Lease Operator Strategies and Better Tenant Management with Jordi Pasqualin

How do you scale a HMO business from 0 to 1,500 rooms?

In this episode, I’m joined by Jordi Pasqualin, a former professional rugby player and now co-founder of BAM Capital. We talk about the unique business model of lease operators and discuss the challenges and misconceptions in the HMO industry.

Jordi also shares his insights and experience on scaling the business through acquisitions, logical planning approaches, and the sacrifices made along the way to achieve success in the property market. 

Topics covered in this episode:

02:48 - Jordi's transition from rugby player to property investor

06:57 - Understanding how the lease operator model works

09:49 - Overcoming challenges and stigmas in the HMO industry

12:38 - The importance of mindset shifts in growing your business

20:39 - Realities of building a successful property business

24:28 - Managing evolving tenant needs and expectations

35:21 - Future challenges and opportunities in property management

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Transcript

[00:00:00] Andy Graham: Hey, I'm Andy and you're listening to the HMO podcast. Over 10 years ago, I set myself the challenge of building my own property portfolio. And what began as a short term investment plan soon became a long term commitment to change the way young people live together. I've now built several successful businesses.

[00:00:20] Andy Graham: I've raised millions of pounds of investment and I've managed thousands of tenants. Join me and some very special guests to discover their tips, tricks, and hacks. The ups and the downs, the best practice and everything else you need to know. To start, scale and systemise your very own HMO portfolio now.

[00:00:40] Andy Graham: In today's episode, I'm joined by Jordi Pasqualin. Now, as you're about to find out, Jordi and his business partner, Alex, have built a really impressive and very unique business in the HMO space on a scale that very few people have been able to achieve. So if you're running your own HMO business, either a small or a large one, or if you want to build a HMO property business, this is definitely an episode you want to stick around for. Please sit back, relax and enjoy today's episode of the HMO podcast.

[00:01:09] Andy Graham: Hey guys, it's Andy here. We're going to be getting back to the podcast in just a moment, but before we do, I want to tell you very quickly about the HMO Roadmap. Now, if you're serious about replacing your income, or perhaps you've already got a HMO portfolio that you want to scale up, then the HMO Roadmap really is your one stop shop.

[00:01:25] Andy Graham: Inside the Roadmap, you'll find a full 60 lesson course delivered by me, teaching you how to find more deals, how to fund more deals and raise private finance, how to refurbish great properties, how to fill them with great tenants that stay for longer and how to manage your properties and tenants for the future.

[00:01:40] Andy Graham: We've also got guest workshops added every single month. We've got new videos added every single week about all sorts of topics. We've got downloadable resources, cheat sheets, and swipe files to help you. We've got case studies from guests and community members who are doing incredible projects that you can learn from.

[00:01:56] Andy Graham: And we've also built an application just for you that allows you to appraise and evaluate your deals, stack them side by side and track the key metrics that are most important to you. To find out more, head to thehmoroadmap.co.uk now and come and join our incredible community of HMO property investors.

[00:02:20] Andy Graham: Hi Jordi, thanks for joining me on the podcast today.

[00:02:22] Jordi Pasqualin: Thank you very much. Thanks for having me. I'm excited.

[00:02:24] Andy Graham: Good to have you here. So you and your business partner have an interesting model. The model itself is not completely unique, but actually the scale at which you guys have done it and are doing it, I think is exceptionally unique and I think you still fly under the radar a little bit.

[00:02:38] Andy Graham: I think that's fair to say. So I'm looking forward to speaking to you on the show today, finding out more about your business and also getting your opinions and thoughts on everything that we're is impacting the property market at the minute. But perhaps to kick us off, Yordi, could you give us a bit of an intro? Tell us about yourself and tell us about your business.

[00:02:56] Jordi Pasqualin: Okay. So firstly, my name is Jordi Pasqualin. I am the co founder and co director of BAM Capital, which is a group of companies. So, The original company was built out of as we like to refer to it and we started back in 2014 and it was an interesting start to the business world. So I was 23, 24, just turning 24 back at the time and I was a professional player previously in my previous life. So, uh, transitioning from that to property was an interest for me, but it's been a blast. So I, like I said, I was a professional rugby player for six years, straight out of school, did all of that.

[00:03:36] And then I guess ambition started to change. Direction of travel started to change and then very coincidentally bumped into Alex, who's my business partner. In St. John's wood, I was with my now wife and we were, uh, just in the car. He was crossing the road and I knew him from school. He was a few years older than me at school.

[00:03:52] So I stuck my head out the window and shouted at him, uh, jumped out and said, how are you doing? And all that sort of stuff. And then just got chatting. And we were both in a very similar position in that we were transitioning away from our current careers at the time, looking to do our own thing. And so we just decided to meet for coffee.

[00:04:08] Um, got chatting and one thing led to another and we thought, Hey, this police operator model thing seems interesting. Should we give it a go? See what happens. And we've very, very little expectation to be totally honest with you. Um, yeah, here we are 10 years later and it's gone quite well, I'd say.

[00:04:22] Andy Graham: So give us some context around that then, because you guys have got quite a lot of rooms under management now and you have grown pretty quickly.So how many sort of rooms are you managing at the minute, Jordi?

[00:04:33] Jordi Pasqualin: Yeah. So in terms of context of scale. I'd say as a group of companies, we're in the. The exact number escapes me, but it's in the region of 1500 or so units, a couple of hundred houses for a 250 or so houses are very typical bread and butter house would be as you would expect in the least offered space.

