Grand Designs for Your Property Portfolio
How Good Design Can Add Value and Increase Cash Flow
In an industry that is overly familiar with magnolia walls and brown carpets we are all aware that we could be doing more to make our properties stand out, to encourage better tenants and ultimately to increase our cash flow.
Julian Maurice of Icon Living believes he has the answer. A pivotal and influential figure within our industry, Julian spends his time pushing the boundaries, creating well-designed properties that stand out from the crowd, are appealing to tenants and make a great profit. An investor and landlord himself, Julian works with investors and developers alike to help them to achieve their goals through the application of great design. He enjoys challenging people to incorporate design principles into their properties, raising the standard of rooms available throughout the country, challenging perceptions of our industry, and working hard to give landlords a better name.
We met up with Julian to find out what it is that drives him, how he tackles his projects and how he can help those of us who know nothing about design to make the most of our properties now and for the future.
A DJ and graphic arts student in a past life Julian unleashed his creativity during his time as a building contractor, always finding a creative outlet in his renovations – “You could say I was a Creative Builder, always putting my creativity into the mix”.
“Pretty much everything that I’ve worked on has been a wreck or a neglected house. Essentially, I get a raw piece of material and turn it into something visually appealing, doing everything from stripping it out to putting in the furniture. I get an opportunity to apply consistent design across the refurb, creating quite an amazing looking property for very little more than doing a very plain job.”
He explains that when it comes to a buying (or renting) decision, 93% of the decision is visual*, which is a useful statistic for property developers and investors to bear in mind when planning refurbs. Putting more thought into the visual aspect of our properties could not only help to make them stand out but could also mean the difference between getting the right tenants from the outset, or getting the wrong tenants and having void periods.
Julian believes that you have to take a different approach with every property, not only in terms of location and property type, but also in terms of what you are trying to achieve, your tenant type, your budget, your exit, etc. Here Julian explains his approach and the process he goes through with each property…
Know your market and work with it
“You need to understand the market and where you fit within it. There are always going to be landlords that do the bare minimum, but that doesn’t mean you have to do the same. Nowadays, the market is maturing, especially the HMO market. There has been a lot more interest in HMOs in recent years, which means the market is becoming more difficult if you have a more basic property. By putting in good design, you’ve got a much better chance of finding good tenants.
“The student market, for example, has changed in recent years, and it has been hugely beneficial to the industry – benefiting the more astute investor, whilst damaging what I would call, the ‘Magnolia Brigade’. If you look at the student market in Leeds, for example, the average rent on one of the student blocks, the flat rentals, can be as high as £750 a month for a room, which is significantly higher than the rents we have seen in this area before. They’re beautifully designed and kitted out. They’ve got gymnasiums and shops and all sorts of things. They offer every facility that a student could want and they ask a real premium for it. If you look at some of the premium HMOs in the area, they now ask a much higher rent than they used to do because of the uplift that’s happened due to these purpose-built student properties. Their rental values have gone up for a good product because they were piggybacking on the back of these luxury student blocks.
“Some might say we are now in oversupply, which is true, but these are often very small rooms in big blocks of flats. In my experience a lot of students actually prefer to live in a shared house with other people. They prefer that environment, which is good news for you if you have a good quality HMO and can compete with the high-spec of the blocks of flats. On the other side of the coin, if you have a low-spec, low-quality HMO you will be less able to compete.”
It is true that due to the top of the range student blocks Leeds is one area of the country, but not the only one, where we are seeing the gap between the high rents and the low rents widensubstantially. Julian believes “If you’ve got a great house, you really shouldn’t have anything to worry about.”
Who wants a low-grade customer?
Many of the adverts on SpareRoom and Gumtree are fairly uninspiring. You often see rooms with bare bed frames, bare mattresses, no duvet, no artwork on the walls, and terrible images often showing damp walls, or rooms from a strange viewpoint. A few years ago Julian felt compelled to stand up at his local Property Investors Network (pin) meeting to talk about it. He was shocked that this was what people were doing.
“I can’t think of any other business where companies put a product on the market that is going to attract a low-grade customer, deliberately. It just doesn’t make sense to me.
“Property is a business. If my (and my client’s) properties produce well, they will be worth money. If they don’t produce, and they start going downhill, they will become a poor business. That’s when I will become a motivated seller trying to sell the damn thing. Of course I want to do everything I can to ensure this doesn’t happen and this is why I keep my properties and my client’s properties looking great.
