Like Clockwork

Helen  (Teaser)

I always say it's easier to get divorced than it is to get out of a bad property investment. And unless somebody is a really seasoned investor, they don't know what questions to ask so they won't see what they're missing. And that's probably the most expensive mistake that I see investors make is not doing their due diligence.

Narrator  

You're listening to Expat Property Story, a podcast in which I share my story to smooth the way for you to have your own Expat Property Story.

Expat Property-Guy  

Hello there, and welcome to episode seven. That was Helen Godbold-Eade, the founder of Like Clockwork, a specialist in the property portfolio sector. As expats, we are frequently the target of property agents who are so skilled at marketing that they could sell absolutely anything. Many investors don't realise this until it's too late. And that's when they turn to Like Clockwork. Stay tuned for this week's episode as Helen advises us the best ways for expats to build a property portfolio and reveal some of the red flags to look out for when carrying out due diligence on potential investments. In the last episode, I revealed how my own due diligence had uncovered a railway line at the end of the garden of a house we had been offered by a property sourcing agent back in 2017. This was the deal that was proposed after the collapse of the first deal, a flat in Manchester that had been mistakenly sold to two different investors, me being one of the two. We said no to the second deal, and a month later, the agent returned with a third offering. It was another new development. This time in a town on the outskirts of Leeds, with good transport links, a rising population and lots of employment opportunities. The developer was well known. And everything pointed towards this being a sound investment, it seemed like it would be third time lucky. So, we pulled the trigger and reserved one of the properties after the Manchester debacle, the sales agent had told us that we would be at the front of the queue for the next property here. When I told him which house we wanted to buy. He told me that it was already gone. Another red flag. I wasn't 100% convinced by our second choice, so I asked for an hour to check with my wife. But he said no, I needed to make the decision immediately. Now the 2020 to me would have left it there and recognised that the agent was working on my fear of missing out as today's guest Helen will expand on later. But by this time, it was September, and it had been six months since we decided to invest in UK property. So despite my increasing frustration with the agent, I decided to go ahead and we reserved the property. Our Expat Property Story was back on. Or was it? A week or so later? I got a call from the agent. You'll never guess what he said. Or perhaps by now you will. They'd sold the same flat to two different people. Now I could forgive you, dear listener for thinking that you've already listened to this episode. But no, you're not going mad. I am. Or at least I was. How could this happen to us twice. The first time it had happened. I had bitten my tongue and philosophically accepted that mistakes can happen and moved on. This time. I let him have it. "It's the developers fault," said the agent. "I don't care. You're the agent the onus is on you to check, and this is the second time. What are you gonna do about it?" He told me to leave it with him. And 10 days later, he came back with an alternative house on the same development and the agent reduced his fee by £1000. My wife and I discussed it and resolved to swallow our pride and move forwards. Follow the show on your podcast device to find out what happens next as soon as everyone else. Now of course if I'd known today's guest back in 2017. I would have approached her to kickstart our portfolio, or I would have at least used her pre investment evaluation service, which helps give investors a longer-term view of any proposed property investments. And if I ever found myself in need of a property troubleshooter, my first port of call would definitely be the founder of like clockwork Helen Godbold-Eade. I asked her about the biggest mistake she sees investors making 

Helen  

You want me to choose one?

Expat Property-Guy 

Or you can choose more than one if you like. 

