Watch: Scaling an HMO portfolio from 120 to 1,200 rooms

Jordi Pasqualin (00:13.519)

Cool. Well, thank you for having me, guys. And I think first and foremost, I should really thank Van for inviting me to speak this afternoon. It’s an honor and a privilege. And also a huge congratulations to the team at Coho, Helen and Van and the rest of you guys, know, pulling together a great event. And I’m really looking forward seeing this go from strength to strength each year. So thank you for having me. Now, look, during this talk, I’m going to share with you some of the learnings and experiences I’ve had growing this business from, as it says up there, 120 to 1,200 units. And to do that, I’ve identified three key areas.

which I’m going to expand on a little bit more. They are assholes, great people, and knowing your numbers. And my hope really for this talk is that you’ll be able to come away from here having learned at least one thing or found something a little bit interesting. And if you didn’t, I’d be really appreciative if you could at least lie to me and say you did, that’d be great. So I’ll start with the assholes. So it was actually my wife that said this and made me think about it, and it’s entirely accurate. When I first started out,

I had no idea how unreasonable people could be. The first story that ever sprang to mind was early on, one of our first tenants when we took on a property, moved in and went on a bit of a bender. I’m sure you guys have all had similar experiences. She came home, threw up absolutely everywhere. Not only that, she then decided to kick the door down to the bathroom because apparently she couldn’t figure out it was a pull, not push door. Now, I got a phone call Sunday morning and then…

proceeding with a barrage of abuse, she then tells me in demand really more than anything that I should come over and clean up her sick for her, which of course is a totally reasonable request, But anyway, I’ll say the point is that no matter how much logic and reason you apply with some people, you just can’t get through to them not everyone thinks in the same way as you do. Now, the reason this is relevant is the most prevalent area in our business that we recognized early on that this was going to impact our ability to deliver a good service was in around the maintenance.

Again, I’m in a room full of landlords, so I hope I don’t offend you, but particularly with the agents, I’m sure you’ve had it plenty of times where you’ve had a landlord who perhaps a little bit slow, drags their feet to take care of issues and or just flat out refuses to take care of their obligations. We’ve been effectively a professional, like both professional landlords, hundreds, well, now counted in the thousands of tenants. We’ve also been a professional tenant. I can assure you that we come across plenty of landlords that I would consider to be slightly unreasonable. So if you’re like us and you’re striving to deliver a good service in any way to both tenants and landlords,

Jordi Pasqualin (02:38.327)

You have to make sure you have the right things in place to protect yourself against the odd occasion when someone is being slightly difficult, shall we say. Now, we found two ways to try and combat this, an SLA and proactive communication. The SLA is, as it says, it’s a service level agreement, and you can either have something like a management contract alongside your master lease, or if you’re able to, have some of the terms put into your master lease as well to enable you and give you the authority or the authorization rather to take care of issues under certain circumstances.

Traditional high-street estate agents, letting agents, you’ll probably find will get a float or a pre-authorized limit to make expenses on behalf of the landlords. The way that we treat this, we’d actually rather go for a time-limited authorization. So rather than a set amount of money, we can take care of issues if a landlord exceeds a certain time frame in taking care of a particular issue. The benefit of that, course, is all the time that landlord is dragging their feet, you’ve got an angry tenant that is perhaps now experiencing a poor customer service.

you can at least give them the reassurance and say, listen, we’re going nowhere with the landlord, but have no fear, come three more days, we have the authority to act and take care of this issue for you.

So the SLA is all well and good, but I’ve got to say the most startling thing that I’ve came across and have learned in this journey so far is that proactive communication is by far your secret weapon. I think we could do a lot as an industry to learn from hospitality. I think Caroline mentioned this as well. I think we really need to recognize as an industry that our tenants are our customers as well and not just the landlords. I mean, for us as an operator, literally they are our customers. If they don’t pay the bills, we’re missing out on that revenue. So we take a particular approach that we need to make sure that it’s not.

