Just One Thing After Another...

By Angharad Owen for Your Property Network Magazine

May 2022

This project was the inspiration for this month's lead feature. When Devon Parker, 31, first got in touch explaining the project, it sounded awesome. But we had to keep rescheduling the interview due to ongoing difficulties. And that's how the idea of exploring projects that don't go quite according to plan came to fruition. Devon experienced hardships at every stage, from the purchase all the way through to the build. Read on to find out how she overcame these challenges and what she learned throughout the process...

Since reading Rich Dad, Poor Dad at the age of 15, Devon has been focused on using property as an investment vehicle. She started saving for a deposit as a teenager, and further educated herself on property when she could. She spent her late teenage years sourcing investments for other investors, and when she owned her own home, she rented out her spare bedrooms. Eventually, she started investing in earnest alongside her job as a management consultant.

Despite being determined to invest from a young age, she has never intended to fully escape the corporate world. For her, property was about the freedom of choice over her own life. "It's been quite advantageous in that I've always known what my end goal she says. "I've never been dead set on one route to get there, but I've always known that pro was what I was going to do, so a lot of the decisions I've made were geared towards that."

The Project

Devon's troublesome project was a four-bed end terrace in South Shields, with a large side garden. It had previously been owned by a housing association, and had a side extension to accommodate people with disabilities. By the time she acquired it, it had been empty for nearly three years.

Challenge 1: Acquiring the house

The problems for this project started before Devon had even bought it. She first viewed it in August 2019 but didn't complete on the purchase until 18 months later, in February 2021. As the seller was a housing association, they had the obligation to offer the property to the local authority before they could accept any offers from private buyers. The local authority took months to decide that they didn't want to buy it, at which point the housing association was finally able to accept Devon's offer.

The offer that had been put forward was subject to planning, so once it was accepted, she then had to begin the process of getting planning permission to do the works. Fortunately, the application and approval was straightforward. The planners did not raise any issues or request alterations, and permission was granted within eight weeks. However, the vendor wanted the property to be revalued, even though they had initially agreed to go ahead without doing so.

Once the legal process had started, Devon's solicitor found a restrictive covenant, which prevented development on the land. To get this removed, she had to approach the local authority, who stipulated that it would cost £17,000 in fees, plus £1,200 for legals, to do so. Although this was a significant amount of money, the project was still viable after incurring this unexpected cost.

While the purchase was crawling along, Devon had several reassurances from the vendor that they were committed to the sale and weren't going to pull out or selli to someone else. However, anyone who has ever bought a property can relate to the constant lingering fear that the deal isn't set in stone until it's legally binding, at the point of exchange. As the vendor had already backtracked on one of their agreements, Devon had some doubts as to whether they would continue with the sale. Each of these setbacks contributed to the 18-month delay in purchasing the property, and the pandemic and subsequent lockdowns also played their part.

Lessons learned:

Ensure legally binding agreements are in place. With this project, Devon had spent money on the planning application, architect drawings and solicitor's fees without having a legally binding agreement in place. She had asked the vendor to enter into an option agreement, however the housing association said this wasn't standard practice for them and instead gave written agreements, which weren't legally binding.
Check for covenants on any land transactions earlier in the process. "We're always looking for new projects, and one of the first questions we now ask is: 'are there any covenants?''

Challenge number 2: Disruptions to the supply chain and rise in costs of materials

When the purchase completed in February 2021, the UK was in the middle of its third lockdown. Devon recalls: "When we were appraising the project to assess whether it was worth doing, we costed everything out and got quotes from all our usual suppliers, which we just had to rip up and throw out the window once the pandemic hit because costs increased massively."

The rise in cost of materials was a widespread problem across the country, and it affected many investors. She had already anticipated the price rises as she had completed a few other projects in the 18 months she was waiting for this purchase to complete.

Armed with this foresight, she was prepared for the fact that it was going to be harder than she had originally anticipated. Her plan was to go in with her eyes wide open, take it step by step and deal with each challenge as it came along.

Since she first priced up the project, the cost of timber had gone up by at least 100% and plaster/plasterboard by around 30%. Across the board, the price of most of the materials had risen by 20-30%, and continued to go up as the project went on. Furthermore, the cost of labour had increased as well, due to the upsurge in demand.

Although the materials costs had rocketed upwards, the good news at the finishing point is that the end value of the project has gone up as well thanks to the increase in house values over the past two years.

Devon's plan is to refinance and rent out the houses. "Financially, it's been an excellent project for us," she confirms and at the time of writing, she is in the process of referencing tenants. While her profit margin has suffered slightly, she knows that she will make it back over the long term. After refinancing, Devon anticipates that she will be able to pull out her initial investment along with additional equity created, which can be used for the next project.

Lessons learned:

• Order materials in advance. Locking in lower prices as soon as possible will protect from future increases ... but don't stockpile!

Challenge number 3: Availability of labour

Devon works closely with her father, who had worked in construction before retiring. When she started developing her own properties, she approached him about coming out of retirement to join the business as a project manager.

