How to become professional investors

CASE STUDY #6 - DEBBIE & AMANDA

  • Target was £100,000 cashflow. Achieved £350,187 cashflow.
  • Target was a £2million portfolio. Achieved £2.32million.
  • £500,000 in equity.
  • ​Bought and refurbished 9 HMOs. Added 49 rooms.
  • ​Raised £657,500 investor funds.
It is customary that at the final workshop of each Mastermind Programme, some of the departing Masterminders get up on stage and talk about their experiences and results. Here is Debbie and Amanda's contribution...

WATCH DEBBIE & AMANDA'S CASE STUDY

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TRANSCRIPT AND SLIDES

SIMON: Our next speakers are going to come and tell you about their journey and what they've done. In fact, we get a lot of people who come on the program on their own, as Chris did and we have people who come in with a family member, relationship partner, business partner, etc and our two main speakers, one's going to do the main speaking, having done just that. So, please put your hands together for Debra Williams and Amanda Kerrison.

DEBRA: Thanks Simon. Thanks very much Simon and thank you for inviting us to come up and share our journey. Great speech, Chris. I know you're really nervous and you came across really really well. I'm Debbie. I'm presenting on behalf of myself and Amanda, my amazing business partner. This has been our journey. Our background is we come from a corporate background. I'm a marketing consultant in IT and telecoms and Amanda comes from an IT project management background.
The reason why we decided to do Mastermind, we took a sabbatical in 2007 and went overseas to do charity work and when we came back and started working in the corporate environment we became very disillusioned very quickly with the politics and everyone that was going on, that we actually decided that we needed to make a change.

I'd also lost my parents very young in life and decided that life was too short and we needed to do something about it. So, there's three primary reasons why we came on Mastermind. The first was for personal freedom and freedom of choice to make the decisions that were right for us in our lives. Secondly was to get our dream home at some point overseas and thirdly and most passionately was to get back into charity work and continue the work that we'd been doing in Africa and Asia.
The original target that we actually gave ourselves was £100,000 in cashflow and £2million as a target asset. So, we doubled the original target because there were two of us and that's what we were really focusing on, and I just want to pull out a couple of points on the approach that we actually took. First of all, we absolutely did was Simon said.

We've heard about and learned about a great deal of amazing strategies and we started out targeting the motivated sellers adverts, etc, and we very quickly came to the conclusion that that wasn't something that was working well for us in terms of how the leads were coming through. So, we changed to developing our relationships with the state agents and all of our deals have come through that channel. We've also focused on a value ad strategy and very early on in the program we learned very quickly how to use other people's money and we started out with cash loans and moved very quickly onto JV partnerships which we now have a number of JV partners who are investing in further properties with us. Our core approach has been to find three to four bed houses which have attached garages and converting the garage either into a lounge or a double en-suite bedroom and using the additional reception rooms to convert them into bedrooms as well.

So, we've taken three, four bed properties and converted them into six bed HMOs which has given us a very good profit in terms of cashflow. The other thing that we identified in the market that was a gap in terms of originally we were going to focus on the student HMOs and very quickly we realized that actually there was a gap in the market for young professionals and mature students who were looking for lovely homes but didn't necessarily have the deposit and capital to buy their own. We focus absolutely on a minimum 20% ROI. We have a business model now where we can literally put in the price of the property, the number of rooms and within 15 minutes we know whether it's going to give us the right ROI or not. So, we've got very quick at deciding whether there's a business case there or not. We also sent out HMO letters. We had a great response on that and we've got a couple of option deals that we're looking at, but there's two key things that really helped us in our success.

First of all, I decided to give up my consulting in December of the course and put a very lucrative business on hold to concentrate on property and the portfolio. So, it was a big opportunity cost there to us but it was absolutely the right decision. The other key thing is we worked out very quickly what our respective strengths and weaknesses were and we have two distinct roles in the business and we only invest in two areas. So, I'm responsible for the JV partner sales and marketing and Amanda is responsible for deal sourcing and all of the re-refurbishments, and we only invest in West London and we only invest in Norwich, two areas that we know really really well and that's absolutely where we're focusing.
This is a very busy slide but what I just wanted to highlight to you is since being on the course, we've bought nine properties which equals 49 rooms. I talked about an average of 20%. We've come in at 24.7% average ROI.

Through the developments that we've done we've added £500,000 in value and our current valuation is two point three, two million. We have an annual net rental now which is excluding all costs, building insurance, utilities, maintenance costs, and we have a recurring annual net revenue now per annum of just over £130,000. In the time that we've done the, been on the course we've also done two developments on our own properties. We've done some paid consultancy in property and we've also earned money through our letting and rental business. So, overall our result is £2.3million in assets and over £350,000 in cash.

