In this episode, Richard sits down with Lee Hounsom and Stephen McKenna to delve into the fascinating world of property land deals. The two expert guests break down complex and massive money land deal opportunities into easy to understand chunks.
- The all essential Power Team for being successful with property land deals…
- Lee and Stephen’s first land deals and how they played out in good and bad ways…
- The mistakes made and the lessons learned…
- How land deals are not for everyone in the property world…
- Getting the due diligence right, and right from the start. Crucial tips to mitigate your own risk of failure…
- The power of connecting: how a taxi driver sourced a major land deal…
- Lee Hounsom
Connect with Lee on LinkedIn
Connect with Lee on Facebook
- Stephen McKenna
Connect with Stephen on LinkedIn
Connect with Stephen on Facebook
- Richard Swan
Connect with Richard
LINKS AND RESOURCES
- ALG Property Academy.
- ALG Property Network.
- Property Protege 12 Month Intensive.
- Catch-up and subscribe through iTunes.
Richard: Hello and welcome to today’s episode of This Week In Property. Now in today’s show we are going to be tackling the subject of land deals and to get stuck into that topic we have two guests who are legends in that area, they’re going to be helping me, they’re smiling there but they certainly are. We have Mr. Lee Hounsom, good morning sir.
Lee: Good morning, how are we?
Richard: We’re fantastic, I’m really excited about this chat that we’re going to have and we also have beside Lee, we have Stephen McKenna, hello Stephen.
Stephen: Good Morning and Hello.
Richard: Fantastic. So Land Deals, here we go I’m excited about this one because we’ve got thousands of listeners tuning into the show but we need to keep in our heads that all these people are different, they might be complete novices who follow the show because they want to get into property but they don’t really know how or where or why to get that start.
We might have loads of residential landlords, just dealing with Buy-To-Lets, just doing their thing, just ticking along but they’re thinking about things, they’re hearing these things, they’re going to networking meetings and they’re hearing Land Deals, what’s going on? What’s going on there? What’s that all about? We want to, I’m going to try and steer and cover you from every possible angle and perspective.
But I called these guys legends, because they’re constantly doing deals, finding land deals, doing business, connecting people, all sorts of stuff and I really want to pull out your expertise. But Land Deals, first question Stephen.
Richard: What can a Land Deal be? And what I mean by that is, we teach people obviously through Protege and stuff, let’s go and find a property. So they might find a two bed house, that’s great but can be a number of things, they might find that they’re going to let it out, so it’s a Buy-To-Let. They might find that it’s a great deal but not keeping it so they’ll flip it, so it’s a Buy-To-Sell. Or they might grab one and we were speaking to Laura in one of our recent podcasts about Serviced Accommodations, they might set that property up for that.
So when it comes to land deals, you find a land, an area, whatever it is. What can that be? Is it a whole host of things?
Stephen: It can be many things but I’ll give you an example of like the ability to find a land deal because a lot of people think, that’s for them and that’s for me and I’m not really very good at that so I’ll leave that to the experts and me and Lee are experts, but we’re experts because we’ve trained ourselves to be experts.
Stephen: It doesn’t mean we started out as experts. So you get a lot of people, like for instance, I was, I was going to a meeting, I was going to meet Lee in Edinburgh actually and I got a taxi into the train station and I was talking to the taxi driver, I never spoke to him for the first ten minutes because I was on my phone and then we started chatting, just idle chit chat and this is the sort of gold that’s in everybody. Now the guy is a taxi driver and has been for thirty years.
Stephen: And he said, “What do you do?” and I said well I buy and sell property, i said I’m predominantly, mostly, 90% of my time is involved in land. And he says “What kind of Land?” And I said, well I just kind of look for like derelict sites that I can take through planning, add value and get some money for the owner and make some money myself and he says “I’ve got a 10 acre site in London”.
Now, so here’s the taxi driver, he’s being driving his taxi for thirty years and he’s got a 10 acre site in one of the best areas, right a great area for a whole wide range of different building developments you could do on it. So, he instantly related to me on his level and realised that he’s got gold in him and he’s got in his family, in his network. So realistically if I sit with you and I said right okay, let’s talk about your pals or your friends or your family or your cousins and before we know it, somebody that you know will have a piece of land and this is for everybody who is listening.
It’s not just for me and Lee and Paul and Billy and the ALG team or whatever, they’ve got it and they’ve got it in their hand and there is one guy that was on, he came onto the Protege program from London and he said to me when I started talking about land he says “You know, my family has had a piece of land that we’ve all been arguing over for fifteen years…” and I says well, why don’t you bring it to me? I’ll sit with your family, I’ll work out all the percentages, everything else. So, I’m just saying that’s what land is and everybody has got the ability to find it, locate it and probably 10-15% of the listeners actually have a piece.