[00:04:51] It's already a five, six, seven bedroom houses, that kind of thing. So that's across six trading companies. So we, BAM, the original company was, we built that up to about 800 or 850 or so units as we approached COVID the first lockdown. And then obviously had to navigate through COVID and then off the back of that came our first opportunity to acquire a competitor and that was not necessarily on our radar at the time, but the opportunity came across.

[00:05:20] It was a good business. It was a good deal. So we jumped in with two feet on that. That was Kingdom Houses in September 2021. And then since then we've done an acquisition each year since then, which it was a pivotal moment for us really in the business in terms of recognising the power of acquisitions and enabling us to further our objectives, I guess, as well as combine it with organic growth. So that's what we did.

[00:05:42] Andy Graham: So interestingly, a lot of your scale, and we'll come back around to that, has actually been through acquisition of other companies and I think the idea behind that is quite unique and partly explains why you have been able to scale to so many rooms in that period of time. But we'll come back around to that. The model, you mentioned you are a lease operator, Jordi. Is that almost exclusively what you guys do? You basically take a property, you lease it from a landlord, and then you manage and control the tenants, what some people might classically call rent to rent, but you have different types of agreements for it.

[00:06:14] Jordi Pasqualin: That's correct. Yeah. So bread and butter core business model, lease operator. We release the buildings from landlords, as you say, the owners, and then we operate them off the back of that. And then that's the way we view it is, um, that's us purchasing our stock. And then we have a product and a service that we sell off the back of it. And that's, we're buying access to a piece of real estate and then we operate off the back of it and obviously run it as a business as you would do any other business basically.

[00:06:38] Andy Graham: Yeah. And so a lot of our listeners will know that I am a big fan of that model. leasing, trying to improve the condition, controlling the asset, very, very scalable model. And I built a great business from it. Although you guys didn't want to buy it, but I think it may have been a bit too far North for you guys at the time, but actually that process that we went through together was really interesting. And I really value that rent to rent, that lease model. And actually I was always adamant that if you're going to manage, well, you may as well do it this way if you can, because the way I would describe it in my business, we did do a lot of standard management as well.

[00:07:16] Andy Graham: That kind of grew a bit more organically off the back of our primary objective was the lease operating stuff that you guys do. But I often felt like 80 percent of our effort and resource went into managing 15 percent of our managed stock, which it was, and actually all the lease stock, because we had that control, because we didn't have that landlord in the middle, because we could make things so much more efficient with time and cost and communication with tenants.

[00:07:44] Andy Graham: It required so much little for us and produced so much more off the back. Is this kind of how you guys viewed this model? Because it surprises me, but there are still so few people on the high street that actually understand this model and do it.

[00:07:57] Jordi Pasqualin: Yeah, I think part of the problem is that we're being honest that the industry as a whole has a bad rep. Right. There's a lot of people out there, not always necessarily with the intent of trying to cut corners, whatever, but some people just get into it thinking it's relatively straightforward and just through accident or naivety, just don't do it very well. And unfortunately, and then, of course, you got everything on it.

[00:08:18] Both ends of the spectrum, right? You've got the professional and you've got the people that do it really well and do it really professionally and do it really well. And then you've got the other end where they really don't. And unfortunately, when you've got something that has a relatively low barrier to entry, there's a lot of really high quality training out there.

[00:08:31] There's also a lot of really poor quality training out there. And unfortunately that does lead to a lot of people trying to do it and not do it very well. And it gets a bad rep. I remember when we first started, it just wasn't anywhere near as understood and prevalent as it is today. So there was a huge education piece for the people that we worked with that was our largest barrier.

[00:08:49] And I remember very clearly went through a period, must've been around 2018, 19, where all of a sudden we were just competing with people that cropped up overnight. Now, all of a sudden, every local agent or everyone I was getting phone calls from 15 different operators on a daily basis. And it's just, it was absolute carnage.

[00:09:07] A lot of them disappeared over time because they couldn't quite make it work or didn't quite do it so well and moved on. But I think as a consequence, it doesn't give the best reputation to the model. And I think that there's a stigma attached to it from the earlier days. And there was also some high profiles, even when we were around, there's some high profile cases where things went really badly wrong, which doesn't help.

[00:09:25] But I think the other thing is, I think there's a perceived risk element, which is real, right? You know, you are guaranteeing these rents. You are on the hook and you go through COVID and all of a sudden that's looking like a pretty rocky period of time. So I can understand why people would look at that and go, it's not necessarily worth the risk.

[00:09:43] Now it is as a business model that is, if done well and correctly, can it, It usually is a more lucrative business model than the traditional lettings side of it, the mat letting and management of HMOs, but it does carry with it risk or risk or reward. So it depends on your appetite of risk. Now we started out on this end of the spectrum.

[00:10:00] So as we look at everything, Oh, this would be great. This would be a nice supplement to what we're doing. But if I started over here, I might be doing that as well. That feels a bit risky.

[00:10:08] Andy Graham: I think Northwoods is probably the single best example that I'm aware of that have leveraged this model. And I might be wrong now because it's a little while since I've looked closely at Northwoods, but I think Northwoods built bought by Belvoir for about 15 or 16 million some years ago, but their model was essentially doing this, but their tenant demographic was more of a social, very blue colar demographic, but they did it and they did it on scale and it worked for them very, very well. Obviously they exited at quite a good number, but I agree with everything that you said and I still think that that cloud lingers over the whole, the entire model, the strategy. There's somebody on Instagram.

