JF1769: London Investor Shares How To Scale Two Real Estate Businesses Totaling €100 Million with Nicole Bremner
Nicole has built two successful real estate companies, and is on the show today to tell us how she did it. She’s currently working on a wide range of projects, from €200,000 to €5,000,000 projects, which are both being sold as of this recording. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“It was quite easy to take that money and invest in a gentrifying area and make money” – Nicole Bremner
Nicole Bremner Real Estate Background:
- Founder of two real estate companies based in London
- Develops and invests in real estate, has close to 100 units both residential and commercial, valued at close to €100 Million
- Based in London, Greater London, UK
- Say hi to her at http://www.east-eight.com/
- Best Ever Book: Oversubscribed by Daniel Priestley
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Nicole Bremner. How are you doing, Nicole?
Nicole Bremner: I’m great, thank you.
Joe Fairless: I’m glad to hear that, and looking forward to our conversation. A little bit about Nicole – she is the founder of two real estate companies based in London. She develops and invests in real estate, and has close to 100 units, both residential and commercial, valued at close to 100 million pounds. She is, as I mentioned, based in London. With that being said, Nicole, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Nicole Bremner: Sure. I started in property after being in banking, actually. I was in banking for a number of years… Most recently I was on Wall Street at Goldman Sachs, and I started on the 15th of September 2008, when everything was just collapsing, which was a really interesting day, and not a very fortuitous day to start a new contract at the bank I’d always wanted to work at.
So anyway, I then found out that I was pregnant with my second child anyway, so I left, moved back to London, and had a third child, and still was just looking at what I could do when I grew up, so to speak. I was just really struggling, banking wasn’t for me anymore, not with three young children… So yeah, I just renovated my house, really loved the experience; was still in talking terms with my builders, and it was my partner then who said “Why don’t you give property development a go?” At that time I didn’t realize that anyone could do it professionally, so I really did think it was just the housebuilders who could do that. That’s really a bit of a background.
Joe Fairless: And now you’ve got 100 million pounds’ worth of property, so there’s a lot that transpired from then to now. And just so I’m understanding, you’ve got around 100 units, residential and commercial, valued at around 100 million pounds… So with quick math, that’s basically a million dollar a unit average, right? Sorry, I shouldn’t say dollar; a million pounds a unit, right?
Nicole Bremner: Yes. Now it’s actually probably closer to 200 units in total, spread across 11 different projects. We’ve got one project with 49 units plus a commercial, so there’s 50 straight up; then we’ve got another project with 15 plus a large commercial, others with 21… So yeah, it’s a whole range of different projects.
The prices tend to range from the cheapest one-bedroom units outside of central London, that might be, say, 200k pounds, and right up to — we’re selling one beautiful apartment which is all over Nest Seekers in the U.S. at the moment, actually, and it’s on at 5.25 million. So yeah, a whole range of projects at various prices.
Joe Fairless: So let’s just start from 2009(ish) or 2010. When did you move back to London and complete the renovation of your house?
Nicole Bremner: That was 2009. I moved back, and then in 2010 I started the renovation. What was interesting though, that was a bit of a catalyst as well, is that I got back from two years in New York, living in Manhattan, and I realized that my flat that I’d left had earned more than me, even though I’d been working in banking… So I was able to sell that flat, take the money and then invest that into more property in a very up and coming area, that — I’d kind of liken it to Brooklyn; it was sort of Brooklyn before it went crazy. That’s the area of Hackney. Very cool, very trendy, lots of creatives in the area, just like Brooklyn, and lots of beautiful buildings there that had been neglected… Including my very first project, which is now my home; it was [unintelligible [00:05:55].18] so it was quite easy for me then at that point to take that money, invest in this great new area that was gentrifying, and make money on that.
Joe Fairless: But you had renovated your home, but you hadn’t – from what I can tell so far – done any ground-up development or renovations on other stuff, correct?