Stephen: That they have forgotten about, it’s almost like a piece of pension paperwork, it sits in a drawer.
Richard: And those opportunities, what can they then be? Is it anything?
Stephen: They can be a wide range, one of the sites I bought in 2004, I paid £850,000 for it. I took it through a planning process and created a value on paper remember. So I’ve paid for the legal process, I took them through a planning process and on paper I sold the site for £1.6million, so I made just less than eight hundred grand out the site but if you look at the site right now, it’s never been built on.
Stephen: So land deals, so people go land and you’ve got build and we need builders and developers. No no, land is about creating a value.
Stephen: And it can be pieces of paper. There’s a piece of paper that owns the land, there’s the planning approval which costs you, it is quite expensive.
Stephen: That’s our part in it, so we could spend fifty to a hundred grand in taking it through a planning process and then we sell it and really what we’ve done is, piece of paper to piece of paper to piece of paper and one day, one builder will build it out. But it doesn’t need to be the person that owns it.
Richard: And every bit of those papers is adding value?
Stephen: Soon as you take a piece of land, the average acreage price for farmland and that is 4000 an acre but if you turn it into housing it can go between one hundred and four hundred thousand an acre.
Stephen: So the uplift is in the planning application that you take it through.
Richard: And Lee for yourself, the deals that you’re finding, when someone says Land Deal in my head I’ve got like a farmer’s field, I’ve got some brown site in some city that’s got nothing on it at all. Are you finding that or do you find deals that have already got structures in place on top of them and it’s that the land that they’re selling? You know their property is just worthless, how does it look physically on the ground?
Lee: So for me obviously we look at, I personally look at both look at both greenfield and brownfield, you know brownfield obviously been developed on before where the old warehouses are and what not, so we look at both with planning and without, obviously with planning it has as Stevie rightly said there, it’s got value now, it’s got an added value which you’ve gained planning. So ideally we look for sites without planning so we can go through that process.
Lee: As Stephen said again, it’s costly fifty to a hundred thousand per kind of site, if you’re looking at to do planning on that, so we look at anything really and it’s crazy what Stephen says, I mean the amount of times you speak to somebody that may have land within the family or something like that, they just don’t know about it until you mention it, they go “You know, I’ve got this bit of land” and you’re sitting there going this is crazy. Certainly doesn’t matter who you are, I mean I read a stat, for all the land in the UK only 1% is built on, that’s excluding all your hills which you can’t actually build on, but the stat is 1% of the UK land is actually built on.
Lee: 1% So 99% is there, it’s there, obviously you’ve got farmland but certainly there’s a lot of land for the taking. So yeah, 1%
Richard: And you’re finding the same Stephen, cause this is what I am jumping into, my brain jumps into the mode of okay, we bring guys through the training that ALG has got, Protege and stuff and for example, we’ll teach them how to become goldmine area experts, right okay let’s focus on your city, let’s look at a one kilometer radius, let’s do this, this and this. But can you be a goldmine area expert for Land Deals or is it really this kind of connecting, networking, asking, questioning? Is that how the deals come through?
Lee: Nah, not particularly, I mean you can go on Rightmove, I mean some of the sites that we’ve looked at have been actually online.
Richard: Have they? Right, okay.
Lee: It’s maybe the guy that owns the land, might not know what to do with it, so he’ll just think, “Right, I’ll stick it on Rightmove” you know, get a selling agent to come in and market it, put it online and hopefully get a sale that way. But certainly, yeah we look at land in all kind of areas now, it’s not specific. Land is different from property, yeah of course you have a goldmine area but land is so different because there’s less of it, you know there’s more of it, we just talked about 1%, but there’s less of it because people don’t know what to do with it and know how to sell it or obviously take it through the planning process but certainly we look at land, obviously Stephen and I have looked at land all over you know, it doesn’t really matter, both strategic and within a kind of development are where you can actually get planning straight away so, I would say no to that question.
Richard: Right, okay.
Lee: There isn’t so much like a goldmine area because it’s not like houses.
Richard: No, exactly. It’s trying to get into that mindset of how to approach it where are my sources, where is this coming from?
Lee: Totally, totally.
Richard: Right okay, so loads of kind of connections and stuff but you do have online stuff, Rightmove that’s good.
Lee: You’ve got Rightmove, you’ve got all your kind of typical, I mean I’ve looked at sites even on Gumtree.
