Fear and Faith
How Paul Merrick Built His Property Business
Paul Merrick has been in property for over twenty years. He has built a reputation on making shrewd purchases, recognising opportunities and viewing each property creatively to maximise its return on investment. He has a large, mixed portfolio and is much in demand as a keynote speaker and consultant.
With all that experience, we were delighted when he agreed to share some of his knowledge with us. From a first project that definitely didn’t go according to plan, to a recent grant-funded refurbishment, Paul shares some of the lessons he has learned.
Paul, can you briefly explain your property experience?
I established my first property company, Braidcrest Ltd, in 1998 and initially worked on it part-time. I now run a number of successful property businesses with a mixed portfolio of commercial, industrial, residential and greenbelt. Over the years, my businesses have been involved in every aspect of the property industry including: researching; purchasing, refurbishment and development; property flipping; and joint ventures.
The foundation of all my businesses rests on investing in people, processes and property. I am proud to have worked with a number of public bodies as a consultant including local authorities and regeneration agencies as well as major PLCs.
Last year, I established Professional Property Training to share my experiences with new investors and individuals just starting their journey, and run it alongside my current development and rental businesses.
What was your first property purchase?
Unlike most people I did not buy a residential property first. I was still living in rented accommodation and had a plant sales business, selling the big diggers and small plant that you see on building sites.
As both my home and commercial premises were rented, I wanted to buy something of my own. I found a piece of land in an auction that looked suitable for building a house and a commercial building. It was about 0.2 of an acre (so quite small) but I thought I could squeeze a house and premises on it, and it would not be too expensive.
At that point I had more ambition than money!
What research did you do on the property?
I found out that it was part of a land disposal from a large brewery. Although only a mound of grass at the edge of a field, at some point many years earlier it had been a tiny cottage and a little pub called The Rat Pit. (I wonder why it closed!) Since it had been used previously for both commercial and residential, I thought there was a possibility of getting mixed use planning again. I knew little about the planning process at that point but the site was not a huge outlay at £2,500; if nothing else I could use the experience to learn more about how planning worked.
What did you learn from this first purchase?
I learned a great deal from the purchase of this tiny bit of land, the first thing being that there are different types of auctions. That’s now one of the ten strategies I teach on my training course. The other thing it taught me was how much money you can make in property.
You’d hoped to learn about planning too. What happened with the planning process?
I bought the site and the next move was planning. I found an architect who was just out of university and keen as mustard but not overly expensive, and we started the journey. He prepared a planning application for one small house and one slightly larger commercial building only to discover that there was an existing application for the site – for an open cast mine. That was a bit of a shock!
The application covered a very large site of which my corner was a tiny part. Consent had been granted for the open cast mine but it turned out there was a fly in their ointment: ME. You need to inform all your neighbours when applying for planning and my site was so small they had missed me.
The outcome of this was that their planning was invalid. They had a £multi-million site that they could not use without re-applying for planning. They tried to buy my little piece of land for ten times what I had paid for it. They even offered to swop a larger site for it! But I refused and said I just wanted to ‘build my little house, thanks!’
If you had stayed with your original plan of building a house and premises, the open cast mine would have been stalled. What did you decide to do?
Negotiations went on for about three months until we came up with a compromise. They could rent the land for five years (the timescale for the open cast mine to extract all the coal and then put the site back to its original green belt). We agreed that they would:
- Pay a rental of £5,000 pa for five years, totalling £25,000.
- Clear the site of all the rubble left behind from the demolition of the original cottage and pub.
- Support any future planning application I put forward for my little site.
So a site you purchased for £2,500 brought in a profit of £25,000 and you still owned the site! What happened when the mine moved away?
By the time the mine moved away, my property business had moved to another level so I decided not to develop my little site. In fact, I still have it in my portfolio. As a first property it was a steep learning curve: on the benefits of researching a site; on the benefits of buying from the correct vendor; on the importance of adhering to the planning process; on the necessity of being able to negotiate with neighbours; and on the ability to be flexible when opportunities arise.
That was an amazing start. But in all your years in property you must have made some errors. What was your biggest mistake?
I made one big mistake: I waited too long to go full-time. Like most people when they start out, I only made a purchase occasionally then always went back to my day job. I can give you lots of reasons why I did that and some of them may even be good. But the outcome was I slowed down my success in property by waiting for the right time to focus on it completely. For ten years I protested, and articulated to anyone who would listen, about how the market conditions weren’t amenable to going full-time or about how I did not have enough experience to do so.
Then there was the best excuse of all: “I don’t have enough money to go full-time.” The truth was I was just too afraid. It was not until 2004 that I made the leap of faith and opened the property business full-time. To be honest a combination of factors eventually made the decision for me – one of the biggest being that I kept missing the big deals.
What’s the benefit of focusing on your property business full-time?