Helen 

Ah, okay, the one that causes the most problems and the one that causes the most stress and potentially costs the most money is buying a property virus selling agent and not doing the right due diligence. I always say it's easier to get divorced than it is to get out of a bad property investment. I have probably 10 investors a week who contact me looking for pro bono advice because they have fallen into this trap. The marketing agents which I know you've covered a little bit in your previous podcasts set up in a particular location or target a certain client. I mean the packages they sell sound fantastic. You know this is a great property, most often the investor will go ahead pay a reservation fee, which is usually non-refundable. All the due diligence they tend to do is through that selling agent. So, when I get these distressed investors coming to me, and I can click, I see straightaway that it's what I call a red flag investment. And I ask them what due diligence they've done. In most cases, the due diligence consists of asking the selling agent questions that the selling agent is motivated to get the sale so that they get their commission. And although they shouldn't be actually giving people false information, they can omit information. And unless somebody is a really seasoned investor, they don't know what questions to ask. So, they won't see what they're missing. And that's probably the most expensive mistake that I see investors make is not doing their due diligence, I get probably 20 or 30 emails a week from these marketing companies, they have really impressive, they're very persuasive. And they really tune in to the investors fear of missing out, this could be a really good deal. This is the one that's going to make me the most capital. So I understand why people fall for it. But when I look at those kinds of emails, nowhere on that email does it say who the developer is. And if you're selling an off plan, that's probably the most important factor when I'm doing my pre investment evaluation for a client. I really drilled down into that, who the developer is, what their track record is, how they're funding the development, where is the investors deposit held until completion? Is it being used to fund the development? What's the finance track record of that development, there's so much there that an investor can look at, to avoid getting into the wrong deal. Very often, a developer will build each development under a separate SPV, a special purpose vehicle, so you can instantly find the link between the two. And that's where having a good network comes in. Because you speak to the people in your network. Have you come across this developer? What have you heard about them? You do your research, you find out who it is? Whether a development is mortgageable as a lease holder, can I purchase this by way of a mortgage? That needs to be a very direct question to the selling agent? I've had investors come to me who have said, we asked the agent that and the agent said, Oh, it shouldn't be a problem. That's not very, that's not 

Expat Property-Guy 

it's not enough.

Helen 

No, exactly. Sometimes a development is a problem for investors getting mortgage, sometimes it's to do with the developer themselves. Sometimes they've been unofficially black-marked by lenders. Sometimes it's the construction of the building, especially if it's a conversion from a commercial, say, an office block into housing, sometimes that doesn't meet the mortgage lenders criteria. Even if somebody is intending to buy as a cash buyer, when you come to sell it, your buyer may want to get a mortgage, if you're buying into something that is only ever going to be a cash purchase, you're losing a proportion of your potential buyers. That's quite a common one that I come across. 

Expat Property-Guy 

I think you also told me before that is very important, that you have a separate solicitor to the developer, is that a mistake that you frequently come across? 

Helen 

Yes, in almost every single problem development that has happened. Usually what happens is the selling agent and the developer set up a deal together to sell and they will put in place a solicitor, the selling agent will recommend and that's a very carefully chosen word recommend that the buyer uses this solicitor that they've put in place. And usually the reasons are, it will make things go more smoothly. If everyone's using the same solicitor they'll have all the documentation on the development on file. They can't actually insist that you use a particular solicitor like that's that would be against the law. But your solicitor when you're buying a property needs to be completely impartial in my opinion, they need to be working in your best interests and not have any other connection. They shouldn't be tied to anybody else. There should be no fees changing hands between your solicitor and the agent or the developer. Your solicitor’s job is to make sure that everything is in order and to ask the right questions of the developer solicitor, so the more independent and impartial you can keep that the better. That's probably the biggest issue in these Off Plan developments that I've seen in the last 12 months 

Expat Property-Guy 

Because expats they often think that the best way for them to build a portfolio hassle free is to go with one of these off planned new build developments because they just feel that it's a safer investment. 

Helen 

Although it looks like a nice, clean, tidy way to invest in property in the UK by going with a selling agent who's packaged everything up for you an Off Plan development. So, you start building in any capital gain right from that, you know, de dot, the reality of it is very, very different. We've had so many issues in the UK over the last couple of years with the whole cladding issue. And after the Grenfell disaster, it became apparent that there were also lots of other issues with these apartment blocks where they weren't built to spec in the first place. Sadly, in many cases, the developer either has long gone or is refusing any contact and it's causing extreme stress. For a lot of people, everything is sold on gross yield. Once you own a property, gross yields are pretty irrelevant to your cash flow. You need to know the net yield. And I just did this exercise for an investor who thought he was getting approximately seven or 8% yield from his city centre apartments is actually getting under 2%. 