What you’re saying to them is how you say and how you deliver it. You can easily deliver bad news to someone or news they weren’t particularly expecting or wanting, but you deliver it in the correct way and you can still get a favorable result. I was listening to a podcast quite recently and an interesting analogy came out of it that really emphasizes this point that I’m trying to make. And they compared when we came onto the scene versus booking a taxi. It’s quite long-winded, so I’ll try and distill it down to the key point, which is in the early days, people used to think that…

Jordi Pasqualin (04:45.293)

booking an Uber was miles better because it turned up really quickly. Five, seven minutes, if anyone is in London, probably used to that. Whereas, in actual fact, a lot of research was conducted and they found that actually made no difference if the Uber turned up in the same amount of time or even slightly later. It was still viewed as a positive experience. The reason being, as I sure you all know, you got a little car on a map and you can see exactly how they getting on. You can see the progress and you have no issues. You not left in the dark wondering where they going, stressing if they are going to turn up on time or be late. You certainly do have to phone up and ask for an update. That is

That is the point I’m trying to communicate here is you’ve got to be proactive. You’ve got to keep your tenants in the loop so they don’t have to be phoning you and ask for an update. Now, the tech is not quite there yet in the property management. I’m hoping Van and a few others in the room are going to take care of that. But in the meantime, rely on some really good custom service and drill it into your team to make sure that they’re being proactive in updating your tenants. And all being well, you’ll avoid having some arseholes. So, on to the second point of what I wish I knew.

And this one is about the about a team and getting great people in and getting them in early. Now, I would argue that as a director or CEO or MD or whatever is you want to call yourself in your business, if you’re looking to scale, arguably one of the most important skills you need to learn is being able to hire great people and at the right time. If you want to increase your chances of success. Now, it’s probably obvious, right? We can’t go from 120 to 1200 units by myself. And I was very fortunate. I had a great business partner from day one. He’s my bearded friend in the the audience. Just there gives away.

Yeah, there you go. No, not you. Obviously, it was a dynamic duo from day one, but even still, 1,200 units, 200 properties. think we’re just north of 200 properties or so. We cannot do that by ourselves. I say the key is getting a solid team in place and getting it done early. I really want to emphasize the early part because that is, as far as I am concerned, that is the key learner I have made from this journey so far. You are probably familiar. I think the most common mistake a lot of owner-operators make when they trying to scale up is that they are

they’re put off by the prospect of hiring more people or perhaps even making their first hire. They stretch themselves too thin and then they get to the point and they’re not sure because they have the uncertainty of whether or not they’re going to be able to grow and scale their business beyond the added cost of those additional salaries, not to mention the aggravation that comes with running people and finding them recruitment and so on. Now, it’s really important to recognize at this moment that actually scaling a business really is a change of mindset from being an owner operator to scaling any sort of business to a reasonable size or even a group of companies.

Jordi Pasqualin (07:08.115)

It is a very daunting prospect. It comes with a lot of risk. And as I say, it’s a complete change in mindset. And more importantly, you have to make a very deliberate and considered decision that that’s what you’re going to do. Because the commitment to make that successful is going to require you to make significant investment upfront. And it does come with sacrifices in the short term. So when we decided we were going to scale up this business, we made that decision to invest in great people and getting them in early. It did come at a cost in the short term, but it is paying back tenfold in the medium to long term.

I will you an example that we are kicking around at the moment. As I mentioned, we are at 1,200 units at the moment. It is in our roadmap to be scaling this thing beyond 2,000, 5,000 units. That in our roadmap, and it something that we will achieve. In the last year or so, we have become a group. We have acquired a number of properties, and we know full well that to be able to continue our great trajectory, we are going to have to get in a group director, operations director rather. That is a pretty senior position. It is a pretty big role, and it is equally daunting to consider taking on someone like that.

now as it was taken on our first property manager when we first began. Now, if that is going to be the bottleneck for us growing this business from where we are today to taking it to the next level, we cannot start that process or take that on when we need them. We have to do it early because otherwise the cost of not doing it is going to be significant. In real terms, if we decided today to set out and find a group director, we’re looking at six, nine, possibly 12 months. If nothing else, a senior person of that kind of role, they’re probably going to have six months’ notice period in their current position, right?

So if we get to the day where we need to scale up and we’d make that decision to go now and we need them today, we can’t grow. So we’re not growing for nine months. That cost is going to far outweigh the cost of just taking someone on six months early in this case and just committing to that salary and backing ourselves to continue to grow. So I’ve talked a little bit there about investing early, but I think it’s really important. think Caroline touched on this a little bit in her speech there, which is, Caroline mentioned the fact that she does this sort of common sense, what I consider to be the common sense check of any new…

new applicant or new tenant. You do, for many years, like Caroline, I went out there, I knew all of our tenants up to about three or 400 units. I knew them all because I met them all, I put them in there myself. And at that time, I had a bit of a mental block. How are we going to grow this business and relinquish that to someone else? How can I take that risk if I’m putting someone in there that’s going to disrupt the dynamic of the house or just be a complete wrong and actually not pay their rent, which of course is going to directly affect us.

