own the slither of them instead of possessing all of them.??????????????????????

And now a decade later, I'm paying off houses, and I've got properties, unencumbered - and that's my goal.

Q: Are you dealing more or less with private investors now that you are paying down some of the properties and owning unencumbered? ? ? ? ? ???????????????????????????????????

SC: Yeah, I think I paid off my last private investor possibly two years ago, and it was like a dizzy feeling. I still get approached a lot, which is lovely, but, the first house I paid off was a really dizzy feeling. I went in, did the whole thing, came out in the bank and then kind of walked on the pavement. So, the temptation in this second change in economic circumstances, just to go back to big investors, isn't it??????????????????????????????????????

It's exciting and I love doing deals. I love doing Property, and I like working with people. I will only work with investors if I really like them as human beings. It was almost more fun that it was just a little cherry on top first rather than previous. It was a real business focus, and it was a natural system and procedure within human relationships - if you see what I mean.

Q: Should we buy now or wait?? ???????????????????????

SC: Always buy now. But don't buy irresponsibly. Always buy 25 to 33% discount with plan A, maybe flipping; plan B being single at ASD; plan C, being an HMO; plan D being service accommodation; plan E being a student less.

So, if any of those plans go wrong, which never to be at some point, some of them will, you're still really nicely fluid - but always buy. And this is the thing; I think some of the questions that I get are, should we buy now or wait? And the answer is to buy now because you are always able to find a discounted deal.?????????

Q: What are your thoughts on Service Accommodation? ? ? ? ???????????

SC: Well, I've done service accommodation since 2009. And it's not because I was ahead of the game, but because I had to flip property that was too nice for tenants. I mean, I respect my tenants, but this was too nice for tenants. So, I was like, well - I still want to sell it. I still own it now, but at the time, I wanted to sell it. I’m only going to put in the short-term renting, not somebody is going to live in it and you know, wear and tear. And I think service accommodation can be fantastic. I believe that you can outsource it, but you're all about the cleaner if you do outsource it. You want to know how the housekeeper works or not all of their flashy bling shiny shoes where they're trying to sell you their services. So, and then at the moment, obviously in service accommodation, people are not allowed to move to a second place, because of this second lot like to say, but that you are able then to fill it with a contractors' NHS.

So again, this is cracking for the sun that works with me at the moment. And in the first lockdown that happened, I was dreadfully worried about them because they do a big service accommodation portfolio, and they were completely filled. And I had extra demand for NHS workers and contractors. So as long as you have fluidity, it works. It was very that a good friend of mine had texted me to say they're 100% full but very late. Looking back, it was an amazing month, but very late at the moment. So, I think service accommodation means you have to be nimble at the moment.

Q: Is it Airbnb, booking.com or other means?

SC: Yeah. Airbnb, booking.com. Booking.com was our best one - way better than Airbnb.?????????????????????????????????????????????????

Q: When you look for deals, what sort of yield are you looking at? ? ???????????????????????

SC: I think 10% is the minimum. I think it's fair. Really, 17 to 23 for my HMOs. And if I did today's values, I wouldn't be on big yields as most of mine have doubled and some have tripled in the last decade.

Q: What is your advice for a person who wants to start a venture in property investment and build a portfolio, especially now during these COVID-19 lockdown periods? Would you mind highlighting the pros and cons?

SC: I think you should look for the background and socioeconomic areas. For example, in London and Bristol - both locations, despite being hit by COVID-19, we’ll continue to have vital jobs. And it’s not your tenant; the rent is the job. If a tenant were to lose their job, they would get another job really quickly. During this time, I only had one tenant go into housing benefits. I don’t normally have any housing benefit tenants. Usually, they are working professionals and others who lost their jobs could switch out and get other jobs. So, for me, look for the background and socioeconomic area. Is there enough of a broad set of industries so that people can replace a job if they lose it through any circumstance? Because if yes, then your rent is paid and you should buy it.

Q: What is the best cash flow gearing level?

SC: My shorter-term goal is down to 40 then to zero, but I think there are three stages. And then there's the acquisition stage, where you gear up. I mean, at one point, I was 85% longer, and I'm going to tell you that I was terrified. It looked like I wasn't in trouble, but I was internally terrified by that loan's value.

On the gearing level, the formal equation you want is age plus loan to value less than a hundred. So whenever your age is, if you're only 25, then your loan to value is 75. If you're 30, your loan to value should be 70. If it's 35, your loan to value is down to 65. But stage one is the acquisition; then stage two is which is to pay off. And then for me, stage three is buying with cash. So as much as I'm beat on the belief and tempted to jump into this marketplace like random was suggesting and purchase blocks of 20 flats, I'm sticking to my original plan - which is I'm still in stage two, which has to pay off because then I can go back to auction and buy with cash.