Expat Property-Guy 

Less than inflation. 

Helen 

Exactly once you build in service charges, ground rent refurb or redecoration every five years. And just the general cost that doesn't even allow for a problem tenant or rent arrears, tenant turnover is quite high because you know, city centre people are coming to work for a company for a set period of time, then they move on. I understand why people who aren't in the location would see this ready packaged deal of a city centre apartment as the easiest way to do it, but it's not necessarily the best way. Do a comparison with a two or three bed, terraced or semi-detached house, run the costs on that of having that as a buy to let and you'll see a very big difference when you're helping clients to build a portfolio. 

Expat Property-Guy 

Is that what you suggest them concentrate on what they call vanilla buy to let two three-bedroom terraced houses that kind of thing?

Helen 

Yeah, it's not glamorous. It's not swanky. There's no glossy brochure or glossy website. But does there need to be what really matters is getting a good investment. I think really the selling agents are appealing to people's desire not to miss out and people's desire to get rich quick and they make it sound that the city centre package departments offices plan approach is the way to go. I always urge clients to do a comparison. Look at the other kinds of investments first run the numbers on buying a good old, boring terraced house. Look at the difference with that. If you have a freehold terraced house, that's your property, your responsibility. If the roof needs replacing, you get on and you replace the roof. If you have a city centre apartment, your investment, you can make or break it by who the managing agent, the block management agent is, who the freeholder is, who else lives in the block. There are so many variables that are far beyond your control.

Expat Property-Guy 

If you're under a leasehold agreement, you're losing that control. 

Helen 

Yes. And I had to explain to an overseas investor last week that a leasehold purchase that it's essentially it's a very long rental agreement. If you buy leasehold apartments, at some point, you'll want to sell that lease or renew it because it will run out. If you buy that and you're buying it on an interest only mortgage, you own nothing. If you want to reduce the risk and maximise the chances of having a long term investment that works for you. And that produces capital growth at the end, it seems from the evidence I see leasehold apartments aren't the way to go. 

Expat Property-Guy 

So, you have sold this idea to our listeners, when we're talking about the building a portfolio side of your business. How do you do that for your clients?  

Helen 

The majority of our clients are high net worth clients who know what they want to achieve, but they don't have the time. And often they don't have the inclination to do the legwork. So that's why they come to us. If somebody is looking to build a portfolio, whether they're UK based or whether they're overseas, I always recommend build your network. You need a network of trusted people you need people who you know are ethical people who when they're talking to you. They're giving you their true opinion and it's not coloured by whether they stand to gain from it, build your network and it's hard. It's hard work. So you have to put the time in. I think the whole idea of selling these pre-packed hitched apartments, it's a bit like going into a supermarket and picking something off the shelf. There you go, I've got one. Now that's it. That's not the reality, you really need to know what you're buying into. If you choose to go down that road, you need to educate yourself. So, I always say to be build your network, find people who will give you an honest opinion. So, if you see a property that's for sale, you want some honest feedback on it. You want to know what your chances of getting Mortgage Funding are in the UK as an expat or as a foreign national, you don't really need people who will tell you what you want to hear, you need people who will tell you the truth. 

Expat Property-Guy

Let's say I phoned you up next week. And I say, Helen, build me a portfolio, what are you going to tell me? Let's say I don't have a network? Can you suggest people to me? Can you get me a mortgage broker, a sourcing agent? How does it work in terms of the actual properties? 