[00:10:44] Andy Graham: I can't help watch his videos, but it is awful. It's just a guy who cold calls landlords and tries to convince him to let him lease or rent the property. And, and it's just such a good example for so many reasons why there is such a stigma attached to it. However, my caveat to that would be, and I think this is exactly what you guys saw, that presents a huge opportunity because if you can be that 1 percent that does it really well and sticks to it, actually there's very few people that can compete with you at that sort of level. Was that something that you identified early on and did you put a lot of your effort and resource into making sure that you guys did do it properly?

[00:11:25] Jordi Pasqualin: Yeah. A hundred percent. I mean, what, what's interesting. So a piece of the story at the beginning, actually, that I haven't said was when we started this business, we didn't have the intention of growing it at all to any significant scale. It was very much a case of like a lot of people going in to it's like, Oh, we're going to do this. We're going to replace our income because I now don't have any cause I've just left my previous gray and I'm going to do property development cause that's where the big bucks are at. Right. And that's where the shiny cool, sexy business strategy.

[00:11:52] And basically what happened was we started going. Took a year to get like our first seven properties or something like that. And then we were very much, we'd reconvene and say, right, how do we get to, I think 30 properties was the goal at the time to be able to sustainably pay ourselves a sensible amount of money to live and all that kind of stuff.

[00:12:07] And what happened was as the business grew, we just kept moving that goalpost further and further backwards. And at one point the penny dropped and went, and we said, okay, hang on a second. This actually is quite a good business. It is profitable. It does feel as though it can be scalable, um, despite my initial preconceived notions that it couldn't be scaled to any significance.

[00:12:26] And internally, it took a long time to battle with that and recognise that actually no, I can hire Lettings people to let these things run. It doesn't just have to be me. We can hire people to get out there and source properties for us and bring them into Groupon Lettings. It is possible, just like any other businesses.

[00:12:40] And once we realised that, that was then when we really saw this significant explosion in growth. And then we had a, probably a three year run to COVID where we were really going for it. We had a really great team and we were just, I think we were acquiring something like six properties a month on average for like a three year period.

[00:12:54] And we, and that's where we saw the significant growth up until COVID. And that's when obviously things slowed down for a period of time and then we kicked on again. But that was the biggest mindset shift is really recognizing that this is no different to any, if done correctly, it is no different to any other business.

[00:13:08] We very much stay away from rent to rent because we do think that it invokes certain negative connotations and it invokes a certain view on the business and how it's run. We don't view it. We intentionally are lease operators. We do that for a very good reason. When you look at airline companies, you know, they lease the planes often.

[00:13:24] And when you look at hoteliers, a lot of them lease the hotel and then they operate them. We're no different. We buy access to our stock and then we operate them and we treat it very much like a business and try to do things properly. And that's how we try and differentiate ourselves.

[00:13:36] Andy Graham: It's really interesting to hear you talk about how your mindset changed in the business. And I've seen a lot of people try and build these sorts of businesses, get to a certain point, and then give up because the results didn't come quickly enough. And often I felt like that is small mindedness and it's inability to see beyond the immediate sacrifices and compromises and struggles and actually Not put certain things in place, not take certain actions and do certain things to actually serve you in the bigger picture.

[00:14:05] Andy Graham: And I guess some examples of that for me when I was building my business were looking very differently at finance. One of the things that we did to grow our business very sort of aggressively early on was raise a lot of finance to do it. But taking on debt finance was always going to be a bit tricky.

[00:14:21] Andy Graham: So we sold a little bit of equity. Not right for everybody. And would I do it in the same way if I did it all over again? I'm not too sure. My shift focused very much from the detail and trying to bring the next properties on to actually, how can we bring gone the next 10, the next 20, the next 50, the next hundred properties.

[00:14:40] Andy Graham: And also where I spent my time, I found that I was much more effective networking with people that eventually opened doors and brought opportunities. What sort of things did you guys do, Jordi, that, when you had that sort of change in mindset, that actually brought different results?

[00:14:57] Jordi Pasqualin: I'm quite a logical person. Generally speaking, I like to try and tackle things through process and logic to be completely honest with you. I speak to a reasonable number of different business owners and entrepreneurs and stuff. And so it's really interesting to see the different skill sets amongst them. Some people are, you know, like the high energy visionary and operate a lot of instincts and emotional.

[00:15:14] And I'm a little bit on the other side, which is much more about planning and process and logic. So. The way we approached it was very much like I said, we'd set the objectives and we would break it down. How did we get to our first 10? What worked and can that help us get to the next 30? And we broke it down and we set ourselves some actionable tasks basically.

[00:15:32] And what was interesting is as you grow those challenges and what got you from zero to 10 and from 10 to 30 might be very similar, but then getting from 30 to a hundred is not often the same. It's not often the same process or it's not necessarily the exact same thing. It might be similar things, but done in a approach in a different way.

[00:15:50] And I think one of the things that has always been a constant learning process for me, I guess, is the organisation structure. And as the business has grown, and we had a new dynamic in recent years, which is multiple companies, just growing a business in itself and building out a team and relinquishing some of that control and delegating and trying to.

[00:16:07] Sort of empower other people to do the things that you historically did is really challenging I haven't definitely not got it right all the time and still Not getting it right all the time and having to learn from it and all the rest of it and then you add in the new Dynamic of okay. Well now we've got another business unit that has staff already Do we integrate it?