"He's got so much experience, skill in areas that I don't and an established network of trades, so it made sense to partner with him."

Many tradespeople were either in high demand or unable to work due to Covid, so this was a problem that many investors struggled with. While it didn't bring Devon's project to a standstill, it did cause inconveniences and delays. To continue progressing, some of the works were not carried out in the most efficient order.

"Things just took longer than we would have liked in normal times because of all these challenges," she reflects. "But you just adapt and keep moving forward, right?"

The project took around a year to complete and as a result of the delays, it ran around six weeks over schedule.

But, given the circumstances, Devon is not too concerned. "It's not the end of the world. I think, given the backdrop of what's been going on in the economy, we did do pretty well and I'm happy with how everything turned out."

Lessons learned:

• Flexibility is key. Doing works at a slower pace or not in the ideal order is sometimes what needs to be done to continue to progress.

"That's the nature of the beast," she explains. "Nothing is ever going to go exactly how you want it to."

Article page from Your Property Network magazine.

Article pages from Your Property Network magazine.

Finance

Unusually, Devon hasn't taken on any external investment to grow her business. To date, all her projects have been self-funded, and this property was bought with cash. As a freelance consultant, many of her clients are big multinational businesses, which provides a strong revenue stream.

She is fortunate that she has the cash available to fund her investments and any unforeseen costs that may arise (like the £17,000 to remove the covenant!). As her property business continues to grow though, she anticipates that she will need to start raising external finance because, eventually, all her cash will be tied up in bricks and mortar.

She also has a robust approach to risk management, as she doesn't enter into a deal without having the finance and a contingency fund in place. "I’ve had risk management ingrained into me to make sure that contingencies are in place for certain scenarios."

Reflections

Many people would have been put off by the difficulties of just buying the property, let alone all the other challenges. However Devon was not fazed. "I'm quite stubborn, and there were a lot of times where I thought it was going to fall down, but it would never have been my decision to walk away from it. I was just going to keep going until something totally out of my control was going to stop me."

Had she known that the project was going to be time-consuming and plagued with obstacles, she would have still persevered. "I think it's character building when you have challenges! I think it moulds you into a better person in terms of how you deal with things."

There will always be challenges at any given point when investing in property. "The challenges change," she adds. "They don't go away." Being prepared and resilient is key, as investors can face a lot of rejection, but one must keep moving forward."

Overall, she is glad she encountered so many challenges on this project, because it still turned out well and when she inevitably moves on to bigger projects, she'll have learned from this one and will have new systems and processes in place to deal with them. While she's aware that making mistakes is always inevitable, she believes it's the best way to learn and grow, not only as a business, but also as a person. “If you want to grow and want to do bigger and better things, you’ve got to accept that you’re going to mess up at some points along the way. And that is ok.”

Looking back at this project, Devon has a sense of accomplishment over what she’s achieved and subsequently overcome. “It was worth it, but it was hard”, she explains. She believes that if it was easy, everybody would do it – but also that if it was easy, it would be boring.

During the lockdowns, faced with uncertainty with not only her project but also in the wider world, she focused on the things that she could control rather than the things she couldn't. "I feel in this day and age were bombarded with so much information, it is difficult to process everything all the time," she says, particularly referencing social media, with which she has a love/hate relationship. She often feels the need to check herself when wasting time scrolling, however on the other hand, social media has been imperative to the growth of her business, and she has connected with many other females in property and the wider community. "But it does have that dark side as well, you just need to step back and realise that it's a highlight reel, and not everyone has these amazing lives all of the time," she reminds us.

The property industry is very supportive, and Devon has found that when she asks for help, people are receptive and more than willing to point her in the right direction. She advises others not to be afraid to ask for help.

Article selfie with Devon.

Taking risks is important, but it's vital that they are always calculated risks. Not doing anything will result in no gain, so some risks need to be taken to get some rewards. "It's easy to compare yourself to other people, but it's important to check yourself and remember that everyone's on different journeys." It's not productive to compare yourself to other people, as it can lead to taking unnecessary risk just to feel like you're keeping up with them and their goals, rather than concentrating on your own.

Devon has also learned that it's okay not to be good at everything, allowing her to focus on what she is good at and bring in people who can do the things she doesn't enjoy or that are not one of her strengths. "If everyone was the same and great at everything, life would be boring and you'd burn yourself out trying to do everything. Delegate what you can."

The Future

Devon is working on a couple of aspects of her business at the moment. She is currently in the process of rebalancing her portfolio, including offloading the properties she holds outside of the limited company due to the changes in tax legislation. She is also aware that there will be some upcoming changes regarding the energy efficiency of properties. By selling the older, less efficient properties, she will be able to reinvest those funds into newer, more efficient properties.

She is also appraising some land for her next new-build project, as she intends to focus on development going forward. "The country needs houses and we want to be a net contributor to the housing stock. if we can be a part of helping to solve the problems in the housing market, then we very much would like to be.”