Helen

That's essentially the first thing I do is ask a lot of questions, find out what the investor is looking for what their level of involvement, what do they want that to be? What's their financial position? Are they looking for Mortgage Funding? Is it cash, and then I look at my network to see who the best people are, that would work with that person. And I introduce them, anyone that I introduce investors to, they owe it to me to give that investor the best service they can. So, if I get the feedback, that somebody in my network isn't doing that they're no longer in my network. Right? Very often, I'll introduce investors to letting agents first because it makes the most sense. If you're going to buy a property in say, Liverpool, you can buy a property, all the numbers stack up, all the boxes are ticked. But if you haven't got a really good letting agent, you're going to really struggle with that property, you're going to have problems, the number of problems, I've had to sort out where people have got involved with a bad letting agent, I have actually lost count. So, I always say build your relationship with a good letting agent first. So, if you know what location or what area you want to invest in, start talking to the letting agents tell them that you're an investor, tell them you know, you're serious about this, get their feedback, and that doesn't happen overnight, you need to build this relationship, they're not going to recommend a property to you, that is going to be difficult to let, or that is in the wrong area to get good tenants, because you're going to ask them to manage it. So that's my starting point is the letting agent, I start at the end, the opposite end, it's really important to choose the right letting agent, you can only choose the right letting agent if you know what the requirements are. So in a sense, an investor has to become a little bit of an expert themselves. That's typically where I step in for my client, because they don't want to, they know I have that expertise. So, I can research an area for the letting agent, run them through a comparison check to see what they do, what they don't do, look at reviews, speak to the agent and so on and narrow it down to one or two agents that I would then recommend my client because I believe they're compliant. And I believe they're proactive. And I believe that ethical, you really need to know what they should be doing and what knowledge they should have. You need to know that yourself. So, you need to know that their competency, you have to kind of educate yourself a little bit.

Expat Property-Guy

And if you don't have time to do that, then you can use a service like yourselves, right? 

Yes, because otherwise, I'm not really sure how the investor would be able to tell a good one from a poor one. And there's plenty of poor ones  unfortunately, so it's a case of continually reading continually working out who the good people are, to follow who's got good information and having a really broad range of people in your network. And always my key thing is if somebody is giving me advice or an opinion, I always ask what's their motivation? Yes. Why are they telling me that? Are they recommending something because they have a vested interest in me following their advice or purchasing from the m, etc, etc. So, one has to stay quite cynical. 

Expat Property-Guy  

Helen questions the idea that property investment can ever be truly passive 

Helen 

if you wanted property to be a truly passive investment where you are completely hands free, then you need to put people in place to do all the overseeing the managing the decision making, and so on and so forth. So yes, there are people who want to do that some of my clients choose to be completely hands free, so they delegate the work to me. But if you just don't do it, then you're going to hit problems, almost without a doubt, you need to know what's happening, you need to be checking in with your letting agent, you need to be monitoring what's going on in the location of your property, you need to be monitoring a cash flow forecast. And that is more important. The more properties you have, obviously, if you have mortgages, you need to be monitoring what's going on with the market, what products are available. So I think to say that it's completely hands off without having delegated all those tasks to somebody else is, is completely false. Because you have to manage your managing agent effectively, right? 

Expat Property-Guy

So what's the best way to manage your managing agent?

Helen 

Make the right choice. That's key. Choose somebody who you believe will be professional, will be ethical, will communicate well with you. And then I think initially discuss with them how you want the relationship to work different letting agents work in different ways. Some of them want everything to be automated, minimal contact with their landlords, unless it's necessary, but I think absolutely key, let them know what you would like from them. If you want to be informed when there's a problem with a tenant, you need to tell them that if you're happy to trust them to deal with it, and make the necessary decisions, tell them that, but I think communication is absolutely key. So if from the off, if there's a communication problem, that's a bit of a red flag, even with the best letting agent in the world, the property investor still has to do their checks and make sure that everything's okay. There are so many aspects that a landlord has to be compliant with nowadays. And just assuming that a letting agent is aware of it has dealt with it, it's not enough, because the responsibility in the liability is always on the landlord themselves, not on the letting agent and most letting agency agreements, you'll find that in the agreement that they cannot be held liable by you for something they've missed. So say for example, an EPC, which obviously valid for 10 years, but once it expires, it needs renewing, one might assume that the letting agent has dealt with it. But the landlord who'd makes that assumption is leaving themselves open to huge fines and issues. So that's the kind of thing that an investor needs to have on their checklist to make sure to check in with the agent, did they do it, it's such a simple check to do. And I would never recommend just assuming that those kinds of tasks have been done. 