Jordi Pasqualin (09:31.691)

In truth, we talked about it and the problem we were dealing with at the time in and around the circles, particularly letting agents, we constantly come across letting agents as examples of people we could hire. And a lot of them were really good salespeople, genuinely really good, but they’re also frankly selfish. They’d sell their nan for a commission. And the problem is they can’t be the person that’s in control of who’s going into our buildings. So you have to hire people that you can trust and need to have aligned values and vision as your organization.

And we’re incredibly lucky, we now have a team of about 20 or so, and they’re led by people that I know and fully trust to make the right decision for the team and not just for their own selfish needs. So that is really, really key. So the final point, knowing your numbers. I can’t really emphasize and stress this enough, that knowing the numbers and the correct data points is probably the most important takeaway from this talk today. Everything I’ve talked about, all the learnings that we’ve had over the years, have been underpinned by knowing and understanding our numbers.

To give you an idea of some of the numbers and the detail that we go to, obviously, financial numbers are obviously key and critical. Being able to produce management reports, forecasts, a click of a button within a couple of days, a month, then is critical. We take it to the next level deeper, and lot of the tech like Coho and a few others out there are enabling this to be easier, is we can pull a report on the profitability of every single property down to how much maintenance it spends per property, cetera, which is really useful data when it comes to renewing some of our leases.

We can say to a landlord, we’re much better than a family. Here’s how much we spent on your property over the lifetime of the last five years, say. And they can see some direct return on that. Equally, from us, it enables us to cut some of the dead wood. Coming out the back of COVID, when things were difficult, we took the opportunity to do that full appraisal of our entire portfolio. And we identified quite quickly that we had a bit of dead wood dragging us down. So we cut it. Other metrics that we follow in data points are things like viewings, LEPs ratios,

close ratios, how many views you have to conduct to get offers out there, how many offers to translate into a new building coming onto the portfolio. The important thing is that we’re able to track this information. Navigating any business is based on data to make a considered decision, that is. And if you can’t track it, you cannot measure it. If you can’t measure it, you definitely can’t make a decision based on it. So make sure that when you go back or you’re looking at your business and you’re wondering how to scale, make sure you can identify what are the key data points in your business to be able to take it to the next level.

Jordi Pasqualin (11:56.01)

and make sure you have an efficient way of measuring and tracking that data. And that’s true in the good times, but I tell you what, it’s bloody important when it comes to the bad times. Take COVID for an example. Our ability to accurately forecast our occupancy recovery was paramount to our survival through COVID without a shadow of a doubt. We had to adapt and constantly remodel our modeling and our forecasting, rather, as we went in and out of the lockdown like a yo-yo. So when we came out of the first COVID,

pretty dark time. We had close to 100 rooms vacant or becoming vacant within a matter of weeks. And every month that went by, we were hemorrhaging more rooms because all of our young professionals were bolting out of London to go back live at home rent free. So to combat that, we started to track viewing data and renewal data to a level of detail that we’d never done before. And we got really under the skin of it, which enabled us to forecast and cashflow on a weekly basis. It was pretty rank time, I’ve got to say. But anyway, I knew

that if our lettings team did four viewings per day rather than five viewings per day, I was not going to be sleeping at the weekend. And I’ll explain why. We had an average close rate of one in five. So doing four viewings a day with an average of 22 working days in the month, we generated 17.6 new lets per month. We had five negotiators on the mission at the time. And when I say mission, I really do mission for survival. That was 88 new lets per month versus a potential 110 new lets per month.

had we had five viewings per day. That’s a difference of 22, with an average of 800 pounds per month. That’s 17,600 pounds straight off our bottom line every single month. The stress was bloody immense, and it was crucial. But without that detail, that level of detail, I honestly don’t think we would have survived it. But we did survive, and we came out the back of COVID not only with our staff and infrastructure intact. We paid everyone 100 % of their salaries. We didn’t make a single redundancy.

We outperformed most insurance policies as well, paid all of our landless with 100 % of their lease fees. And we came out in a strong enough position to be able to make multiple acquisitions and expand our group and our service offering. None of that would have been possible had we not known and understood our numbers.

Jordi Pasqualin (14:05.512)

So that’s it for me. And if anyone else is fancy selling their business, you can come find me and have a chat.