If you work in it full-time and have a real business, deals and opportunities come to you. People know what you do and have confidence that you are a professional so they want to work with you. As your reputation grows, you need to be available to take advantage of opportunities. When you are part-time you have the stresses of another job and your mind can only be on property part of the time.
What advice would you give someone starting out in property?
I always tell people to get some training and start full-time as soon as possible; that can be sooner that you think with the right help. I set up Professional Property Training just over a year ago to help people become professionals in property faster.
What would you say to someone who thinks they don’t have the funds to start a property business?
It’s about skills and attitude. It’s not about how much money you have.
When I eventually opened my property business I had little money but I had time. I was able to use that time to work at something I love. That time and commitment have given me a large portfolio of mixed properties and financial freedom to do what I want to do.
What was your biggest fear when building your business?
Fear of the unknown. That’s much easier to overcome now with all the great property training available.
What’s your best deal?
For me, it’s a bit like a rock star with their music or a director with his latest movie. It’s ‘the one I am working on now’. We have just bought two great sites: a 4.7-acre commercial site and a 1.5-acre residential site. Both are in the planning stages.
They’re both quite large – do you still complete smaller scale projects?
Yes, in fact the project that excites me most at the moment is a little shop that has just been completed with some grant funding. People don’t use grant funding in property nearly enough. Over the last five years we have helped companies get over £8.5m of grant funding as well as securing tens of thousands of funding into our own company.
Tell us more about how you used grant funding in this recent project.
This shop is a classic example of the benefits of grant funding. We bought it for £7,000. (Yes £7,000!) And applied for and received a 100% grant to refurbish it. The grant was for £25,491.36. I spend time teaching people how to do this on my course. It’s like free money and not that much work. I keep a timesheet so I know how much time I spend on each contract or each property. For the shop it was five hours to get a £25,000 grant. That’s £5,000 per hour! (Not a bad rate of pay!)
This was an easy one … if you know where to start. But most people don’t know where to start.
How can people access grant funding to enhance their portfolio?
Most people make the mistake of looking for a property and then for a grant. The secret is to look for a grant then find the property. In this case there were huge grants available for the regeneration of this area in Glasgow.
The Gallowgate has been run down for many years and is a more infamous than famous part of Glasgow. The local council wanted to create a new image for the area. We bought the shop because we knew grants were available. We did not buy a shop then look for a grant. It’s a vital difference.
We teach how to find grants on the course but suffice to say the key is finding the grant then the property. I love doing this because you get a property at a great price and perhaps more importantly you get to make a part of the city look and feel better. It’s a real win/win.
What happens when you receive a grant for a property?
It depends on the grant and the property. This refurbishment took about two weeks and was fairly straightforward. The council suggested a contractor that had worked on other shops in the area so we appointed them to carry out our refurbishment too. It was the simplest solution as our staff did not need to oversee the project.
We could have chosen our own contractor but that would have meant putting more time into it. One of the many things I have learned over the years is that time is money.
Most of us will not value our time as much as we do our money. We say things like “I’ll do that myself to save money”. If you want a successful property business, you need to learn to value your time. So on this one we let the council officer project manage the refurbishment. I got a call from time to time over the two weeks asking the colour of door handles we wanted or where we wanted the roller shutter. I always said, “Whatever you decide will be fine with me”.
Have you any pointers on how to manage a grant-funded refurbishment?
When you have a project underway, trust the people you employ to do the job. It’s easy to fall into micro-managing projects but it is never productive. Recruit your staff or contractors, then trust their judgement and knowledge.
When a grant is involved, focus on building a good relationship with the grant-provider. At the start of the project, agree clear deliverables and a mutually-acceptable timescale.
This project was simple and stress-free. I attended a few meetings, signed some papers and let them get on with it. It’s now complete and they handed back the keys last week. We have a brand new shopfront in a street with lots of new shopfronts in an area that is up and coming.
What are the final figures for this project?
The numbers are fantastic. We bought the shop for £7,000 including legal fees. The grant was for £25,491.36, the value of the shop is now £47,000. The rental value is £320 pcm which is £3,840 pa. That is a yield of 54.86% on my £7,000.
Grant funding is not something that only people like me can get. You don’t need to have 22 years in the property business to know how to do this. A little education and anyone can do it.
You have had a very long career in property and the techniques you teach and use seem very different from what’s out there. I am sure people will learn a lot over the coming months from your articles. What would you say has been the biggest learning for you over your years in property (whether in rental – both commercial and residential; development; planning and/or conversions)?
I think it’s about fear and faith. To have the faith that you can do all this; to face the fear of failure. To know whatever you need to learn, there is someone who can help you. To give back to others and to help when you can.
Property has given me a great life. I get to play with all my cars. I can go where I want when I want. I can build projects that will be here long after I am gone … and it only cost me one thing. I had to let go of my fear. I love YPN because it shows what is possible when we step outside of our comfort zone.
Every day, people are changing their lives through property and through my course I get to help make that change. I am looking forward to sharing some of my many property experiences every month and seeing the impact on people’s lives.