Young – The Early Years Business Model

By David Mackenzie, written March 2020

This is the first in a series of blogs charting the early years of Young from inception in 2003 to 2014.

The partners of Young have always, in our own way, been passionate about real estate. Whether through professional study, love of culture, the arts and architecture or simply appreciating the beauty in any man-made structure, something about it touches us deeply.

We have therefore always wanted to combine our passion for real estate with our work. In the late 90s, as colleagues and friends working in international blue chip companies, we were busy and travelling the world, all the while thinking of the future and our real estate ambitions.

We started personal investment with cautious small steps. As our careers blossomed, we worked around the world, sometimes having to relocate. In the meantime, our homes were temporarily let and creating an income. The spreadsheets soon indicated that this was a great source of income; capital employed, leverage, yields – all ticked the boxes. Mortgage lending was catching up fast, with Buy to Let (BtL) now a recognised investment category.

We were now looking for property to buy specifically to let on a long-term basis, but encountering some frustrating situations. Estate agents were hard-core sales people with little or no knowledge of the rental market. Not listening or caring about clients’ requirements, everything was ‘the best buy ever!’ Furnishings were a headache with Ikea being the only real option on a budget. At the time, not great for robustness, but great for design flair. Letting agencies were not, and are still not, regulated, customer service was variable at best and the delivery of quality tenants was sporadic. There were very real grievances from tenants about terrible landlords and agents, sub-standard accommodation, poor maintenance, a lack of responsiveness and a ‘take it or leave it’ attitude.

Shocked by our experiences, we decided that the BtL industry needed professionalising. So, in 2003 Young was formed to offer a professional end to end, hands off direct investment option for investors of residential real estate in London.

Young Group became the umbrella over Young Property, Young Finance – FSA (now FCA) regulated, Young Furnishing and Young London (Letting and Management Agency).

Young diligently researched areas (in travel zones one and two), prices and developments that we considered to be overlooked or undiscovered. These had to represent great value and have long term upside. We would wear out many pairs of shoes in our diligence to understand an area, the capital and the yield dynamics.

Our mantra was the ‘10 minute rule’ – no more than a 10 minute walk to a convenience store, bars/restaurants and public transport. All three criteria had to be met – not as easy as it sounds!

We then contracted to buy developments wholesale and sell on individually to our clients.

At first, our clients were friends and colleagues. Then word spread until referrals were the only marketing channel that we needed. We helped to mortgage, furnish, let and asset manage the investments for the long term.

The clients were from all walks of life. Some bought their homes through us, others as an investment and trusting Young to create income to supplement their pensions for later life. We had a broad range of clients from blue chip board members, MPs, celebrities, stay at home mums, professional athletes, trades people to media heavyweights, with their ages ranging from 20s through to 70s.

Seeing that the model worked, our clients referred Young to their friends and families (without commission). Many then became investors in multiple developments recommended by us.

Importantly, many of those clients became lifelong friends.

Meeting Clients’ Investment Aims
Investment strategy is as broad as it is long. Some investors focussed on capital appreciation over the longer term, some needed income from a specific moment in time and others a combination of both.

Some were more risk averse than others and for some financial leverage was everything.

Our investment recommendations were based fully on our clients’ investment aims, liquidity requirement, risk profile and exit strategy.

It was clear that there was no one investment solution that would fit all.

Customer Service Centric
Our earliest impressions of the rental market were that it was very landlord biased. Without the tenants’ (we prefer to call them residents) rental income, even the best investments did not perform as they should.

We took a pioneering approach to put customer service at the heart of renting. All our staff were remunerated on customer (resident) service feedback, compiled and measured by an independent company (Real Service). Our firm belief was that if we took care of the resident, all the investment metrics would be optimised – we were right. Average tenancy length, occupancy, security deposit retention and referrals all improved and were all industry leading.

This is a philosophy that we live and breathe to this day.

Multi-Award Winning
Our approach to customer service and innovation lead to a plethora of industry awards being on display in our trophy cabinet. Young became a multi-award winning company, recognised by Property Week, The Sunday Times, HSBC London Business Awards to name but a few.

We would go on to win another clutch of awards at Get Living – more on that in another blog.

A Financial Crisis
Bear in mind that much of what is described above happened during a very difficult time economically in the UK. We came through it and we are proud of that achievement. Young and our clients completed on all 380 purchases that we had contracted to during 2008 and 2009. It was not easy, it was a time to learn, adapt, collaborate and innovate.

Summing up
Over 11 years we transacted £750m worth of London residential real estate, and asset managed over 500 investment properties for our clients.

We were the pioneers for Build to Rent. As early as 2009 we were calling for institutional investment in residential and we were retained by a number of institutions to advise how they could accomplish this at scale. We were, once again, significantly ahead of the curve.

By 2011 we were advising the Delancey/Qatari Diar JV on the set up of an operating business we went onto name Get Living. Situated at the Athletes’ Village (East Village, E20) we ran the company as the Exec Team in the image of Young. Under our stewardship it became a £2bn+ REIT with additional mixed-use development throughout the UK.

Our thirst for innovation, spotting gaps and seizing new opportunities could be ignored no longer and in 2020 we returned full-time to Young.

At Young, we listen to our clients’ needs and present appropriate Placemade Returns.

At Young, we spot gaps in the market and act.

At Young, we listen, we think, we care.

Please do get in touch.

David Mackenzie
Client Partner
Contact David