[00:16:23] Do we leave them to it? And all that kind of stuff. And it's been an interesting process, but I'll say that my approach has often been very much a case of, right, where do we want to get to? And then I usually try to work it backwards, try and break things down. And I think one of the best bits of advice I've received when planning and assessing all of that sort of stuff is very much the, just start blank piece of paper again, look at what it is you're trying to build.

[00:16:43] And then. Build it from a blank canvas and then see, well, where are you today versus that? And do, do the people have the right other, if you've got the right buttons on seats, as I refer to it, which is, have you got the right people doing the right roles and for the right tasks to be able to get you to this optimal structure?

[00:16:57] And if not, then you can start systematically changing and tweaking and amending and so on. So yeah, that's been the way we've tackled it.

[00:17:04] Andy Graham: I think without that sort of logical approach as well, it's very difficult to make decisions that allow you to invest in the future of your business. And it's that investment in the future of your business that allows you to put bums on seats and put the systems and processes in place, which sometimes can feel like a step back.

[00:17:22] Andy Graham: You've just made some money. You've just brought some deals on. Usually we want to enjoy that. And it actually, I think it's hard as a business owner. And it's certainly something that I had to really kind of train myself into coming out of a job and a professional career. You get your paycheck at the end of the month and really maybe might save a little bit, but you generally spend everything else.

[00:17:39] Andy Graham: And that's kind of the point of it. And actually running a business, it's really quite different. The priority, if you want to grow, really does have to be reinvesting. And I try to explain this to people regularly. That compromise of how much you are willing to give to the future of your business and sacrifice now is so vital to whether or not you're going to be able to achieve that end goal.

[00:17:59] Andy Graham: But I think it does need a certain character. And I think there are entrepreneurs, the visionaries, and then there are people like yourself who are logic and can see that. And execute on it really well. And it's so important. Otherwise you can very much just get stuck at those four properties and you leave your job and all of a sudden, yes, the first four or five maybe replacing what you made from your job, but actually what do you do now?

[00:18:21] Andy Graham: Can you even afford to do the marketing or pay anyone to help you free some time? Or can you make any improvements to the next deal and things like that?

[00:18:28] Jordi Pasqualin: Yeah, you're dead right. And there's a few things that right. One is it will often feel like two steps forward, one step back in that sense, because if you want to invest into the next level to take a next step up, that typically means you have to invest upfront that you talk about, because then it's not going to pay dividends until the future.

[00:18:43] Like for example, if you want to go and hire a really senior commercial person, for example, that's going to go out there and win you business, they're going to come with a pretty hefty, sort of salary or commission structure, which might take six months to sort of start paying back. You've got to grow into that.

[00:18:55] But what I would say, one of the things you touched on there is about achieving your objective, right? And I think it's really important. A lot of people get into this and think they want something, but don't necessarily actually really want that, or perhaps aren't prepared to make the sacrifices and go do the work to get there.

[00:19:09] And I think it's really important for people to be honest and self aware about what it is they really want. because you can then set upon a path that you get the worst of both worlds, right? You think you're trying to get here, you don't quite make that, but then you cut back and you take lots of shortcuts, but you don't invest into the business properly.

[00:19:24] And then what you're left with is a half a house, which isn't quite right is there's absolutely nothing wrong with someone taking this business to your 10, 15 properties, having a very, very good living and earning possibly more than they were in a previous career. And just. Having loads more time freedom.

[00:19:38] There's nothing wrong with that at all. It's very respectable. I know people that do it and they live a fantastic life, arguably a better one than I do because I'm working all the time. And it very much comes down to what it is you're trying to achieve. And certainly for us, we have an objective in mind and we're working towards it.

[00:19:51] But. Equally, it doesn't come without a bit of faith and some risk, right? I mean, we're investing at the moment into a chunky role and there is a degree to which we're like, well, we're not 100 percent sure if this is going to give it payback, but we're going to take the financial commitment and see what happens. Um, it doesn't work out, you know, it's just cost us a lot of money.

[00:20:07] Andy Graham: Can you talk to us about some of those sacrifices and compromises that you've had to make along this process? Because I think the point you've made there is a great one and I always on the podcast, try and highlight actually the pros and the cons and the reality of building property businesses.

[00:20:25] Andy Graham: And I think what you said is a great example of that. And so many people do get it wrong, but can you talk to us about some of those sacrifices and compromises that you've had to make along the way, Jordi? And I imagine there are quite a few to get to sort of the number of rooms you're at now through COVID as well.

[00:20:40] Jordi Pasqualin: Yeah, yeah, without a doubt. And there's, it all comes in, it's all the same thing, which is basically rolling up my sleeves and getting stuck in and putting in the hours of the day. That's probably a consistent theme throughout. I definitely haven't ever really got to a place. There's probably an argument that I could have done and we could have taken it easy, but it wouldn't get us to where we want to get to in the timescales that we'd like to.

[00:20:59] But in the early days, it was really obvious, right? It was getting up and driving an hour and a half round trip, two hours round trip to do a viewing on a Sunday. To try and let one room is going to Ikea late at night, stocking up the car and building all the furniture yourself is the amount of times Alex and I used to joke.

[00:21:15] So we should be filming this to document our day, but like painting banisters, cause it was an absolute state or painting a kitchen and cleaning toilets, whatever it was, you know, we did it all from early days because we had no choice. We had no money to do it. I invested and get other people to do it.

[00:21:27] And every penny investment into the business that was safe, it was a better return that would help us fund the next deal. And so. And as the business has grown, I may not be doing the building of the furniture and doing the setup of the properties anymore, but it's then the, it's the working round the clock to get a particular acquisition over the line before a deadline.