They say failing fast and failing early is a useful one. And it's quite helpful to run other businesses in the past. You know, I ran fair trade businesses years ago. And I remember the first time I found out an employee was I had five shops and an employee was stealing from me, and I cried all the way home. Then I called the police and had them charged with theft because, sorry, it must be black and white, but I cried about that human relationship all the way home. And I think, when you grow our business, so on the one hand with Property, you've got deals.

Q: How to scale without tipping over; it's about just keeping going with the momentum when you get in an upward trajectory?

SC: I think it is also checking and balancing. And we as entrepreneurs will like creating, developing and moving forward, but I guess when I scaled, you could see some of the creeks; I wasn't doing enough checking and balancing. We have a KPI (Key Performance Indicators) dashboard, and we check it. But sometimes you need to double-check a bit of a layer underneath, and some almost hear what's being said, zeitgeisty, and think, "Ooh, am I picking up? And something, is it my gut?"

Of course, as an entrepreneur, I don't want to waste any time, and I want to go and do things. Still, sometimes it's almost accompanying somebody on their day job almost to see what bits they're missing out that maybe, they don't realize, or just to make you feel good, how could you miss it litigate for this? But this is when you scale a bit too fast.

We built a house once; it was a joint venture property, and after the person who is a project manager who had left my business did not discover that the surveyor had the 10-year warranty. After three days of terrifying moments, we resolved it, we dug some inspection holes, and then everything went well, but it could have been a disaster because you wouldn't think to check that it's one of them didn't want to have the instructions, but sometimes it's almost, maybe it's like, if you're a factory, you have to almost take a sample. Don't you?? And I think if we look back, I put in a relatively inexperienced project manager and I should have sampled more frequently really rather than just listening to the other.

Q: So, with building houses, is this something that you've done more of, or that was your first and last?

SC: That was the first one we've done. And I am definitely going to do it again, but I'm going to do it when I have all the cash. Then I've got planning permission for multiple houses. I've done many houses to flats, I've done HMOs, but I just sell the garden for some five grand that could have built a house sometime at the moment because I plan to pay down debt. It is something I'm going to do. But I'm grateful for the bank funding I've had, but not necessarily when I'm so lean into it. You know, in the early days, you're so lean, banks can really have you. And you know, it's the deal you took, but I've seen some talented people in the 2008 recession and go bust.

For me, I'm finally ten years later going to listen to advice, which is to have cash in a bank and then build anything with money. So, I have a vast development. And as I observed, the bigger guys go bust sometimes who are talented. And I just thought, you know what, I'm going to build this property portfolio, which is a safe level. And then we've got loads of non-sleep as it's all of the people who are just going for it.

Q: Do you pay one property off completely or pay chunks off each property????????????????????????

SC: And I still want to stay at my level two at the moment, which is paying down houses. Then I use it to gain myself. And then I'll go to level three, which is buying, building, developing but with cash. So, I can do it at my own pace and without a bank necessarily pulling at the last minute for me. And this may not be the logical economic way of doing it, but the biggest brain I have to get in, the biggest barrier I have to overcome is this brain. What should theoretically be? I pay a little bit in each house, but I can't do that because I'm an all-or-nothing else. I have to go right or do a road; the mortgage is 108 to two grand. I am going for it. Then I've got castle road, and that's 250. And so, I'm doing one Property at a time because that's how my brain works. And that's how I'm motivated.

One of the great things about Property is that you can borrow money to buy and flip assets. It's always staying very light on your feet to own the difficulty that sometimes banks can present to you. You know, my office, a code for a million quid.? And I've been a banker with them for ten years and four days before I was buying it. They're like, "Oh, by the way, we've had to change the strategy. We can't fund your office anymore because you're a property developer."

I’m just constantly aware that as banks give you money for interest, there is no kindness. So, they're not my friends, and we all need to try and mitigate that risk as well.

Q: How do you protect yourself against negative equity, and what is your strategy to avoid the issue?????

SC: Isn't it buying discounted? I think so. The only property that I didn't buy discounted was a property up in Glasgow where my son went to college. I think I've got a grand and a half discount - 1.5 or 1.7 percent. I believe your greatest difficulty is not as negative equity as growing your biggest difficulties is cash flow. Isn't it? I mean, I want 38 pence in the bank and about a ￡9000 payroll at the time. You know, I paid everybody, but it was pretty tough. It was late twice and communicated because you had things that went wrong, but it's cash flow, isn't it? That's the tough one in the middle of it.