Nicole Bremner: No, not at that point. Apart from just putting on a lick of paint on my flat that made a lot of money, I hadn’t done anything, no. So it wasn’t until about 2011-2013, around then that I started looking more seriously at property and started doing renovations on properties in Hackney. And then finally in 2013 I did my first out-of-the-ground – or into the ground, actually – development, where we dug a lovely basement. We stripped back this beautiful house, back to three walls, no ceiling/roof, really built out that project and it became a really beautiful home that we sold to quite a well-known musician. That was my first real build experience, and that was in 2013.
Joe Fairless: How do you teach yourself how to do that, in a relatively short period of time?
Nicole Bremner: Well, I was really lucky, because I was able to joint venture with a very experienced real estate investor, who had been doing it for about 30 years… Avi and I were introduced through an architect, and one of my joint venture partners pulled out at the last minute on a property, so my architect introduced me to Avi, Avi had already done his homework on the property, so as soon as he walked into the property, he went “Yup, let’s do this.” That felt very, very quick, but anyway, it’s been a very good decision, because over the last 6-7 years now we’re either working on or have done about 12 projects together… And that’s how I learned. I learned everything from him. He really was and still is my mentor in this whole property development process.
Joe Fairless: For that first project you partnered with him on, what did he bring to the table and what did you bring to the table?
Nicole Bremner: [laughs] I brought very little. I think I brought money and that’s about it. Money and eagerness, and a huge willingness to learn. I didn’t even realize that we could get bank finance, that’s how green I was. I thought we had to use cash for everything. I thought that the only bank debt you could get was your mortgage on your home, and you’d be committing mortgage fraud if you’re trying to do any sort of development… Which is true, you can’t; but I didn’t realize that there was development finance.
One thing I did do was I ran my own building team, because my builder and I had gotten along really well; we’d done some projects together before, and I was able to bring my knowledge of running a building team, project managing to the partnership… But he obviously already had that anyway, so… Yeah, it really was just my part of the cash, and my eagerness to learn.
Joe Fairless: And now fast-forward to 12 projects later approximately, what are you doing versus what is he doing? And have you brought in any other joint venture partners to fill in any other areas?
Nicole Bremner: What we’ve done is we’ve very clearly split the tasks. Initially, I was running my own build team and so was he, but then we clearly saw that he was able to do it so much more efficiently than I could… So I parted ways with my build team. Then I started focusing on the finance raising, and the dealing with architects, and investors, and helping with the marketing of the completed projects. I still do go along to the construction meetings when I can, but mainly I leave the construction very much to him.
As far as other joint venture partners, we haven’t really worked with anyone that has additional skills to what we have. Occasionally and very frequently we work with other investors, particularly with crowdfunding. We were able to raise 6.4 million from the crowd, people with as little as 500 pounds, and being able to invest in our projects… So we’ve got — I think the latest count was 169 investors, which is a full-time job in itself, just communicating with them.
But as far as other principal partners, it’s tended just to be the two of us, and then occasionally some high net worth investors have come through more silently, as investors.
Joe Fairless: So you have chosen a path that can be incredibly rewarding financially; conversely, it can also be incredibly draining from a mental capacity standpoint, emotionally, and then also financially, if things don’t work out… So what are some things that haven’t worked out as planned, and how did you approach those challenges?
Nicole Bremner: Well, I can give you many examples, unfortunately… Right now, as I’m sure you’ve seen all over the press, we’re going through Brexit here in the U.K, and it’s just been a disaster. It really has. I don’t think there are any businesses that have benefitted from this, and even down at the local nail bar, the ladies there were saying how quiet they are… And friends who have security companies, and recruitment companies, everyone is just getting a battering right now… Because there’s just no visibility.
That came at a time when the government also announced tax reforms on landlords. That was also quite catastrophic for many landlords. Thirdly, they increased the tax for people buying more than one property.