[00:21:45] I just think about capital living the amount of late nights we had on Zoom meetings with lawyers and just basically being absent from family and absent from the team as well. One of the big lessons I learned from that particular deal was actually some key people in the business were completely unaware of what was going on and what we were working on.

[00:22:01] And I think probably for about a month. Or in the buildup to it, we were just so absent from them. Like slow to come back on emails, not rest necessarily as present in various and meetings, because we're just working around the clock to get this deal done. Cause it was a huge amount of work to get it done in the timescale.

[00:22:15] So that's a learner for sure. I should have let them know what was going on a bit. So they were aware. That's why we weren't so present, but that's really where the biggest sacrifice comes from is the time you put into it.

[00:22:23] Andy Graham: Did you find that, I mean, you were doing viewings at weekends. Honestly, hand in heart, relate to everything you just said, Jordi. And I remember times standing in rooms just on my own, sort of 10, 11 o'clock at night, questioning life and wondering, have I made this right? And it's very hard. And actually, I think it is the people that can see beyond those difficulties and those struggles that actually do go on to build difficult businesses. I can resonate with all of that.

[00:22:49] Jordi Pasqualin: What she just reminded me of, I remember our first ever property we took on, we did not do what we had planned to do. And we took on something that was, you know, when you first ID research, you find a property, you advertise it, see if you get traction and all that kind of stuff.

[00:23:01] And then what we did was we posted like a really nice, pretty looking property in a fantastic location. And the first property we took on was questionable, whether it was up to the standard of a student let, and it was in an app miles away from anything. And we were like wondering why we couldn't let the room.

[00:23:14] So I remember just lying there, Alex in the neighboring room on the bed, Have we messed this up? Are we going to go bankrupt in our first month? And we struggled through it and we figured it out and we got it sorted and then all the rest that we learned from it moved on. But yeah, it's just the stress that comes with not knowing if you're on the right track as well is quite, you've got to be resilient, I guess is what I'm trying to say.

[00:23:33] Andy Graham: Absolutely. I mean, at this point we haven't even discussed managing. Tenants and that whole part of this business model, which you and I both know, and any of our listeners who are already managing tenants will know is in itself incredibly challenging. I assume early days, again, that was you, you guys, you were doing the deals, you were doing the viewings, you were doing the property management.

[00:23:55] Andy Graham: How have you seen that process evolve both in your business, but also outside of the business in general, in terms of what tenants want, what tenants need and how you deliver that, because there must be something that you guys are doing very well to deliver a service on this scale and be able to continue growing profitably.

[00:24:13] Andy Graham: Because truth is a lot of people really do struggle at the point of management and I've always been a big believer in bringing a good deal on paper is one thing, but actually making it continue to perform well over a five, six, seven year period is something different entirely. So how have you guys done that, Jordi? And what have you seen change over the last 10 years?

[00:24:35] Jordi Pasqualin: It's a good question. You're dead right. I have an enormous amount of respect for people that choose to go into property management as their career and what they do. They are on the sharp end of it 100 percent and it's a thankless task often as well.

[00:24:46] So hats off to anyone that does that. I've got a lot of respect for it. It's very, very difficult. The truth is we try to remember. Let me put it that way. What we've had the unique position of in what we do as lease operators, we've effectively been a professional landlord and a professional tenant at the same time for the last 10 years.

[00:25:02] And I would say it's fair to say that there is an enormous amount of poor property management out there in the sphere of property management, certainly in the, in the areas that we work with. I mean, we, we work with a lot of managing agents and that kind of stuff. And we see firsthand some that are really good and some that are not so good.

[00:25:19] We always have tried our best. To go in with the mindset of treating the tenants as a customer, historically letting agencies and managements, they view the landlord as a customer because they're the client, they're the ones that pay their fees and so on. But ultimately the tenants are the ones paying the rent at the end of the day.

[00:25:33] And that's where the fee comes from. So there was always this bias towards just Well, the landlord says no, so no, suck it up and get on with it. And therefore that's not being done. Complete disregard often, whether or not it's the right thing to do, either morally or just objectively. Statutory obligations dictate you need to take care of X, Y, and Z.

[00:25:51] I am astounded to this day, the number of landlords that just seemingly just refuse to do what is required of them on a statutory and a contractual obligation basis, not yet alone a moral one. It's like all things, right? We deal with a reasonably large number of landlords. So it's not the case that they're all bad by any stretch.

[00:26:09] We have very, a lot of very, very good ones, but we also have, even if it's a small percentage, when you're dealing on scale, there's quite a lot of individuals, right? To deal with. So it does always surprise me and it's very hard. Sometimes we can get caught in the middle. We try our best. We've got in house contractors that we use.

[00:26:24] Take care of bits and bobs just to speed things along and often we'll do things on behalf of landlords that perhaps we shouldn't necessarily have to do, but we do them anyway to in an attempt to appease the tenants, but there's always going to be some stuff that goes beyond the scope of what we can and should be taken care of that relies on the landlord.

[00:26:39] And that's usually the pinch point for us where things aren't being done in a timely manner that's outside of our control. And I think that's the bit that frustrates. The business model much more so than anything else, I would say, and generally as a consequence, obviously your tenants can rightly so get up in arms about delays and what have you.

[00:26:56] And it's just constantly about just trying to have a very good rapport and relationship. The tenants speak to them, try and reason with them. These are the things that we're doing. This is what we're allowed to do legally. And this is the steps we're going to take to push this along. We don't always get it right, obviously.