Q: You mentioned KPI.? What sort of KPIs do you have on that dashboard?

SC: We went into the different departments, the development department, which is typically the renovation and flipping. Then we don't do deal sourcing anymore, but we used to do deal packaging.? Lettings - the education side is in head office. I've had a reasonably decent portfolio, and I only want five repairs outstanding at the end of the month. I like the repairs over the year to be less than 10% of the rent roll, but it has to be zero. I don't accept void rates. We allow one day in between the tenant moving out, and a tenant moving in. We will allow one day of a void. I've switched a lot to student lets, even this pandemic, which is a great way to go. So, I want five viewings before a property is taken. Otherwise, there's probably something wrong with the property, and I like less than 24 hours between tenants giving notice before the properties are advertised.??????????????

So, it's quite tight management. Now, in the past, and talking about scaling has fallen, I wonder whether you're employing young people who are dealing with their peer group is the quality of inspections. And because if we don't want to have a fight with a tenant, the property has to stay high. What we're doing now is bringing in a third party to do inspections to keep the property standard really high.

Q: Yeah. And that's a bit of excellent advice. What about on the renovation side?

SC: Rent renovations. It's got to be a 20% mark-up, so we were looking to make a 20% after all costs, but before tax is my simple one, and then the other ones were all about speed effectively. So first of all, the KPI's, how many are we going to do in a year and make sure I target buying a third more, getting an agreed or third more deals than actually flips I want to deliver. I want to know my total profit that wouldn't make that year, 20% mark-up as the average in standard, so times that total profit by five, that's basically the kind of value of the properties you need to be buying to get 20% mark-up. And then I measure speed. So, if we buy them on a Friday at the latest, the men need to be renovated on Monday. And then what I'm looking for is the speed of purchase to renovation and speed of marketing, to sell. And generally, on a flipping strategy, four weeks at selling a specific price; two weeks at that price and turning it into a renter. I think that we've talked a little about cash and that being the thing that can occasionally trip you up.

If you've got a property that is being renovated that costs you money, it's empty. If you go to a vacant property, it's either going to sell it, or if it's not going to be sold within eight weeks, get it rented and keep it. And then, later on, you'd be so glad that you saved it.

Q: What's your thought on whether or not to select a property management company or manage the property yourself? How do you choose a good management company if you decide on that route?

SC: By the way, I didn't even mention bad debt because I don't do bad debt. So, good management company - first, what's your bad debt situation? Because you need to know that they manage bad debt. Second, what's your void position? Ask to see their system because they will do reporting and maybe you will see the whole system. And then also see the examples of the exact types of Property you do, to make sure that they're specialists in your kind of Property. So bad debt and voids, meaning who can pay first, who goes in, and then who is being managed correctly for payment. Those were the two questions I'd be asking them. And then for us, we've always mentioned in-house so far. We introduced Arthur Online about a year ago. Going back to your question about scaling, so at one point I had a breaking point of ￡33,000 a month, which is fairly high, and again didn't engender sleep sometimes. And what I'm now looking at is Automate, Outsource, then Delegate.

And so, we've introduced Arthur Online, a lot of repetitive tasks are now automated. And then I found it really good. We still manage in-house, and then we've got people in the business who are very good with people who can bring the software to a more focused side. Delegation and employment it's the most expensive. You and I have both recognized in our businesses - as you scale, it's the one that you've got to trust and verify like my joyful moment of realizing that the foundations of a house, at an email that had been deleted, and the job had not been done - that was probably my worst moment in Property, so it had that been automation.

Q: What are the pros and cons of using a main contractor in the future?

SC: Suppose you look at any big developers, you know, a big house by companies that they outsource. In that case, they categorize, and then they're corralling the risk the whole time and the responsibility in why you need to get this job done before you get paid. So, I think that makes sense as long as you know what your skills will be that you are bringing to the table, then some of the cons would be if the person doesn't do a great job with the company. And I think the other con is just to make sure that's a healthy company. You know, always check out the insurances, liabilities, any cases against them, and their previous profit loss to make sure they're healthy enough so you can withstand the cash flow agreement you and they have together.

One of the mistakes I made was to try and grow my smaller builders into more prominent builders. You know, that kind of classic, I want somebody who is really strong at doing this kind of ￡30,000 to ￡70,000 renovation is not strong during a million renovation. I found that out to my cost and their costs actually. So, to make sure that you've got the right piece as well - this is a normal process for them.

Q: One question I get asked all the time and I'm sure you do as well is - how would you start in Property with ￡50,000 in the current climate?