Lee: As crazy as it sounds. You can get land on Gumtree.
Stephen: That’s is probably some of your best stuff because think about it, if someone is going to advertise a piece of land on Gumtree, they are really saying “I’ve got something here and I know what to do with it, so I’m actually going to put it on Gumtree” and we can turn our nose up and be like, imagine putting a piece of land on Gumtree but that’s the goldmine, there’s gold in it. If you know what you’re doing and I think it’s genius what Paul and Billy have done as well, because they’re taking everybody through all the processes, step one, step two and to be fair Lee will agree with this, we don’t want to be sitting in front of someone who is an absolute novice and try and tell them about Land Deals.
Stephen: So we are going, let’s go and talk about land, let’s understand the legal process, let’s understand the planning process, let’s understand how we’re designing it so it can be sold. It’s not university stuff because I never went to university to learn it, it’s practical knowledge that you pick up along the route, whether it’s in the legal meeting or it’s in negotiation skills and I think it’s all that stuff that Paul, confidence, that Paul and Billy are teaching through Protege.
So it’s a great natural, some people jump into Protege and within a month are on their way to do land deals, that’s fine because they are ahead of the game and, it’s everybody is different.
Stephen: Some people need the full 12 months so that they can learn all the bits and bobs, even after that they’re not ready but they’ll maybe take a wee hike up and go “Right okay, let’s do this”. So I think when you’re doing it, we’re not talking about it’s very easy to do, well we hold your hand through it and I always say to everyone that I sit across the table from, I don’t need to be in every deal, if you want me in every deal I’ll be in every deal but if you don’t want me in any deals I’m happy just to work with you to get you your deal over the line.
Richard: Right, get that guidance.
Stephen: Most wise people will say, well going to hold my hand for the first one.
Richard: Yeah, yeah exactly.
Stephen: That’s what I would have done.
Richard: Yeah, exactly.
Stephen: I’m just going to hang about with them for the first one, do the first one with them then go “Right I get it, I don’t need you now.” and think about it, if somebody leaves a seat, there’s a seat for somebody else.
Richard: Yeah, exactly. Now both of you guys mentioned the big numbers of getting the planning and getting the paper. Now let’s look at the upside, that’s brilliant. We’ve discussed achieving that bit of paper, getting the planning approved, suddenly the land has increased in value, so you’ve increased that opportunity. But then the other side of that equation is the downside, the risk. That’s a lot of money, so is that a massive gamble? How do you know when to play that card and go for that planning? Because if I throw fifty grand at something and I get it turned down or it doesn’t work out or I get the planning but somebody doesn’t want to buy it, do you know? How do you juggle that in your minds?
Stephen: I think to be fair, I think you’ve got to do your just profile on yourself before you start right, like any ordinary transaction, whether you buy a twenty grand flat or buy a piece of land worth a million that you’ve invested fifty grand into. I think you’ve got to just look at the pros and cons of it right.
Stephen: In the past when money was freely available we would be buying sites for two million pound now without planning.
Richard: Right, really?
Stephen: We’d be doing that and we would take the risk of that two million running monthly at a rate right, through the term but you’ve evaluated it in the cost, the sales cost and everything else. We’re working smarter now, we don’t do that now because the same money is not available at that level without planning. It is available with planning but without planning it’s not available or maybe it is but not in the network that I am in but I think that because of past experience of spending a lot of money on it and doing the hard yards, it’s very easy for us to actually just pick out a deal.
So if there’s ten deals available and they’re all available, we’ll pick that one because it works best, put it in our risk profile but as I said go back to, what someone would say, “how’s your risk profile” if you’re a one well, don’t work with us.
Richard: Nice and simple.
Stephen: You need to be at least a three or a four or a five coming in but if you’re a one it’s not for you right and I think that’s, you’re as well cutting it because that wastes our time as well. We don’t want to invest in things and work with people who get frightened within the first ten minutes and that’s where the Protege program will eliminate everyone that’ll come through that, not a lot will go to the next level in that.
So that lets you see where you are, might locate you, might be just happy to do an apartment here or an apartment here and that’s good, you’ve made your money back ten times and you’re away but when you come into land it’s not for experts, big rewards, big risk.
Big rewards, big risk right and to be fair you don’t need to be, you can be a percentage, you can come in for 10% and that’s not a massive risk. It’s not a massive risk.
Lee: Definitely, I mean, we need to, definitely a feasibility, so knowing good architects, having architects on your side that you can go to them with a site and say look, we’ve got this site can you come up with a feasibility drawing, that’s to see how many units we can get on it, where the road infrastructure is going to be and then whilst that is happening you’d also look into your proposal, not your proposal, your appraisal.