Joe Fairless: Man…
Nicole Bremner: All these things just created this perfect storm for investment in the U.K. The government is really sending a message with the tax reforms that they want to try and professionalize the industry, and they don’t want the regular person to be able to participate in this industry anymore; they just want the big corporations.
So that’s really the headwind that we’ve been facing. With that in mind, I’ve got a number of examples. One that’s been quite public, and that I’ve been really open and transparent about, is this beautiful five-million-pound property in West London. We bought that really cheaply at the time, put a lot of money into making it just the most beautiful apartment you could find on the market, and then we had this three-pronged attack of the tax changes plus Brexit, and the whole market for luxury, prime property in London just evaporated overnight. So now we’re left with this stunningly beautiful apartment that we’ve had to short let unfortunately, which takes the shine off something new… And we’re getting, luckily and finally, after 15 months on the market, we’re getting some low, cheeky offers… Which are fine; I welcome cheeky offers, they’re offers all the same… But we’re getting offers that are even lower than the money we’ve spent on that property, which is a really bitter pill to swallow… But sometimes you’ve just gotta cut and run, don’t you…? So we’re trying to work out what to do with that.
Joe Fairless: So is the thought process, “Hey, there might be some change in the headwinds, or change in the direction of the way the wind’s blowing, so let’s hold on to it”, or is it, like you said, “Cut it, and let’s move on”?
Nicole Bremner: It depends which of us you ask on which day… [laughter] [unintelligible [00:13:11].19] headache it’s causing… So today I’m feeling quite positive; it’s got short-term lets booked right out until August on the property if we want them… So my current thinking is that we’ll hold it. The rental income covers the interest cost on that, and I really just don’t believe we should sell it for less than we’ve put into it… So we’ll hold it for Brexit to settle down. Because all these things – look at the tech bubble, and the world financial crisis of 2008… Everyone forgets, people move on, house prices recover. Everything goes back to normal. If you look at long-term charts, these are short-term blips. So my current thinking is that we hold it, weather the storm, and wait until things turn. Then we’ll get five million or six million for it, so… That’s my current thinking. But ask me tomorrow and I might have changed my mind and decided to “Let’s just take anything for it!”
Joe Fairless: Yeah, fair enough. Therein lies the challenge of any developer… And perhaps you can challenge me on this, because first off, I’ve never developed anything, so there’s that; I don’t have experience with what I’m about to say, so I’m coming in from just an academic standpoint. My theory is when you do a development, it’s not cash-flowing, therefore you have a lot of cost upfront, and if things change when you eventually have it developed and it’s stabilized, then there could be some trouble from a financial standpoint… And then conversely, if things change positively, then even better. Or if they do what you think they will do, then great, you accomplish what you were set out to accomplish. So my question is “How as a developer could this challenge, this five-million-pound property in West London, how do you attempt to mitigate the risk from that happening again on future deals? The development risk – how do you approach that for future deals?”
Nicole Bremner: Yeah, that really is the million dollar question, and you’re absolutely. That is when most developers come unstuck, and the number of developers who unfortunately go under is very high, and the reason is simply cashflow. As you pointed out, these developments are really cash-hungry, and if you don’t have the cash to put into them… Us property developers by nature are all glass half full; we share a lot of traits with gamblers even, we really do. We set up this base case, mid case, best-case scenario, and no one ever believes that we’re gonna hit the base case, ever. They always think we’re gonna hit the mid and above. And yet, when we do hit that, we’re just completely under-prepared for that.
So I think that the only way to mitigate against these occurrences is by holding much more cash than you thought you needed, and even double that again.
So just to tell you, some developers are doing really well right now. I had the fortunate opportunity to interview Tony Pidgley, who’s the chair and founder of the Berkeley Homes Group here in the U.K. The largest housebuilder in the U.K. They’re having a great time right now, because they have been hoarding cash over the last decade, because they could see that properties were getting expensive, so they were going against the grain, holding on to cash. Right now they’re sitting on huge amounts of cash, and they’re not at the beck and call of lenders; they’re able to just to go out and buy, and landowners are wanting to buy not just because of their name, but because it’s just an easy transaction. There’s no waiting for banks to come through, and things like that.