SC: Oh my God. I can't get rid of my basic nature. I wanted it to do everything yesterday. And that's the annoying thing about it. What I should tell you is buy and sell, buy and sell, buy and sell and then when you got major cash to buy for cash, but I'd be so keen to get started because I personally wanted to own a portfolio. After all, that, to me, represents safety from a family. 50Ks, depending on where you are in the country, may or may not buy your house. How will I do it is I would actually put the 50K in the bank, and then I would run two strategies:

I would run a flipping strategy, a joint venture flipping process with investors, with a lot of research, and all was the plan A, B & C. So, they put the money in to make sure that they're compliant. You do all the work; you split the profit 50/50, right? And so that's my first strategy so that you're generating more cash. And then as soon as you got very good at finding discounted deals, I had also in the early, so bear in mind, you've still got your cash. That there I'd be borrowing money from investors buying refurbing, refinancing and paying back. Now 50% of my properties, I've got all the cashback out in the 50% I didn't. This is why you are running a flipping strategy as well to have to keep the cash coming forward.

And do you know why you get your 50K cash in the bank working capital, but more importantly, because it's extra, you know, if I can't pay you back fully from refinancing this property, I still have 50K in the bank – and it sounds odd. Doesn't it keep your money? And if I was investing in somebody I had met, I'd much rather know that they had a bit of safety. If I wanted to get my money back in, maybe the project couldn't give me all the cashback. So that's what I'd do is the way of flipping, but joint ventures and borrowing, buying, discounted borrowing the money refinancing and paying them back out.

Q: What is your definition and examples of bad debt and good debt??????????????????????????????????????

SC: Oh, this is classic rich dad, poor dad that indeed - good debt pays the bills. So good debt, you borrow, and it buys an asset that delivers all the bills, including all of the debt, etc.

So far, for me, bad debt is when you are taking out debt for something that doesn't pay off, you know, like how people have beautiful cars, but they lease them. Even though people say having a car and lease is a really sensible financial equation. I'm old school. I don't get that. Unless that car is paying you for the lease, why are you doing it? So, I like toys with cash. And then gearing is for investment with the kind of rules that you and I were talking about.

Q: Can you recommend any book that describes the experiences of property investors/entrepreneurs??????????????????????????????????????

SC: I like reading a lot. When I had my particularly difficult time, my PDT, I read books like every night, and the books I read at the time were much more about entrepreneurs' journeys. So, it sounds terrible. Because I don't enjoy when other people have bad times, but when I was reading that Jo Malone was having a terrible time in a business, but she came out on top, I was like, "Oh, thank God." In my difficult time, I found reading entrepreneurs' stories inspiring because that difficult time was causing sleeplessness. And it enabled me to normalize it within the entrepreneurial world and go to every single one.

I found biographies excellent when I was having a difficult time. The ones that are my classic are: The 7 Habits of Highly Effective People by Stephen Covey. And when I heard he died in a cycling accident, I felt like a member of my family had died because I had held on to that book so strongly during the early days of running my property business; Then, obviously, the Rich Dad, Poor Dad by Robert Kiyosaki and Sharon Lechter - that one is amazing; The E-Myth by Michael Gerber is also great. And then just any book around Property or any of the current entrepreneurialism. So, I think that I gave my mentees a 78 list of books.

Q: You are prolific on social media. What is your purpose, what do you get out of it and what do you bring to your social followers?

SC: Well, there's a business purpose and a human purpose. The business purpose is clearly for a brand and an establishment of values, the thought processes of that credibility, you know the kind of decency of the business. And I've created lots of really high-quality pieces of online education. I mean, people tend to enjoy my mentioned programs because I'm quite detailed. I do webinars, I've created academies. They have been good to me. It's effective to highlight that these are for sale and they're good for you. So, people will buy them. We do webinars a bit that are fun, you know, I'll do it. And it's live, and I do a master class and then we do Q and A, and then people join the Academy. So yes, it's got a commercial intent to run a profitable, high-quality business, which then helps me pay down my properties, you know? We show credibility. We do showcase studies. We talked about things going right as well as wrong; we do kind of a mix of motivation stuff. Obviously, we have other people saying what they think is the most. And, then we talk about what we believe that somebody would benefit from it. But I also started a YouTube channel a long time ago. We've had over a million views, and the reason I started it, well, I always had an eye to digital. I always thought it was going to be a thing that was going to come.

Q: If people want to get in contact with you, Susannah, what's the best place?

SC: Well, if they want to just get in and check out some videos, go to YouTube: The Good Property Company or Instagram: @susannahcoleuk, or send us an e-mail the classic [email protected]???????????