Reflections on the current times
I like my small business, it feels good to break free from work, shift for yourself and hear the ker-ching of money you have made yourself. This last 2 weeks has been eerily quiet so a great opportunity to reflect (as well as clean my much-neglected house).
When You Are Up, You Are Up...
Business has its ups and downs, just now is a down…or maybe an up. We are facing a test of resilience that nobody predicted. These times will tell if businesses are too highly geared, exposed to contracts that they can't fulfil and if their decisions have been sensible or imprudent. Landlords tend to be cautious and in it for the long game so hopefully my friends on this page will all fare well.
A few reflections:
- Totally and completely glad to not lose a single-let asset base. Single lets are safe for now and should provide through the worst of it. Glad I didn't jump 100% into short lets.
- Consider risk when choosing a business model. In Serviced Accommodation there are three main models: rent-to-rent which is high risk (this is where you rent a property from someone, maybe a family let for £900/month and then update it and rent it by the room or the night in order to make more than the £900 monthly outlay), buy a property to offer as Serviced Accommodation (medium risk) and Management of someone else's property for them (low risk) with the usual inverse ratio of risk to reward. I have a mix of my own properties and management. At this time those practising rent-to-rent are going under, and fast because of high fixed costs.
- Keep an eye on your contracts. My workforce is down but they are all able to claim government help because they play it straight. Keeping everyone in the team OK is my priority.
- Most of my services (cleaning and linen) are on a unit-cost so nothing to pay here…
- Act quickly (2 weeks ago) and decisively to downsize the portfolio and limit exposure
- Staying in touch with tenants, clients and contractors, keeping everyone informed and making sure my people can get hold of me.
- Trying to build connections with interim clients such as NHS and Housing Options team.
- Not worry too much and enjoy the unexpected break from business.
I thought I would end with a few words from Martin Vander Weyer (The Spectator), and a recommendation for a short read for those of us that find economics more interesting than literature.
'Philip Coggan's highly readable new history of the world economy, offers a handy summary of the economic effects of the Black Death.'..The Stanford-based historian Walter Scheidel, quoted by Coggan, has written of the Black Death as an example of shocks to societies that lead to reductions in inequality. I commend also a paper called The Economic Effects of the 1918 Influenza Epidemic by Elizabeth Brainerd and Mark Siegler (2002): in that terrible episode, the spread was partly caused by troop movements at the end of the First World War, and deaths occurred particularly among men of working age, so no wonder wages rose in the short term. But in their analysis of available US data, the authors also found 'a large and robust positive effect of the influenza epidemic on per capita income growth' over the following decade.' Martin Vander Weyer.
PS. I used to like Thomas Piketty but his latest is unforgivably anti-property so he is firmly off the Xmas list now!