Lee Jones, founder of The Lettings Room and The Investment Room, in conversation with The Property Chronicle
Lee Jones is the owner and director of The Lettings Room and The Investment Room based in Stocksbridge, Sheffield. Specialising in the North he manages 4,000 properties and currently has 1,000 units under construction. (In 2018 The Lettings Room won agent of the year at the South Yorkshire awards).
How did you get into property?
“While studying for a PhD in Chemistry at Leeds University I bought a house, divided it into flats and rented them out to students. I quickly saw the potential for development and the opportunities that a captive rental audience offered. While working as a sales assistant at a high-end retailer selling to Premier League football teams, I went into partnership with several players. They financed my property developments and I split the profits with them on exit. This taught me a valuable lesson about the power cash can give you in a market that can present liquidity problems.”
Where do you source your stock?
“After the crash of 2008 many of my purchases were from bank repossessions. I realised I had to offer clients something different – selling discounted property in a distressed market was attractive to only a few. As my letting agency grew I realised the rental demand could be channeled into my portfolio. I started offering clients two-year rental guarantees (typically 8– 9% pa) which provided a more passive approach for those who wished to ride out the slowing market. Two years guaranteed rental and an initial discount proved popular at a time of QE and low interest rates. It is fair to say that these are still big factors in our clients’ decision to invest.
“In the last few years, as the banks’ bad debt portfolios have been cleared, we have moved away from buying individual units to converting office blocks, mills and buildings out of the ground.”
Describe your building operations.
“I have worked with four sub-contractors for over ten years who operate with full knowledge of our business MO. Turnarounds and lead times are among the fastest going and provided without compromising quality. The Investment Room employs 42 people over four offices around the North. Our developments range from five units to up to 1,000 (the latter is an old brewery with houses and a museum that will regenerate the entire area).”
Who is your client base?
“We have many high-net-worth clients in the City and abroad, all of whom are cash buyers. Some buy and hold for the next generation, some buy off-plan and look to sell on when the development is completed, typically to property funds who buy in bulk but will not pre-commit. Their cash is then freed up for the next development and a repeat of the same process. Competitive pricing is key to this process, as securing returning investors generates cash flow to acquire new sites.
“Our clients are increasingly buying whole sites and this has smoothed the administrative trail and improved the speed of decision-making.”
What is the appeal of the North to clients unfamiliar with the region?
“It is hard to answer this without using clichés, but the Northern Powerhouse, improved infrastructure, HS2, devolution of power to regional bodies, low unit costs and strong employment numbers all add to a sense of value. I also believe a change in the way people work and the kinds of work they do is encouraging them to move out of traditional urban centres down South.
“The perception of an overpriced South East sector in England – and subsequent struggling yields – has caused many to look for value in a country that is still thought of in property terms as a good bet. The government’s inability to tackle the housing crisis underpins investors’ belief that property remains a shrewd long-term bet, particularly in areas where property can stillbe bought at a discount to pre-crash levels.
“In addition, the North outperforms the South significantly when considering rental yields.”