I (Jayne) was intrigued to speak to Joanne Sainsbury of Silkwood Properties a few weeks ago when working on a feature on people new to property investing.
Technically speaking, Joanne considers herself a property newbie. And while that is true because this is the first time that she has fully embraced the potential of using creative strategies, she did in fact made some tentative steps into the world of property investing way back at the end of the 90s.
At that point, she bought two flats, rented them out … and that was that. She stopped. It’s a scenario that is familiar to lots and lots of people. You buy one or two flats or houses to rent out, then either life takes over and you simply don’t have the time to put into it, or you decide that being a landlord is not for you right now. Or maybe you only intended to hold a couple of investment properties to supplement your income or support your retirement but have since begun to wonder if it’s worth buying more.
So if not entirely a stranger to property, why does Joanne consider herself a newbie now?
The answer lies in what she has learned during an intensive period of training that started at the end of 2019. She confesses that she had doubts at first because of her age – “I always seemed to be the oldest person in the room at any property event!” – but once she started, she soaked it all up and “got it” right away.
That led to a period of shiny penny syndrome when she was attracted to all sorts of strategies like blocks of flats, title-splitting and commercial conversions amongst (several) others. However, a clear objective to create cash flow helped her focus.
To achieve her goal she settled on the HMO strategy. “When I started, I was so naïve – I thought HMOs were only for students,” she says. But the course opened her eyes to the potential of property, and what she learned was completely new to her. After discovering that working and professional people, not just students, really do want or need to live in HMOs, she got to work and found her first deal – a former Victorian bakery that she converted into a five-bedroom HMO. The full story of the conversion of The Old Bakery is in the February 2021 issue, where Joanne also talks through the figures in detail. (You can subscribe here to read this and explore several other beginner stories and case studies in the magazine or on the YPN app.)
New to property investing but not to business
As she had worked in and owned retail businesses throughout her professional life, that experience helped when transitioning to operating in a different sector. Nevertheless, it is, she soon recognised, crucial to build a network of people specific to the sector. That includes professionals, as the company structure advised by the accountant who worked on her shops before she sold them was not the correct structure for the new property company she was setting up.
The deal and the project weren’t without challenges. Anyone in property will tell you that encountering problems is when you really start to learn; anything you are taught on a course is just theory until you put it into practice. Perhaps because the stakes are so high, a lot of newbies make the mistake of trying to find the “perfect” deal before they commit to buying. This can be counterproductive because you can get stuck before you start.
Is there such a thing as the perfect deal? Probably not, as each one will bring challenges. It’s only by taking the plunge and getting started that you gain confidence and momentum. Everyone learns as they go along and even the most experienced property investor or developer who has been in the game for years will tell you about the new challenges they ran into on their latest project.
What the intensive training has done for Joanne, along with providing her with a raft of knowledge and tools to work with, is to give her confidence to deal with issues as they crop up. She has been through a tremendous learning curve but has also built up a network of people and mentors she can turn to when she has a question.
In addition, it has given her the confidence to actually go out and apply the knowledge. Working with a debt investor for the first time has opened up even more possibilities in the scope of the projects she can take on, and therefore the speed with which she can move towards her goal.
One of the initial attractions of investing in property for many people is the promise of passive income. Joanne warns though that, particularly at the beginning when you’re building an HMO portfolio, it is not passive. Many landlords start out by managing their properties themselves before handing them over to a lettings agent, and this is the route Joanne has chosen. For now at least. Harking back to her days in the retail sector, she likes to fully understand a process before handing it over to someone else. Definitely a sound approach for measured growth.
And measured growth is what Joanne is aiming for. She has a very clear, concise five-year plan, at which point she will hand the HMO portfolio over to an agent or manager and reap the rewards of five years’ work to build it up. Her income then will be much more passive.
It’s true that plenty of landlords outsource tenant-finding and lettings management right from the beginning, indeed are often encouraged to do so. This is a lot more straightforward for single let properties than it is for HMOs, as it can be harder to find an agent who deals with house-share tenants outside of the student sector. With management fees averaging 10-12%, maybe more for house-shares, outsourcing this task also eats into the cash flow so in the early days it can be a matter of personal choice, of time vs money.
Joanne’s enthusiasm for property is engaging and her story is an inspiration for anyone thinking about investing in property. She’s also living proof that you don’t have to be young to be a newbie! What matters is being open to learning, applying yourself and simply getting on with it.
Joanne is a guest on episode 61 of Your Property Podcast, where she talks to Michelle Cairns about her experience of being a second time beginner and starting to build an HMO portfolio during the Covid-19 pandemic.
In addition, you can watch Joanne chatting with Ant Lyons about the importance of having a clear plan on this video …