So you look at your appraisal, I’d run through the whole appraisal, looking at your risks of SEPA, your flood risks, is there any tree preservation orders in place, what kind of area is it, what’s the likelyhood of getting specific units, is it going to be flats, is it going to be houses. You need to look at a full feasibility and then at that point if you’re in a position that you feel comfortable then yes we can go to the next stage and there’s obviously architects involved, they’ll draw up plans and then from that point there, you can then look to appoint a QS, cost management, stuff like that and they can then look at what you’ve kind of got there and then they can break it down and say right okay, well you’ve got say twenty units on this site, we’ve got a square meterage of ‘X’ to do the development, then we’ve got the road infrastructure and everything else involved.
Then you can get a good indication of what your development value is going to be and then obviously you’ve got your gross development value, so yeah.
Richard: Now jump into that then, what would that tell me, gross development value?
Lee: So, your GDV would obviously be, so it’s twenty units again to say for easy maths, its 100,000 a unit so you’ve got 2,000,000 worth of the GDV, your Gross Development Value and then let’s say you’ve got build costs at 50,000 a unit. So you would have a build cost of 1,000,000 and let’s just say the land is worth 100,000, that’s the purchase price. So you’re 1.2 and then you’ve also got all your additional fees on top of that which is your professional fees, obviously your planning fees and everything about that.
So that obviously gets brought into the deal, interest payments if you’ve got a finance in place. So that then narrows down to say, what of that is profit? And then you’ve got to look to say is that deal good enough and how long is the process.
Richard: To push forward.
Lee: To push forward, it’s all like Stevie said it’s all in the start, it’s all looking at your feasibility, it’s looking at your appraisals, you know speaking to the right people but again…
Stephen: We do that anyway and I think if we’re working with whoever we’re working with, the maximum we’ll allow anybody in with us is 50% so it’s 50-50. So we’re not investing 50% of our money into something that doesn’t work.
Richard: Yeah, exactly.
Stephen: We might have more experienced than the client but we’re not investing our money into it, there’s no point. So at the end of the day, we desiring the best sites at the best conditions, at the best legal terms. So we’re not just going, listen we’re all in here for this crazy amount of money, if we don’t get it done next week then the ball is up in the air. It’s not like that, it’s totally different.
Richard: Right, okay. Power Team, we teach a lot of guys when they’re doing, building portfolios and stuff, right let’s get a power team sorted, let’s get our lawyers, let’s get accountants, let’s get our trades, you have to refurbs and stuff. Who is the Power Team when it comes to Land Deals, who’s the guys we need around us, what are the roles?
Stephen: Well I think we’re quite fortunate in Platinum because I think every Power Team starts with a sourcer and that’s no disrespect to anyone in Platinum because I’ve spent my life sourcing as well, so it’s part of it, so we’ve maybe got 30-40 people in Platinum who are actually actively sourcing.
I was at a site yesterday, I was at a site on Friday, I’ve got a meeting tomorrow, I mean and these are all different individuals, I’m meeting someone else on Thursday to take me round five sites. Now it doesn’t mean the sites are all great, so we go like that, no never that one, that’s a possibility and Laura, you were speaking to Laura yesterday, she’ll tell you how many times I’ve said to her, said no.
Richard: Right, really?
Stephen: And it’s just been relentless and what you’re aiming to try and achieve, so she maybe had fifty no’s before she got a yes. I mean we’re not just picking up anything, the sites we’ve got, the one we concluded on last week, we concluded that one on Wednesday and I had a guy out to look to buy it on the Friday and we don’t even have a sign up but it’s for sale. So I’m actively this week running about get signs, we’ve not even one on the sight we’ve got in Stirling. So now Ian’s going out to put them on every site that we’ve got.
Richard: Oh brilliant.
Stephen: Now what’s the chances of that, that was a fluke. Now all he done was, when I met him on Friday, I gave him all the information he’s asked me for and I list that information but there’s how quick. So why would somebody want to buy a site that we’ve just bought? Because we are buying well.
Richard: Yeah and they know that.
Stephen: They know, well they know that, they’re wondering why we can do it so quick.
Stephen: It’s experience, I’m not the cleverest guy in the world, I’ve got experience. There’s people a lot smarter than me, aim higher than me, aim for me but at the end of the day it’s the experience that’s allowing you to go yes and no matter what expertise we’ve all got on the table, if I come into your world Richard, you’re experienced, in that you’ll know something is good. So that’s what I know.
Richard: Yeah and you’ve got that at a gut level now because of that experience.