[00:27:08] Um, but at least there is definitely a willingness and a desire to try and deliver something that could be viewed as a quality property management at least. And I think that's the key difference. I think a lot of people in property management don't view that as a service to take pride in and do well. And a lot of people just think it's an unfortunate necessity to running the property as opposed to something that they should take pride in trying to do well.

[00:27:30] Andy Graham: Yeah, I agree with all of that. And it's interesting because there are some things that we can do and we don't always actually know whether or not it's the right thing to do. So I'll give you an example actually of something in my portfolio at the minute. An unfortunate sequence of events has meant that in one of my properties with six students, three girls, three boys, they currently don't have any hot water or the ability to shower.

[00:27:54] Andy Graham: Now, as a general rule of thumb, I've always installed some electric showers in my HMOs as a backup if the boiler goes down. In this particular property, the shower trap under an electric shower has broken and is leaking into a bedroom and it's a sunken shower tray, which is very difficult to access the way.

[00:28:16] Andy Graham: So actually the trays all got to come up. It's actually quite a big job at the same time. The boiler is broken and they can't use the other shower. And this is one of those things where understandably for tenants, it's both frustrating and actually practically quite, quite challenging. If it's for a day or two, they can probably manage.

[00:28:34] Andy Graham: I think they're reasonable enough to kind of make do. But how do we know that it's just going to be a couple of days? Well, at the minute, actually, this happened on Friday. The first opportunity to get somebody around and assess the boiler properly was yesterday, which lo and behold, needed a load of parts, then need to come in and be fitted.

[00:28:51] Andy Graham: And with no guarantee of when that is actually going to get done, despite the fact we've probably done it all as quickly as possible. The shower tray all needs tearing up and that's a body of work that's in motion as well, and it's difficult to know or what to do for the tenants that will get to the resolution as quickly and as efficiently as possible.

[00:29:09] Andy Graham: It could actually be that tomorrow the boiler is repaired and everything's fine. It could be that we throw everything at getting this shower tray up and do everything. Maybe in the end what we should do is actually just get a new boiler installed and it would probably take 24 hours and it's very difficult and I have found that whilst there isn't always a perfect solution to some of the scenarios that do present.

[00:29:28] Andy Graham: The one thing that I think can resolve almost any issue is really, really, really good communication with tenants. And I think it's a little bit like the Uber thing, right? Uber, just a taxi service. But what they did was allow you to see where your taxi was while you're waiting. And they did loads of studies and Google have looked at this as well.

[00:29:48] Andy Graham: And actually that experience of just, Even if you're waiting just as long, but that experience and that communication of why you're waiting and where it is in the process makes all the difference. And that's the sort of thing that we really tried to apply to our business and our tenants. And it had a game changing sort of result.

[00:30:05] Andy Graham: Quite frankly, it reduced the number of serious complaints that we would get. It reduced the number of phone calls we would get from very upset guarantors and parents. And you'll know that's a challenge in itself. And actually, it helped build much stronger relationships. And the next time something went wrong, we hadn't already upset the tenants.

[00:30:23] Andy Graham: We'd maintained a good relationship with them, which made the next issue easier to deal with. Whereas actually, the opposite can sometimes be the case. If tenants move in, they have a bad experience. The next thing crops up and all of a sudden it goes from zero to 100 really quickly, because you've already frustrated them in the past.

[00:30:39] Andy Graham: So that was something that we realised and we've really tried to prioritise and that's that's certainly a good piece of advice that I would give to anybody managing tenants and managing properties. What other advice would you share, Jordi, for anyone either managing a small or a large portfolio? What sort of tips and tricks have you picked up along the way that you think could really enhance the way, I suppose, the tenant sort of satisfaction, maybe profitability in their business, maybe even landlord wellbeing?

[00:31:05] Jordi Pasqualin: Well, I think you hit the nail in the head in the communication piece first. Funnily enough, that Uber example we gave is exactly the same example I gave in the speech to the HMO Awards two years ago. It's nail on the head. If you can, unfortunately, I don't think the tech's quite there yet to have had it automated where they can see exactly what you're doing and the stage process.

[00:31:21] But I do think that that goes enormously long way in alleviating the frustration, just the not knowing what's happening and what's going on. And I think that don't be shy. Pick up the phone is what I would say. So many problems can be solved with just a good two way conversation. Sometimes email, you know, the tone of an email can come across if it's read in the wrong way or unintended way can just set someone off.

[00:31:44] And you, so it's not always about what you say. It's also about how you say it is a key thing that we always talk about because one of the things you asked me was about how have we seen things changed from property management sector of the years. I think that one of the key things that we have seen change is I guess I can only his expectations as well.

[00:31:59] terms of the expectations of what a landlord should or shouldn't be doing for them. And I would say that it's the standards and the expectations have definitely crept up over time and in often for good reason and without question and often, but in some cases can take a little bit too far in terms of what they expect to be done for them.

[00:32:18] And I think that sometimes being able to tell you someone actually know that's not I think that's something that you need to take care of something relative to changing a light bulb. So it's one thing to tell them that, but it's another thing about how you communicate that. And I think the way in which you communicate is as important, if not more important than actually just communicating as a matter of fact.

[00:32:37] And I think that's really important to keep all the tenants happy as well, because you can be saying no to someone, but doing it in such a way that still fosters a positive relationship rather than just saying yes all the time. And even just saying, yes, some people can rub people up the wrong way if you do them the wrong way. So, Yeah, that how you communicate as well is really important.