“Clients I have worked with have consistently found that they not only get more rent but they can also pick and choose their tenants. Because the property is high-spec they don’t need to take the first person that walks through the door because they know that if something doesn’t feel right, someone else is going to walk through the door pretty quickly and that person will be better. It avoids so much aggravation because you can select who your tenants are, which enables you to get rid of a huge headache.
“You’ve got to be proactive with maintenance too. But if you get the right tenants they will look after the property and you will have an exit strategy as well.”
Design usually comes last, which is the wrong way round
“I think a lot of investors get a thrill from the chase. They get a thrill from the deal. They do the deal and that is their high point of the process. They’re excited. They love it. That’s where they get the thrill. They want to move on to the next deal. When it comes to the design-side of things, they often aren’t interested or they leave it too late or they leave it to the builder, who will only do the basics.
“After the inevitable aggravation of the purchase process, it’s easy to lose interest. It’s exhausting buying a property sometimes, and dealing with different trades and issues with the build can really take their toll on our enthusiasm. By the time it comes to the end of the project not only does the builder want to get off site, everyone wants to get off site and move on to the next thing. When people actually get to the crucial bit – which is the finishing touches and creating that beautiful product – everybody wants to get away from it. Plus budgets have been squeezed due to unforeseen elements with the refurb and the last thing on your mind is spending more money on furniture, artwork and bedding. I have seen it happen so many times and I totally understand why. With all the best intentions people invariably leave it too late to incorporate design and that’s why we see so many magnolia walls and brown carpets.
“If you imagine the last part of a running race, it’s the most painful part where a lot of people start to flag. Refurbishing a property is the same. But ultimately it’s the end of the race that is the most important and the part that you absolutely must get right. It’s the difference between winning and losing. In property the finishing touches are pound for pound the most profitable part of the job – the detail at the end. That’s what makes you the most money long term. If you screw up on the design side of things, you have the potential to lose a fortune!”
Design it well from the beginning
“I always specify (spec) the job fully at the start. I love the process of a property being transformed. I take a lot of notes at the beginning, which enables me to get good quotes at the end.
“Getting the spec right takes time, and it is time well spent. If you work out the full spec before you meet the builder you know exactly what you want to achieve and can start to map out how it is going to work, working with the builder to help you to get it right, and on budget. The spec should include design and refurb elements – the two go hand in hand.
“The spec should include design and refurb elements – the two go hand in hand.”
“Sometimes people call me The Cushion Guy, which I don’t mind, but it’s so much more than that. I prefer to call myself a Principle Designer. I design all aspects of the project from start to finish. A lot of thought goes into each aspect of the design and refurb spec, from colours to fixtures and fittings. There is a certain finesse to it.”
Think like a designer
“The most important part of the process in terms of the look of a property is thinking like a designer and working with the materials. When I look at a house I take a lot of pictures first of all. I’ll look at the type of property that it is. Some properties are very light and airy, some are quite dark. I look at the light. I get a feel for the property and I’ll get an idea in my head of what I want to produce. I’ll create a vision of what I want to create with that property using the images that I’ve taken and changing them using Photoshop to create the room or the look that I want.I know what it’s going to look like at the end before I even start. Then I work backwards from that.
“The other thing that I also do is check the local market. I look at what’s available in the same and nearby areas. I look on SpareRoom. I look at what the higher-end priced properties are looking like. I’ll look at what the lower-end priced properties are looking like so I can get a gauge of what kind of accommodation there is out there. I always recommend to clients to look at how many rooms there are available in their area. If they’re in any kind of major city there’s going to be around 600, 700. I challenge them to find many good ones that truly stand out. Then my aim is to blow all the others out of the water, so if anyone looks at the property online, it will easily stand out from all the others.“
More than just a feature wall
“A feature wall can be a great addition to any room, but it’s not just about painting a wall. You have to think about the colour scheme, lighting, light switches and fittings, cushions, artwork, door handles, as well as spec-ing the kitchen, the tiles, the carpets or vinyl flooring.
“It is a process. I put a huge amount of effort into the design of each and every property I work on. It takes me a lot of thought and effort at the beginning and attention to detail is key. There are so many elements to think about, and I always cater my design to my audience. For my HMOs I kind of emulate what the high-end student market is doing in terms of fitted furniture and other items that are durable. I also make it look really stylish, dress them well, use nice colours, put in things like wall-mounted TVs, not too high up on a wall like I see a lot of people do. I put in subscription services, good WI-FI in the properties, and just make them so that once the people move in they’re not going to move out. I aim to create small communities of tenants.