Expat Property-Guy 

Helen would much rather help her clients make sure they're getting a good deal, then get them out of a bad one. When it may be too late. 

Helen 

Probably the most important thing that we do is the pre purchase analysis and review where we use the expertise that we've gained and the contacts that we've got to look at a potential purchase. And we look in very different. We're looking at different aspects to the way that an investor would look at it for themselves. They generally, when people come to me, they've crunched the numbers, but they haven't looked further than what the selling agent is telling them. And due diligence has to go a long way past what the selling agent is saying. 

Expat Property-Guy 

I asked Helen about her typical clients

Helen 

Very, very varied At any one time, we probably have 50% of our clients are people who are either expats living overseas at the moment, but British citizens who are living overseas, or they are foreign nationals living overseas who are investing in the UK, because a lot of the marketing companies actually target overseas investors for a number of reasons. Those are the people who tend to come to me because they're struggling and they find themselves out of their depth. So probably 50% overseas clients 50% UK based clients, 

Expat Property-Guy 

Helen is transparent on fees and unlike most operators in property, she doesn't charge a commission. 

Helen 

I charge my clients an hourly rate. So they're paying for my time and expertise and that's on a pay as you go, use me when you need me basis so I'm not tying the clients in. Sadly, the property investment sector in this country is riddled with this whole commission structure. When you buy a new build property, there's goodness knows how many layers of commissions and introduces fees and referral fees that paid. I've been told by several people in the sector, that I'm crazy to work on an hourly rate basis, and I shouldn't be charging commissions. When I introduce somebody, I should be asking for referral fees. I don't work like that. And it's nice to be working differently to anyone else. If I recommend an investor to say a mortgage broker, I don't get a referral fee or an introducer fee from that mortgage broker, I'll recommend somebody based on merit. And that's it, the only thing I would ever accept back from that mortgage broker is a reciprocal referral. And it would be fantastic if the property sector worked more on that basis. I've been stung by that myself, I asked a fellow investor for a recommendation to a mortgage broker. And he gave me a name and said, this person's fantastic. It was the worst mortgage broker I have ever come across. They ended up doing organising the mortgage myself. And I found when I went back to this particular investor with my feedback, he said it was a shame. He said, “I've, given loads of referrals.” And he told me how much he got for each referral. So, it wasn't based on merit. So, I made the rule right there. And then that Like Clockwork, wouldn't give referrals for money, or recommendations for money, we do it based on merit, and we don't accept fees. So, the only revenue we have is our clients paying for our time and expertise. And that way, the client certain that they're getting impartiality, and I enjoy it, it's not a pleasant sector to work in, at times. If you stick your head above the parapet, you're going to get shot at so if you do something differently, or you speak out against a rogue developer or rogue agent you are going to get shot at but there have to be some people in the sector who want to see it done properly as well. 

Expat Property-Guy

I asked Helen what she understands by the word risk. 

Helen

For me it's about balancing that reward and what you're prepared to put in for it. I often see potential investors on property forums who will say, you know, I earn £40,000 a year, I've got £20,000 saved up, I'm just going to buy my first buy to let and they're going to put the whole £20,000 into a deposit to get their first buy to let To me that's committing too much to one pot. It's not leaving cash as a cash cushion. So, for me measuring the risk is looking at the what ifs if I can answer the what ifs. And I'm happy with those answers. But obviously, all my clients have different levels of risk. I accept whatever their level of risk is, I'm just aware that my list of what ifs is probably longer than most other people's. Right in the often dog eat dog world of property investment. It's refreshing to find someone so passionate about fair play and ethics. I work with a lot of clients on a pro bono basis as well. I usually have between five and 10 pro bono clients at once. People who've got themselves into a really difficult spot either with a letting agent or with one of these packaged off plan deals. Very often it's people who've put their life savings in and they stand to lose everything.