[00:32:54] Andy Graham: Definitely. Well, I think the immediacy, the expectation of the immediacy that things can be done has been one of the biggest challenges that we saw. And one of the ways that we tried to manage that was actually setting, like you said, very clear expectations from the outset.

[00:33:08] Andy Graham: And that would be right down to actually what our sort of expected and reasonable maintenance. Response timeframes would be urgent, emergency stuff, non urgent stuff, and just being able to refer to something like that to say, look, we've given you all this information, here's just a little reminder, we are doing our best, this is where we're currently at with it, but please try and work with us on this, and we found that that really helps as well.

[00:33:32] Jordi Pasqualin: On point, actually, and it's really good, but we went through a period when we went through the high growth period of organic growth and onboarding loads of properties really quickly. One of the things that we found is your first impressions with a tenant is vital because if you get off to about that, it usually sours things to the point where they're then frustrated or exasperated with legitimate issues that come down the line.

[00:33:52] And it's usually not taken with any grace or without any giving any leniency and understanding to the tenant. The, your time and effort that's going into resolving it. And what we found is when we were onboarding new properties into the group, it's the first time we've operated them. First time we've come into that property.

[00:34:04] And lo and behold, there's a few things that were the unknown to us in terms of whether it's a maintenance, something not quite working right, get people moving in and then they're immediately reporting issues. So one of the key things that we implemented quite early on when this, we've got a very detailed check in sort of.

[00:34:19] Checklist of things to check and we literally go around, try it, turn everything on, turn everything off, try everything as best as possible, make, take serial numbers of all the appliances. So if it does go down, we immediately know what it is and all the rest of it, you know, it's putting that effort up front has saved us an enormous amount of headaches when we then caught something early on.

[00:34:36] We go to a landlord on basically day two and say, look, listen, we've got these issues, we can resolve them. X, Y, and Z. No problem. We'll just take care of it. Don't worry about it. But we have discovered X, Y, and Z. It's not quite working that we do need to get sorted sooner rather than later, because we're about to have people moving in.

[00:34:51] And if, if it's not working or either soon or quickly, it's going to cause a problem. We don't want to get off on the wrong foot. Absolutely. Yeah. So that we've printed as well. That has helped.

[00:35:00] Andy Graham: This has been a really interesting conversation about management and about how to build a good HMO business, whether this stuff, I think, is personal, whether it's an owned business, whether it's a lease operating business or another type of management service.

[00:35:13] Andy Graham: And I do strongly feel that getting this stuff right is kind of 90 percent of getting HMO businesses right. But just before we wrap up, I'm keen to get your thoughts as someone who's operating a large business in this space of the challenges ahead. It seems to be that we're potentially staring down the barrel of some difficult times as landlords and property managers.

[00:35:36] Andy Graham: Like anything, challenges can present opportunities. But how are you guys approaching this at the minute, Jordi? And what advice or maybe words of comfort could you share with our listeners at the minute, if any?

[00:35:49] Jordi Pasqualin: Well, I'm not trying to comfort many people, unfortunately. I think I'm rubbing my crystal ball. I think I do see some challenges ahead, but now I would never willingly go through COVID again, but what I would say that did provide some significant opportunities, which has enabled the business off the back of it to jump forward several years. So, I can't say I'm looking forward to the bumpy ride, but it is inevitably going to cause some great opportunities that you talk about.

[00:36:12] So that's the first thing. I'm not sure if that's comforting for people or not, but it's what I'm using to reassure myself at the very least. I think it's a really interesting one. I think we are headed for some significant changes. Obviously the largest reform of any piece of legislation in our space for 20 plus years.

[00:36:26] Um, I think it is, and it's going to cause some term or some people are going to really struggle. Everyone's going to have the challenges, but they will create an environment where some people can thrive as well. I think the interesting dynamic, I've seen a number of people talk about and publish a few articles and their opinions on the challenges specifically to lease operators and the view of it.

[00:36:45] And making it more risky and that kind of stuff. Interestingly, I actually hold a, hold a perhaps a contrarian view on that, which is, and I think it's supported in part to like, when I look at the continent and some of the things that's going on in wider Europe is that all of a sudden we're going to be in a place where our landlords are no longer going to be able to have a guaranteed income from a, not a traditional tenant of 12 months on a fixed term tenancy.

[00:37:05] They're going to be gone. And at any one point, any landlord's only going to have security of income on their asset for three months or two, depending on how you hear it, with the notice period. So all of a sudden our leases, I think, you know, become more valuable. Now, counter to that, because, you know, we can come along and say, look, we'll give you income for the next five years that you can count on for your asset.

[00:37:22] And I think that will, if with a sense of, with a decent covenant behind it, I think that that will carry value to a land on where perhaps historically in certain parts of the UK, the whole guaranteed rent piece isn't necessarily an issue for them. You look in London, average tenant's length historically has been reasonably long and void period has been relatively low because London is a very buoyant market.

[00:37:39] So the proposition of a guaranteed income for say five years plus. Isn't necessarily as compelling as it is in other parts of the country. Whereas now, you know, you've got tenants that can just leave at a drop of a hat. It does change that dynamic, I believe. And I think it can make the lease operator proposition more valuable and therefore our lease is more valuable to them.

[00:37:57] Now, The counter to that is obviously it's going to be a lot riskier for us as the operator. So we need to balance that because all of a sudden in a not too dissimilar fashion, our average tenancy length, I think sort of around 18 months. Um, we generally speaking, do do tenancy management to ensure that people are renewing into fixed terms.