“Many people think it’s not worth adding great design into LHA type properties, but I disagree. You just need to think smart. If I was looking at an LHA project for example, the first thing I would be thinking is how long do I want to own this property and how much abuse is it going to get? If I expect that the house is going to incur some damage along the way, I design with longevity in mind. I look at fixtures and fittings. I look at door handles, possibly the quality of the doors, how the kitchen’s fitted, how the bathroom’s fitted, so that if I need to replace anything it can be done cheaply and efficiently or the materials will last a lot longer. If you want to make a profit then you have to think about the design from a longevity perspective.”
Know your materials
“It’s important to know your materials, and what’s available, as you never know what’s in stock at any one time. Take for example my local tile suppliers, they never seem to have the same tiles in from one project to the next. I’m not going to go, ‘Right those are the tiles I’m going to use from here until eternity’, because stock changes. You’ve got to recheck everything and make sure that what you’ve chosen is still in stock or better still, you might find a better product. Every job I do I review the design every time.
“Never just get the cheapest of anything, just because it’s the cheapest. Think about wear and tear. You have to think about whether making miniscule savings at the front end is more beneficial than long-term profits from getting it right first time. I gowith getting it right first time, every time.”
Helping others to achieve the same great design
It is clear that Julian is passionate about design and refurbishment and that he takes the time to know his market, his potential tenants and then provides a visually appealing and very comfortable home, in which they will hopefully live for a long time. In addition to refurbishing his own HMOs, Julian works with many clients on their projects to help them achieve maximum stand out and increase cash flow. To try to give something back to the industry, Julian also created a manual, which guides people through using design principles to add value to their properties. The manual contains several complete designs that are easy to follow – the colours, the colour numbers, where to buy all the cushions from, what cushions to buy, even the artwork that matches the designs, plus it also contains trade suppliers for furniture etc as well as contact details and discount codes.
“Using the manual makes the process easy for everyone. Everyone uses the manual differently – some follow it to the letter, with fantastic results and others add their own spin to it, which is great. I am really pleased to say we are seeing some amazing properties on the market, created by people who were scared of the design process before. But, who now realise it isn’t difficult if you have a helping hand.”
If you are interested in speaking to Julian about how to incorporate good design into your property then contact him below. Alternatively if you are interested in the manual visit his website for more details. And look out for more design- and- refurb-related content from Julian in future issues to help your property investments perform better.
Case Study 1: Waterside Apartments Leeds
Project: To furnish a block of 180 apartments that had been empty for two years. The builder had gone bust and so the project also required additional snagging works, repairs and general maintenance works as the block became occupied.
Client: Mayfair Developments Manchester
Market conditions: There was an oversupply of City Centre apartments and the block was located in an undesirable area adjacent to Leeds inner ring road amongst vacant industrial units.
Work involved: To design and specify furnishing schemes that would ensure a speedy transition to full tenancy in as short a time as possible.
Outcome: All apartments let as my team completed. All apartments let at higher than average market values, all snagging and maintenance issues dealt with using my small local team of independent tradesmen.
Within a year of my team completing works the developer had sold the entire block to a single investor.
Case Study 2: Daisy Spring Works, Sheffield
Brief: The asset management company was left in a position where they were obliged to acquire a large stock of apartments in Leeds and Sheffield after many of their investors pulled out of property purchases. Apartments were in negative equity and a combination of poor furnishing and poor management had led to apartments being abused and falling into disrepair. The company could not offload the properties as the market had collapsed.
Market conditions: The same conditions applied with this client as with Waterside – the apartments were in poor locations in a market flooded with comparable properties.
Work involved: I applied the same colour design technique I had applied on the 180 apartment block in Leeds, using the same small team.
Outcome: The result, all apartments let as fast as they could be furnished.
Case Study 3: HMO
Project: To acquire a small portfolio for myself using my war chest gained from the large furnishing contracts. I needed to create income security.
Rather than look for large HMOs, I took the experience gained through fifteen years working with investors and seeing their mistakes and went small. Buying 2-bedroom terraced houses and turning them into Boutique ‘MiniMos’.
I now have a small portfolio that allows me to pick and choose who I work for and what I do.
I have designed them to achieve maximum long-term rental income, to require only minimal maintenance and management.
Outcome: All properties let consistently with very low turnover. None of the properties require cleaning as tenants look after them so well, all properties are now on 60% LTVs as they have gained in value and all achieve a net ROI on cash flow of around 22%, all that on a low-cost, low-risk property asset.