Stephen: Aye, remember I’ve done it through sites I shouldn’t of bought, I’ve done it through sites that I paid too much money for, I’ve done it through sites that have worked great for me, I’ve been lucky, I’ve had all the right ranges so you’re putting all that together into your choice and sometimes with land there’s ten moving parts in it, with me if you’ve got six of them, you can go for it but if you’re waiting for the ten then good luck with that.
Richard: You’re never going to get that, that’s perfection. So sourcers you picked up on there, that’s an important part of the power team, legals a big thing?
Stephen: Yeah, well we use the best lawyers and I was saying to you the other day, I was saying to you this morning Richard. The site we bought out in Maryhill there, it has been sitting for ten years and you go why would you buy it if it’s been sitting for ten years and the reason we bought it because there was a problem on the site, tree preservation which you brought up this morning Lee.
Richard: Aye, you touched upon that earlier.
Stephen: So on the site you’ve got maybe a third of the site has got a yellow line right through it and anybody who’s ever seen this would go it’s a tree preservation, so you lose a third of the area of your site, if you’re losing a third of the area you are losing a third of what you can build on but our lawyers, because we use the best, we pay the best as well which is unfortunate for us but when you use the best, it’s amazing the gold that’s in them, so it’s a wee bit extra to pay or triple what everyone else pays but they found out that even though it was highlighted on the title as a tree preservation, it wasn’t in a conservation area, which means that becomes null and void, which means you can build on the whole site.
Stephen: So the person came to see me on Friday and said “But I heard there’s a tree preservation on the site.” I’ve got the email here. And I said, I’ll send you the email and it says it’s not a conservation area and went well done.
Richard: There you go.
Stephen: So that’s a bit of luck, that’s what we aimed by using the best.
Richard: And you’re using that expert, exactly. And Lee you mentioned surveyors earlier, so they’re part of the Power Team, are they specialists? Who are we picking on? Who have you got surrounding you? So when you’re going into a potential opportunity, right I’ve got my lawyer, my sourcer has found this for me and what’s the deal with these surveyors? Who are they?
Lee: I think, it’s really down to the experience and build up that kind of track record with your architects is obviously a fundamental one.
Richard: That’s another one you mentioned, so architects, we need that.
Lee: Obviously, lawyers you need the right lawyers to get the right contract for it between yourself and the landowner which you know all about.
Stephen: But look at the meeting we had last week, we were sitting with funders, second charge funders which are part of the Lloyds bank group and they’ve got one hundred million to fit right into, somebody will give you 70% of the land they’ll give you the other 30. They want a bit of meat on the bone, they want you to put something in, but they’re there and it’s not a done deal with them, they’re a certain criteria but you’re asking for surveyors. The Power Team surveyor, we can pick whoever we want, can’t we? But whoever the money comes from, always instruct their surveyor.
Richard: Ah right, so that’s key, is it?
Stephen: We prefer Mike Frank or Savills or someone else and that’s what the guys said last week. He said “We’ll just instruct ours.
Richard: Ah right, that’s good to know, anyone else in that team? Anyone else we need to call upon?
Stephen: Your own Power Team, because Lee has an amazing Power Team round about him.
Lee: I mean obviously another fundamental, I mean this is probably one of the key ones again it’s the lawyers, is a planner, you know a good town hall planner, somebody that knows the planning, I always go to him first, that’s my first protocol. If I find a site, I’ll look at all my checklists, see what’s what, if it’s a good enough site, if I feel like it is, I’ll go straight to him, normally to start with. And I’ll say to him, here’s a site, can you come back to me with your kind of feasibility of what he thinks, that the council will ask, what they’ll look for, can they build flats, what height can the flats go?
Richard: So like restrictions?
Lee: Of course, so that’s by far your first protocol, so having a good planner. There’s a good few planners out there to be fair, so getting inside with a good planner and then obviously from that point if you feel happy, he’s kind of, you know I’ve had a few sites where I’ve sent him over and he’s came back and he’s like well you’ve got restricted access, I reckon you’ve got big problems with the traffic impact reports because it’s on a busy street for example. So he’ll just red flag a few thing to the point where you sit down and go well is it really worth taking this site beyond this, is it worth bringing in the rest of the team i.e you architects. You don’t want to waste people’s time, you want to make sure you’ve got a good deal and it’s all about your Due Diligence, I mean that is the fundamental.
Richard: That’s the thing.
Lee: Do your own Due Diligence, but again Stephen touched on that as well, it is really down to your experience. Now, I remember when I bought my first property, getting the first mortgage on it, looking at the first refurb costs and I’m sitting there going, this is just crazy. We’ve all been there when we’ve bought our first house but now fast forward, bloody over one hundred houses, you’re sitting there going I don’t even look at them, I don’t even go and view them I just buy them and I’m not saying that through like an ego thing, it’s came down to the experience of that and obviously grown to a point that I’ve been able to go into land stuff and for me to be able to work alongside Stephen and look at bigger deals, you know I’ll pick up the phone and say Stephen, I’ve got a site here and he’ll come back and it’s always good to bounce back ideas and say well that’s actually that’s okay, that’s not bad, I’ll put that in category C, so I’ll maybe put that to the bottom of the pile and bring other ones further up. So certainly a planner is fundamental, your architect obviously.
I mean it’s down to your track record, our architects don’t charge because obviously they know, No Win, No Fee but certainly we’ve got deals that are working, so they’re getting paid for things like that, so they are happy to look at other things. For anyone kind of starting out, I would certainly look to use smaller architects, where you’ve maybe used them for an attic conversion or an extension, that kind of property stuff. If you’re moving into that and look to obviously speak to that same architect and say look I’m moving into land and stuff, would you be able to do feasibility and sketch drawings.
I mean it’s very rough, nothing is concrete, nothing is ever concrete until you’ve got into planning and then planning the site is still a good example, we’re thinking ok fifteen units great and they came back.
Stephen: They denied it, down to ten or twelve and fought us on six. Because it’s all about, you use an architect, see you’ve got different levels and if I’m doing a house or a single house, you go an architect or a small engineer and then you go, I’m going into a housing development, when it’s a planner. So we go back, what is a planner, do you still need your architect? A planner has his own architectural team.
Richard: Ah right, okay.
Stephen: But the planner sits and talks about policies, so Glasgow City Council policy is we need a thousand houses or we need them in this area or that area, so he knows all that and he sits across the table arguing the point with someone he went to Uni with or his pal or whatever. So they’re all going like “I’m smarter than you”. So then you go, talking about different levels, that’s why we like to hold your hand for the first one or two because you’re walking from an architect and then you going on a big step, so you’re jumping from the first step to the sixth, planner.
Lee: That’s right.
Stephen: Right, so you go planner and if you want a development above fifty units, it’s a major development. So you then go into time scales, six months is not enough, I need a year and a half. One thing that I will stress about land, land is a part-time job, it can be massive, life-changing work when it happens but it’s a part-time job. You don’t wake up tomorrow and go I just want to go and buy and sell land, I’m going to quit my job to do it, don’t do it with land unless you’ve got a couple of years money behind you, it’s a part-time job but it’s very fruitful and you’ll enjoy it but don’t make it your only thing.
Richard: That’s interesting, I like that. Now if you guys had to start again, what would you wish you would have done differently? Is there things where you’ve found out the hard way maybe and the first deal has maybe been a bit of a nightmare or maybe the third or fourth deal? Oh this happened, I wish I hadn’t… So if you had to start again tomorrow, what kind of things would you wish you would have done differently that you never did at the start of your journey?
Stephen: Well if you’re asking me, I would say we are doing it right now, I actually we’re doing the way, we are buying land the way we should be buying land now, if anything I’d still like another year on the timescale because that would allow us to drag it all through but right now I think, I think we’re in the sweet spot, I would build up a bigger Power Team.
Richard: A bigger Power Team, right okay.
Stephen: It’s amazing because Lee has done that and it actually benefited last week when we went to that meeting, even though it was a preliminary meeting that they get you in, listen you need wisdom round about you, one of the guys at the meeting was sixty another one was seventy, I’m 31.
Richard: It’s a good thing this podcast is audio only.
Stephen: So I was saying to Lee and Ian who was with us, I was saying who blessed is Lee because he actually gets it, you know you’ve got a guy at that age, a guy that age, I’ve got this guy here, he’s the best looking guy right. But I think Lee is on it, I think he’s on exactly where you should be at. Now yes I have the experience, but everything changes, it’s a new day and what was great five years ago isn’t great today, you’ve got to move with it and any job will tell you that.
Lee: Yeah I’ll second that, it’s definitely your Power Team, I mean you don’t know it all and in land it’s such a vast amount of knowledge that you need in so many different fields that you know, you can try and become the best and knowledgable about it all but you’ll be doing that forever.
Richard: You’ll never achieve that.