[00:38:13] Now, all of a sudden, we might have sort of 1500 tenants that could all hand in a notice at any one time that does carry with it an inherent risk. So there's going to be balancing those two. So they're not huge on one hand, but there will be more risk to it.

[00:38:25] Andy Graham: I think how I would probably summarise my advice to anyone at the minute is that this is clearly another move to professionalise the sector. You guys are well primed to actually take advantage of an opportunity there, despite the fact that there will inevitably be some challenges with it. And I think small or large operators, I think that that same approach and decision really needs to be made. I think really we will either have to step up and do things differently.

[00:38:52] Andy Graham: And I think in time, I think. The balance will kind of level out again in terms of profitability. And I think ultimately the tenants will pay for these challenges. But I think that the other decision is either to step down. And I think there are a lot of people that will step down now that itself presents opportunities.

[00:39:09] Andy Graham: It means people might choose to operate that property differently like you highlighted, but people owning small portfolios. And I'm thinking largely about maybe a generation of property owners that are maybe nearing retirement. The idea might be too much for them. They may not be willing to invest the time and resource into actually stepping up and the ultimate decision, or maybe the action that they're forced into is stepping down.

[00:39:31] Andy Graham: And I do think actually that it will be one or the other. I don't think coasting anymore, which a lot of landlords have been able to do over the last couple of decades, it is going to be a possibility, but I mean, that's just my opinion.

[00:39:44] Jordi Pasqualin: I completely agree with that. I think that the other thing to add onto that is as regulation has got tighter, and I wouldn't necessarily say the regulation has got tighter and tighter, but for example, you see now more and more boroughs bringing out additional licensing, selective licensing, and so on, that historically normal properties would never have been affected by.

[00:39:59] So it's not necessarily tightening the legislation. And the requirements is more just making those where it is more stringent widespread. And I think that the notion that you can be a relatively passive landlord these days is gone. And I think that you have to be on top of it, even if you're working with a trusted agent that seemingly is up to date with all the latest developments and changes in legislation and licensing schemes in the local areas.

[00:40:20] And so it just requires you to be much more on it because it is getting harder and harder to navigate. And enforcement is becoming More and more prevalent as well, where people have often through naivety, just missed something and wasn't aware of something. And it wasn't necessarily because they're intentionally neglecting it.

[00:40:36] It might be as simple as just didn't realise they were supposed to have a selective license, because why would you think that of a two bedroom flat sort of thing? It's that could easily have gone missed for someone. So I think the landscape changed such where being a passive landlord with a couple of properties is just, you've got a question, is it worth it?

[00:40:51] Andy Graham: Well, I'm not sure whether we've helped or comforted anyone at all. At least we've addressed the elephant in the room and look, like anything, I'm sure there are ways through this. I'm sure it probably seems now worse than it will be, but I think there are definitely some very proactive decisions that we need to make as property owners, especially in our space.

[00:41:09] Andy Graham: But Jordi, it's been an absolute pleasure to have you on the show. I've been looking forward to having this conversation for a long, long time. I'm certainly looking forward to catching up with you next and seeing where you're at because you guys are on quite an impressive trajectory. For anyone listening today. Perhaps anyone sitting on a business that there may be thinking, you know, it's time for them to move on. How best can they contact you?

[00:41:32] Jordi Pasqualin: Yeah, good shot. I don't think I've got too many people out there with the same name as me. So probably LinkedIn search will find me pretty quickly. So yeah, just find my LinkedIn, hit me up on a message or connect.

[00:41:42] No problem at all. I'm happy to chat as well. I speak to quite a few people who just want a bit of advice. I'm always willing to talk to people. I find it enjoyable to be honest, to speak to other business owners here, their challenges and what have you. So yeah. I'm more than happy to speak to people if they want to reach out and have a chat.

[00:41:55] Andy Graham: Fantastic. Well, thank you again, Jordi, and wishing you and Alex all the best luck for the future and look forward to catching up with you again soon.

[00:42:02] Jordi Pasqualin: No worries. And thank you for having me. It's been a pleasure. And yeah, looking forward to seeing how it all plays out over the next 12 months, I guess.

[00:42:07] Andy Graham: Thanks, Jordi. That's it for today's episode, guys. Thank you for tuning in. I hope you enjoyed it. I hope you found it interesting and I hope more than anything, you found it useful. What a great insight into how we can build a successful HMO property business, either on a small or as Jordi and his business partner, Alex have done on a large scale too.

[00:42:31] Andy Graham: Now don't forget that you can find guidance and support over in HMO community. That's our free group on Facebook, over 10, 000 members now on hand to answer your questions and help you with any challenges that you're currently facing. And of course, don't forget that. All of my tools and resources that I use to run my own HMO property business are waiting for you inside the HMO roadmap.

[00:42:50] Andy Graham: Just head to theHMOroadmap.co.uk, and as well as all of my resources and templates, you'll find dozens of masterclasses from experts in our industry. You'll find all of my video lessons helping you understand what you need to do to find deals, to fund deals, to refurbish them, how to manage all of your tenants and so much more.

[00:43:09] Andy Graham: Trust me, it's an absolute no brainer. It'll cost you less than the price of a cup of coffee every single day. I really wish this existed when I was just getting started out. I'd have been able to achieve twice the amount in half the amount of time. So go and check it out. Let us know what you think. But I promise you won't be disappointed. That's it. Don't forget I'll be right back here in the very same place next week. So please join me then. For another installment of the HMO podcast.