This is the fourth and final article in this mini-series - if you haven’t read the rest in recent editions of the magazine - by way of a reminder I am a property investor who primarily buys, refurbishes and holds/refinances, using what is popularised as the “momentum investing” strategy. I target relatively low-value suburban stock in secondary locations throughout the UK and have bought over 200 units in the past eight years . The majority of those purchases concentrated in the last four years, and very recently I agreed in principle to buy a further 82 units as part of a portfolio purchase.
This final article on The Four Pillars of Property Investing focuses on the often-overlooked but incredibly important part of any long-term property strategy - the management of those properties. Management can be further divided into sub-categories - for example, property management, tenancy management, and asset management to provide three examples. This article largely avoids those characterisations, and instead focuses on some classic management mistakes that I have observed over the years. I have already discussed supply pipelines in the first article - i.e. where you get your deals from - and also the financing of these deals in the second article. In the third article I discussed refurbishment or optimisation - and now management is the last piece of the jigsaw.
Management is the least “sexy” of all of the four pillars, but in my opinion, it is also the most important. You can, and should always try to, buy well - but historically, purchases that have been at full value or even overpaid for, have often come back to perform well as investments with time on your side. You should try to be smart with your financing solutions - but again, time can be a great healer. Even a poor choice in terms of refurbishment can recover in time and you can get a second bite of the cherry - but when it comes to management, time is more likely to be the enemy than a friend. Poor management is hard to see, hard to fix, and hard to understand the impact of. I like the analogy of the British Cycling team and Dave Brailsford - seek out those ways to be 1% better in all of those moving parts. When we look at asset performance, even 0.1% per year over the lifespan of a long-term asset can be the difference between an average return over time and an excellent return, thanks to the power of compounding.
The difficulty of assessing management as one tangible thing (as opposed to say, a great new kitchen, or a quality decorating job) is what makes it, when badly done, as lethal to a portfolio as carbon monoxide can be to a human being - a silent killer. Every single portfolio I have ever seen that has any element of distress in it, has bad management as one of its problems. Sometimes it is not the only problem (more often than not), BUT it is the one thread that seems common to the numerous ones that I have seen.
I will move on by sharing a slide from my four pillars presentation: