Navigating property development & investment after coronavirus
Summers! …Money …Feeling hot, hot, hot!
In 2002 I did a study for a client on a location for a new hotel site from a selection of three different cities in the South East. From my research I was quite astonished and a little apprehensive to discover from a prediction made by the Meteorology Office that Bournemouth would be as hot as St Tropez each summer by the year 2020.
I recommended Bournemouth (instead of Winchester for its history or Southampton for its cruise liners). Asian tourists were predicted to rise over the next two decades and they love history, culture and novels etc. All of which Winchester is steeped in, so it seemed promising. Southampton however had a growing cruise industry with a thriving passenger overnight stay stream, highlighting it as the right destination and finally Bournemouth. It had a very vibrant university with international students, therefore likely to have visiting parents for several days. It also had a huge conference centre – both providing year-round business, and an airport and ferries going to France and Spain so I thought, all in addition to the fact that it was a faded tourist seaside town for English holiday-makers. The study reminded me that people began to fly overseas for annual holidays because they were guaranteed good weather. Bournemouth, I decided, was the right location of the three. I decided that I’d invest there too. So, I did. Almost twenty years on it has served me well. My investments are looking better than the stock market might have returned to a novice as I was when I began. Property investment held less risk, however there is the compliance and the maintenance and the accountant fees before the taxes; as well as occasional voids, agents’ fees and service charges – not to mention the occasional bad tenant.
Once I had a house that the tenant sub-let as rooms in breach of the tenancy agreement for single occupancy. The previous occupant was the CEO for Europe of JP Morgan Chase Bank – the house was immaculate after years of great tenants – and I still have JP Morgan Chase as a tenant some twenty years on – when I haven’t let to them, I have had bad tenants. I pursued one. I tracked him down via a private detective in another city and served him with court papers, froze his bank account and finally in court got an order for damages and debt. He had a very expensive car too. He paid every penny but by the time I refurbished the deliberate damage incurred, funded the outgoings and calculated the loss of rent I had still not broken even. I learned from that! And if it ever happened again – I won’t lose.
The moral of that story is that whenever you think you are winning, you just might be level – not winning and you might even be behind the curve too. The impact on business, not health caused by the virus feels like that moment. People appear to be nonchalant; perhaps it is all the great weather the UK is having… and yes, Bournemouth stood up to its predictions and what an investment it’s turned out to be for me – it is after all my pension! I should have been travelling around the world and enjoying life carefree at this stage but the world decided that people can live longer – so they need to work longer and that’s what I seem to be doing – apparently when my pension plan arrived the other day it allows me to reinvest it for another 25 years – I’m not even sure what I’ll have for breakfast, so how can I decide what I want to do with the money I need to live on in 25 years’ time?! How much will it be worth? It just feels like these little things jump up and bite us when we aren’t looking – another warning!
Yes this is convoluted but, the point is those that do not plan now for at least the next three years of work, income and risk caused from the fall-out of Covid – nope I’m not talking about the virus I’m talking about the devastation that occurs because there’s a virus – will suffer financially and they will suffer hard and may even take some decades to recover, if they ever do. This isn’t a national crisis – the country isn’t in recession… the entire world will soon be in recession! It will be hard and long and it will bite deep for those people that are not forward-planning to create some insurance around its impact. There will be pain. For those of us with children, it is a concern how their lives might end up – and we all want our children to have more than we had. It’s human nature.
Interior designers create and generate revenue in consumer facing industries such as the hospitality and retail sectors, but in this global recession – those industries are struggling hard and many outlets won’t survive at all. Those sectors will need to seriously review how they reinvent themselves and to do that, they will need to look at the world 20 years on to create a model to meet those needs. It’s not the wondering about getting the work in that will be an issue, it’s getting the payments in once the work has started that will be the challenge and funding the chase. Sometimes things go wrong but if it’s planned – and there will be many who will deliberately plan to walk away without paying – if you have not factored into your balance sheet the cost for chasing debt to recover fees (even if it financially doesn’t make sense to pursue debt, sometimes the costs can be offset against taxes) – you need to be a girl guide. So be prepared! Build your foundation now and as much as you can, sort out your finances! I am still talking with government twice weekly and together we strategised how to generate change, but we are looking at the world in 2030 to 2050 for the interior design industry. Come on, keep up! And in the meantime, I’m fighting for non-payment to be made unlawful. Fingers crossed!