Narrator 

Monopoly Challenge 

Helen 

Well, I fast learned, when I was playing Monopoly, that if I were building houses and hotels, and I had a cash flow problem if I landed on somebody else's property and I didn't have the cash for the rent, I could persuade them to wait till the next go round. Ultimately that meant I won the game because cash is king. 

Expat Property-Guy 

The monopoly you is very different from the real you, I think ...

Helen 

Very much so.

Expat Property-Guy

Ha ha! So are you ready to play Monopoly Challenge? 

Helen

Yes. 

Expat Property-Guy

You're not allowed to repeat any squares… 

Helen 

Oh gosh, 

Expat Property-Guy

Okay, you have 30 seconds, your 30 seconds starts now. 

Helen

Okay, so Oh Kent Road, Whitechapel, Chance, Community. Kings Cross Station, Angel Islington, Pentonville, Euston, Jail. Pall Mall, Whitehall, Northumberland, Marleybone Station, Bow street, Vine Street, Marlborough, Free Parking. Stuck...Coventry Street, Leicester Square, Piccadilly, Jail.  How many?

Expat Property-Guy 

Helen scored 21 which takes her to the top of the leaderboard in joint first place with Ivan from Episode Three. Helen, you would like me to tell a joke, I believe for this episode, 

Helen

Please do. I'm not going to attempt it. 

Expat Property-Guy 

Don't worry, my jokes are terrible. It's a Knock Knock joke. It’s our second Knock Knock joke. Knock Knock. 

Helen

Who's there?

Expat Property-Guy 

Doctor

Helen 

Doctor Who? 

Expat Property-Guy

There you go!

You did actually tell a joke because you delivered the punch line. Ha ha

Helen 

Ha ha. That's very kind of you.

Expat Property-Guy

I had one final question for Helen. How did she choose the name for her company? 

Helen 

One of my clients said to me I don't know how you do it. But it's gone like clockwork. Again. You should call your business that. So, I did. Because it says how we do what we do. Rather than telling people what the nature of the business is, 

Expat Property-Guy 

You've given some great advice today haven't that's fantastic. So I really do thank you for your time. I think the information you've given is so invaluable. If people do want to contact you, what should they do?

Helen 

Probably best either go to my website, or they can find me on LinkedIn. 

Expat Property-Guy 

Thanks a lot for your time. 

 Helen 

Thank you 

 Expat Property-Guy 

Have a great day. I'll keep in touch. 

Helen 

Bye bye I

Expat Property-Guy 

Long-term listeners will recall that in episode one, I made it very clear that I'm not claiming to be a property expert. One of the reasons I started this podcast was to learn from the guests I invite on the show and to share their knowledge, experience and expertise. I leave it to you, the listener, to make your own judgement on the content I provide, rather than assuming that I endorse everything every single guest suggests. But for this week's guest, I make an exception. For the cost of a couple of hundred pounds, you could prevent yourself from being saddled with a property you can't let or sell not to mention a whole load of stress and a potential loss of thousands of pounds. Another reason I started my podcast was to help build a community of expat property investors. So, if you know someone you think may benefit from listening, please take a moment to message them or point them in the direction of my new and improving website www.expatpropertystory.com where you can leave an honest review, find links to my social media accounts or contact information for Helen. And why not write me an email with ideas for the show. You can do all this and more at expatpropertystory.com Now, as expat property investors we frequently need to transfer money from one country to another so next week, we’re off to sunny Sydney to get the lowdown on all things forex, and that’s currency, not beer. I’ll be talking to Samuel Pitt of OFX, the online foreign exchange and payments company. So, join me then for loads of useful information on moving money.    

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