So yeah, if you’ve got cash, cash is king, and you’re going to win every time… But property developers are always chasing that next deal, and it takes a lot of discipline to hold back the cash that’s needed, and I’m guilty of that.
Joe Fairless: Let’s talk about a success story. What’s a project that you’re really proud of?
Nicole Bremner: I think the project that I’m most proud of hasn’t quite finished yet… But we bought this beautiful rooftop development around City Road, which is sort of a tech hub of London… And we bought it off — I’m not sure if you’re familiar with Simon Cowell, the judge of X Factor, but we bought it off his brother, Nick Cowell; he’s a pretty lovely guy, who’d owned an estate agency here in London… And they were selling it with planning permission just for two flats, on to of this really beautiful building.
My business partner Avi could see that there was quite a big gap between the ceiling of the top floor and the roof of this building. We got an engineer up there and worked out that we could probably get another floor on this building without increasing the visibility of that additional floor from the street view, which is what the planning department are worried about.
Sure enough, our architect did this beautiful scheme, went back to planning, but unfortunately the planners didn’t even look at the scheme and just rejected it. So fast-forward two years later, we’ve finally won on appeal, so we over-doubled what we had previously bought, and now we’re building it out… But my goodness, it’s being a challenge. Sometimes you feel like you’ve got obstacles at every turn… But with this particular project, it’s just beautiful. The computer-generated images that we’ve got currently are just really lovely.
Every time I walk through this site I just get this beautiful feeling. The views are lovely, and the feel of the project is beautiful. I just can’t wait for it to be finished, and stand in these lovely apartments, looking out over London… And hopefully, if things go to plan, one of them will be my homes, so…
Joe Fairless: Oh, nice.
Nicole Bremner: …I’m very excited about that.
Joe Fairless: What is your best real estate investing advice ever?
Nicole Bremner: Best advice is cashflow, and it comes back to what I’ve said before – develop the discipline to understand that this is not about short-term gain; this is about building a long-term legacy… And if you can have the discipline and develop that discipline to hold back cash and know when to say no, your career is going to last your life’s time, rather than just be for the next couple of years.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Nicole Bremner: Sure, let’s do it.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Okay Nicole, best ever book you’ve recently read?
Nicole Bremner: Oversubscribed (I think that’s the name) by Daniel Priestley… But pretty much anything by Daniel Priestley.
Joe Fairless: Okay. You are introducing a new author to my world, so thanks for that. Best ever deal you’ve done, that you haven’t talked about already?
Nicole Bremner: Englefield Road, in Islington, Central London.
Joe Fairless: How come?
Nicole Bremner: We did it at the height of the market; we bought low, renovated beautifully, on-time, and sold within a couple of months at a peak, just before the market bottomed out… And also, it was just a stunningly beautiful development. This is the one that was bought by quite a famous musician. He’s a lovely guy as well, and has invited me around a couple of times to see what he’s done to the place, and see all his musical instruments. That was a great deal.
Joe Fairless: Best ever way you like to give back to the community?
Nicole Bremner: I sit on the board of two charities. One is for [unintelligible [00:20:55].19] which sounds very weird, but a cause close to my heart… And the other is for cancers of the neck and throat, which again, is something that’s very close to me, having experience in that area. I sit on these boards, and I’m really excited to give back in that way as well, and any other way I can through mentoring or advice on investments.
Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?
Nicole Bremner: I’m prolific on all social media – Instagram, Twitter, LinkedIn, Facebook… Or you can go to my website, NicoleBremner.com.
Joe Fairless: Nicole, thank you for being on the show, sharing the successes as well as the lessons learned from being a developer, and how you got into it, how you initially structured the deals with your partner, and how roles have evolved and how you two have settled into what your strengths are, in your areas of focus.
Thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.