Here's an example of some of the properties that we've bought in London and in Norwich:
Just a couple of case studies, this was the very first property that we bought, in Norwich:
£177,000, we invested £55,000 converting it into a six bed property. It gave us a net monthly rental profit of £1,465 and a 32% return on investment. Our first conversion of the garage into an en-suite bedroom. We actually partnered with a foster care home and we did a three year lease with them to support them on supported housing for 16 to 18 year olds. We dropped our profit and actually signed a three year lease, still giving us a 28% ROI. The children are really happy. They've been in there for nine months and we have two investors lined up to buy them two more homes to continue their growth.
The second one is also a property that we did in Norwich. We got it 20% below market value. We totally reconfigured this property into a six bed, bedroom house with two lounges. It's fully let to professionals and it's earning us an ROI just under 40%. We're looking at actually putting a commercial loan on this and taking all of our money back out.
We've come up with what we've called a cookie cutter approach. We've fine tuned all of our systems and processes and with these three to four bed properties and converting the garage this is an example of that whereby here is the original lounge. This is where we started to put in a en-suite. This is the finished en-suite here. We've also put in a communal toilet here for the rest of the house and this is the double bedroom. We've rent this room out for 515 pounds to a professional and this overall property is returning us just under 25% in a 50/50 joint venture. Through our approach of doing this very quickly now because we've fine tuned our approach, we've managed to pick up the keys, completely re-furb the property in four weeks and we had the first tenant move in the day after the re-furb finished.
This was the original garage and this is now the new lounge. This property - from picking up the keys to fully tenanting and earning that kind of rental - happened in six weeks.
During our time, the most time that we spent, we could've done more deals but we decided to really focus on systems and processes. We've set up two businesses in this time really looking at rights from the investors side of the equation, my property angels. We've set up our own lettings and management company through SMART Lettings UK which stands for smart modern affordable rooms to let focusing on the professional market. We've become accredited land ladies. We're part of The Property Ombudsman scheme and from a systems and process point of view we have a very developed investor program, right from a full engagement program with them, collaterals we give them on the process, deeds of trusts, etc. We have a website which gives all of the information about who we are and what we offer and we have an investor's portal where we share all of the information with them.

On the letting side, we have templated all of our processes. We have a lettings manager who works with us now. We have inventory clerks, a power team, do all of the re-refurbishments and project management and all of that is built into back end systems. So, we automatically produce financial statements every month for our investors which is linked into our accounts and we have a very sophisticated system now.
What does the future look like? We've got a couple of lease options that came from the HMO letters that we're exploring. We're also looking at commercial lending. Our JV investor portfolio is expanding and we're also looking at bringing on board a new service package for landlords and investors in terms of those back end systems.
The top tips that I would say that we have taken onboard is first of all absolutely focus. Become masters in one or two strategies and really earn your success through that.

Then look at the other strategies that you learn on the program. Otherwise you'll be totally overwhelmed. Secondly, take action and just do it. Overcome your fear of taking that first step and you'll see that actually you'll learn so much like we have from all of our mistakes to actually go on and refine the steps that we've taken. Don't try and do it all yourself. We started out thinking that. We now have teams of people around us who are far better at doing some of the things that we're not good at and they're helping us to become successful like we're helping them. Don't give up and believe in yourself. Persistence, we've heard about it. That's really important. From our perspective, start systemizing early. Absolutely sexy to get loads of deals but you do have to convert those into revenue at the end of the day.

So, how did we actually do?
Our target was £100,000. We did £350,000 with a recurring net profit of £130,000. We targeted £2 million. We just crept over that to £2.3 million. We added lots of rooms, nine HMOs. We raised a lot of investor funds and in the last day actually the investor part has just gone up to just under a million because one of our investors has just decided to do two more properties with us and we've just had a cash loan of 300 thousand given to us as well. The other thing going back to our original dream of freedom, lots of you will know that we've been at YB for a few times and we've managed to fit in all in all I think seven holidays this year. We've just booked to go Hawaii in November. So, we are living our dream, absolutely, but one of the most important things for us is charity and we are giving back and since we've been on the course we've managed to earn profit personally that we're now investing in really really meaningful charity projects.

We've invested in Centrepoint which provides homes for young homeless people between 16 and 25. We're now sponsoring two rooms in the Centrepoint hostel in London where they get not only a safe home but also life coaching, training, and helping them to get back on track. We've supported a water well in Africa for a community and a water pump to serve that village with constant water, and we continue to support the foster care home that I mentioned. We're really excited about being able to provide them with two more homes and so, we're really pleased that we could get back into the charity to give back, because that's what's really important to us, to allow us to have the lifestyle to be able to free up our time to give back and I think that equation works really really well for us.
We want to thank everybody, which I think Chris did extremely well in summarizing that but also we both want to thank everybody in the room that has support us, motivated us, and thank you in particular also to our investors because through you believing in us and investing in us we are now actively giving back to people that really need the help. Thanks for a great year. Really looking forward to working with you all carrying on and we've made some brilliant friends and from both of us, we're totally delighted. Thanks very much.

A NOTE FROM SIMON ZUTSHI

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