Lee: I mean it’s like buying property, you need to have the right Power Team, you’re not going to try and do the lawyer’s stuff, that solicitor stuff, why would you? You pay for that expertise to carry you forward as you would with getting the right mortgage, I know you go to a mortgage advisor because at the end of the day you could spend weeks trawling the net, saying right, I’m going to save fifty quid if I go with that mortgage, I mean look at the time you’ve taken up so certainly, I would definitely say that as well, probably building a bigger power team earlier would of probably excelled, would of been a bit quicker but nevertheless we’re still on the right path, we’re still going in the right direction.
For any listeners listening to this, I would say definitely Power Team, I mean you could spend years looking at planning and how to apply for planning and you know how do we speak to owners of land.
Richard: Then you’re never going to start are you?
Lee: Never, you’re never going to start.
Stephen: I think what’s going to happen is the Power Team will get wider as well because what it will be is, Yes you’ll have all your expertise, you’ll have that he’s been in business for fifty years, he’s been there, he’s been at the top financially, he’s dealt with that financial constitution, he can open doors and then you go right okay, that’s the power team, that’s them round the table, let’s get the money for the development, then you go, let’s get deeper than that and you’ll go, let’s have your planner on a retainer.
Richard: Right okay.
Stephen: So instead of fifty grand a deal, they might be on four grand a month or five grand a month and then your architect, a couple of grand a month and your engineer, so actually passing volumes. It’s going to take us a year or so to get that, it’s like working but I would say the perfect run would be to have ten spots filled and you’ve got every single person on a retainer.
Now you don’t want to be working for your retainers because that can happen as well and me and Lee have had a conversation about that maybe six months ago, when you need this you need this you know but before you know it you can be paying out twenty grand a month just on retainers.
Richard: And there’s nothing going through that pipeline.
Stephen: So what you do is you build heavy first, so I think right now we’ve got maybe seven, eight sites that are done, now you bring in the power team underneath it so it’s not the cart flogging the horse, it’s let’s actually get the volume, now we’ve got the business to do it, let’s bring them in, but softly because each individual has got to be strong enough to deal with the way we are, so you can have the best planner in the world but if he’s weak, he’s going to take an easy six instead of a hard twelve, that it.
Richard: Right okay, I like that. Right going to bring it to a close but I’m going to take yous back in time. Do you both remember your first Land Deal? Do you remember the details of it? Oh we’ve got nods from Stephen, yeah what can you remember from that?
Stephen: I was very naive when I done my first Land Deal and this will help people as well. It’s never simple with me, I’d done an option deal to buy a piece of land of someone and get him ten grand, it was a wee sight in Bellshill for about twenty units. Now I had used a poor lawyer, is the best word for it right. Even though I’ve got better words than that but that’s about the best I’m going to use.
Richard: It’s a family show.
Stephen: So the lawyer I’d used was really just a conveyance lawyer I had used to buy and sell a flat and I had used them to do a deal. Now anybody who knows anything about land and you’ll get maybe 10% of the listeners who will understand this but on the site, they own a piece of ground that’s called the title, so you get a drawing saying there’s a title, that’s your house, that’s the piece of land but on that title, it was split in two. One title had one and the other had twenty-nine so it had thirty titles on the one piece.
Richard: Oh my goodness.
Stephen: Probably why I got it. So I’ve got a basic lawyer, so I’m out my depth and to me I’m going, he’s going do you want to just test me, do you really want to do this, I’ll get something better for you, do you really want to go down this route. So he goes like that, six months or eight months later, I’ve also linked into my off plan sales, so I’ve now sold them all off plan, even though I’ve not bought the site.
Richard: Right, okay.
Stephen: I’ve not done the transaction but it’s all there waiting.
Richard: Aye, it’s all line up.
Stephen: So i’ve got a company down south who I want to do great business with, who I did do great business with. So I’ve got the pressure from there, I’ve got two business partners, I’ve got the pressure from the two business partners and I’ve got the pressure of having the worst lawyer in the UK and 30 titles all on the one title and believe me, I got it done one Friday afternoon and I think my heart skipped a beat, it wasn’t even about the deal, it funny how you get your dream done but there was no joy in it because I was just putting out fires for the people round about me and great, I’ve started a great business with the two business partners, I started a great business with the off-plan sales and I finished never using that lawyer again. So I knew exactly what I was to do but that was my first land deal and to be fair for anybody who thinks it’s going to be really tough, it’s going to be tough. Once you get through the first one and it’s like do you really want to do this, it’s your energy, if you want to do it you’ll do it. So if you’re going to quit, quit.
Richard: That’s amazing to still kept going after that first effort, that’s fantastic.
