Babrul Matin is the co-founder of the Islamic Investor, a specialist investment company which co-invests alongside real estate experts in the UK. He is a specialist trainer, coach, consultant and public speaker on property development, and has a particular interest in distressed properties.
Here, he explains why investors should consider these type of properties as part of their investment strategy.
Over the years, in times of general scarcity, here in the UK we have been able to pick up a good number of distressed properties from sellers. Perhaps even a disproportionately larger number than the average. A friend asked me recently, 'how do you do it, Babrul, how do you always end up doing deals with distressed owners of properties?'. I will seek to answer that question below.
Economists are fearing the current crisis could lead to one of the hardest-hit recessions in modern times. In the month of May, the Guardian reported that Britain’s economy had suffered its worst monthly slump on record. Inevitably, as with previous economic slumps, coupled with the pound rate being low, this will bring opportunities to those that are prepared. The article will also touch on key aspects of being prepared.
Presence, being trusted and being positioned correctly to attract deals
Being present and persistence have opened opportunities for us over the years. We've built friends and business partners at auction viewings, property training events, business dinners, social and religious circles, social media and during other business engagements.
Not to mention family members, work colleagues, solicitors, accountants, financial advisors, our mentors and coaches have all afforded us opportunities because we show up and are present in the marketplace.
We are fascinated by the science of being trusted in business, and have spent good time over the past year studying the two main thinkers of trust in business on this subject area, Frances Frei of the Harvard Business School and Charles Green a consultant advisor in trust, and here is the most simplistic model of how trust is built in business...
If you sense that I am being authentic, you are much more likely to trust me. If you sense that I have real rigour in my logic, and I can communicate my logic well, you are far more likely to trust me. And if you believe that my empathy is directed towards you, you are far more likely to trust me. When all three of these component parts are working, we have great trust.
We have made it clear to our trusted stakeholders that we are on the lookout for good deals, and hence during this lockdown, despite restrictions on trade, we have already started to see good deal flow.
Organising financial capacity to act decisively
Having financial capacity to be able to do a deal is an important aspect to attracting deals, some would argue THE most important - we disagree. When we select the financial partners we work with, we select them on the basis of their values, their expectations, their experience and whether they are more interested in us or the deal.
When partners value us as their biggest deal, we are positioned correctly to be able to strike a deal both with vendors and our investor partners. If they are only interested in the deal, it is a relationship with weak foundations and one which we avoid.
Experience, buying criteria, robust due diligence and track record
Buying from the hands of receivers and distressed sellers can understandably be an emotional experience for the seller and can become a lengthy and complicated process, requiring skill in negotiation, deal structuring and finding legal and financial solutions.
It can take time to get a deal over the line, persisting with patience and creating wins for all concerned will seem impossible at times, and at any stage, the deal may be lost even if a lockout agreement is in place. The experience of eventually closing deals is gold dust in these times.
We have found, having a buying criterion allows for streamlining of opportunities and maximising the use of our time on primed deals. We never compromise on our due diligence (DD) procedures, because it is from this that our reputation is built, we leave no stone unturned in going through our 313 step DD checklist. Our lawyers, building surveyors and tradesmen are well-trained to look out for the pitfalls during pre-acquisition to minimise risk and reduce unknowns.
As well, we see it as immensely important to continuously improve as a company and as professionals, to learn from mistakes and build abundantly proficient teams that can deliver.
Through exhaustive trial and error, we have assembled established experienced delivery partners to get projects delivered. Once a team is built and deliver seamlessly from inception to closure, one can begin to be regarded as a true investor. And as the saying goes: 'for a true investor, the deal of once in a lifetime comes along every other day.'
Bringing it all together
For us, attracting great property deals and in particular distressed property deals was possible even during times of scarcity and short supply in the market. During this pandemic and economic downturn – with the pound sterling at a low, there will be further opportunities to come to the fore and an opportune moment for foreign investors to benefit.
Those that will benefit are who will be prepared to benefit. Being prepared means having liquid funds, with trusted partners who are able to attract deal flow and perform the execution in delivery for mutual gain.