Stephen: Well to be fair, that was my experience, because I didn’t even understand, I mean you could of asked me before about a title, I wouldn’t of known. All the terminologies, sitting in meetings and they’re talking about traffic assessments which they call TA, I’d end up talking about the Territorial Army. So listen, we’ve all got to start somewhere.
Lee: It’s all about the experience, it’s all about the experience.
Richard: What about Lee? Where did he kick off?
Lee: I’ve been quite lucky in regards to land and that’s because when I started the journey I met Stephen. So lucky for me, I’m using Stephen’s experience and his knowledge and what his pitfalls, I mean it goes back to your Power Team and who you work with and who’s around you and that is the Path of Least Resistance, go down a path, where you can leverage and use other people’s experience to kind of catapult you forward in a way that you can do deals of the back of their experience.
Stephen: No but it’s funny because the deal that Ashton Lloyd and Lee are involved in, it took two year to get to fruition. Now Lee come in, he’s just one of those lucky guys that runs in with a white flag at the end and steals all the glory, right so, there’s a journey in it right, not everyone is like that but I always think, I mean remember we’ve went from Land wasn’t really that attractive for maybe five, seven years, it wasn’t the thing, house builders got it but other people didn’t get that but then you see the window open up again and it just shows you, two years to get to that point and then walk through the line and now we’re getting them, we’ve seven or eight and that’s this year.
So the first one was a hard one and now we’re on it’s like pushing a steamroller, it’s moving, dead easy.
Lee: That’s like what you’re saying about how it’s like a part-time job and it is because it’s so, I mean two years like you said, if you’re sitting there and like I’m going to quit my job and move on to developments and I’m sitting there and going I can’t believe this land deal has come to fruition, well we’re quids in because it’s not, it doesn’t work like that. Even if you do get it through planning, it’s still a process to that and then you’ve got the build time, you know twelve, eighteen months, twenty-four months depending on what size the site is, you know you can always take a management fee throughout that kind of process but still, it’s a long process. So certainly for myself and where I was, it’s experience and then move in from the properties, commercial conversions and then it’s a kind of stepping stone to the next kind of thing, jumping from nothing to land, I mean crack on and I wish you all the best but it’s definitely a journey, you should definitely go through a journey of the process of each kind of thing within that kind of specific role or job.
Stephen: You learn as you go, it is, it’s a journey and I’m still learning, we’re all still learning. There’s new systems, new planning regs.
Richard: Exactly, it’s always changing isn’t it.
Stephen: When I first started doing Land Deals, there wasn’t a thing called a badger report, now there is. It’s crazy, I mean you don’t take, SUDS is a big thing now, every site has got to have drainage.
Richard: What’s that?
Stephen: It’s soil under drainage, you’ll see on big housing sites the first thing they build is the pond where all the excess water goes.
Stephen: So regulations move, so imagine being stuck back ten years ago where that wasn’t a major and housing sites just got flooded. So everything is changing, it’s a moving target but as Lee says it’s not a full time job but it can be the most lucrative and if you’ve got a piece of land, you own a piece of land or your family does, there’s definitely great value to be had in it as long as, I mean I meet so many people and I just walk away from deals, they’re too clever in the deal. There’s no chance we’re going through a two year process to make you the money Richard, we’ve all got to win, so if you’ve got it and you want all the money for you then you keep it because we are business people, we’re doing it to make money as well, right so we’re not just doing it for the fun, it is a bit of fun but we’re doing it to make money, but if somebody wants all the cake and eat it, then good luck to them. I’ve seen it, I got offered a site, Laura brought it to me actually and I’d been offered it, I’m not going to tell you how many years ago because it’ll show my age and it had to be done this Friday and I said just let them keep it, I’m not interested.
Richard: Right okay, okay.
Stephen: So it’s like that, there’s being too clever in it, you’ve got to be open minded and realise it’s a journey but listen, it’s for the brave.
Richard: Yeah, it certainly sounds it, that’s for sure. That’s fantastic gents, we are going to bring that to a close to be respectful of these gentlemen’s time but I think the listeners have learned a tonne, I really do, fascinating subject and I would like to thank our guests on the show today who have been Lee Hounsom and Stephen McKenna and if you would like to connect with any of the guys then all you have to do is go to thisweekinproperty.com and you can check out the show notes for this episode. You’ll find the contact details for our guests along with any of the links and resources that have been mentioned in the show.
Now I want you to write down two other links dear listeners, we’ve got algpropertynetwork.com and that will help you if you’re looking for high-level networking events in your area and also if you’re wanting to start your property journey or if you want to take it further, you’ve maybe already started then head over to algpropertyacademy.com and check out the resources there. That’s all for today, thanks for tuning in and we will see you in the next show.