Investing £1.4M in a derelict pub conversion, with Kath Gibb

This is the story of how Kath Gibb took on one of the biggest projects of her career - renovating and converting a Grade II listed pub into a hugely profitable mixed use investment.

Find Kath on Instagram - https://www.instagram.com/anetoproperties/

Watch the interview on YouTube - https://www.youtube.com/watch?v=yXgwSfMKJwg&t=45s

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Interested in the world of commercial conversions? Join me on November 8th for our final, behind the scenes introduction to commercial to residential projects. 

Book your ticket now at insidepropertyinvesting.com/openday

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Transcript

Mike Stenhouse (00:13)
So before we get into the details of this amazing project, talk to me a little bit about how you got into property in the first place. So I met my husband, so we're both in the business together, Jim. When I met him, he was always dabbling in it and his background, his father was in the business, so he's always had that kind of background of it. And then when we met, we bought a place in France together.

and ended up renovating this place in France, which we sold in 2017 and moved back to the UK. Part of the reason for moving back was we wanted to build up our own property portfolio. Just in time for Brexit and Covid and all the fun stuff. We couldn't do what we wanted to do in France because of the tax system and all sorts of things. It's not so easy just to kind of flip properties there. So we came back and did a few flips.

kind of how we built up what we were doing in the UK and then we progressed on to doing more projects to hold on to and keep within a portfolio. So we've kind of been doing this since probably in the UK about 2017. And this project itself were I mean right in the heart of Knutsford. You can get more central. So for anyone who doesn't know I guess

How would you describe it in one sentence? It's quite an affluent area. We are kind of on that sort of golden triangle. It's real sort of you've got Alderley Edge, Presbury, Nutsford, Wimslow, kind of footballers and Cheshire housewives kind of area. it's a small market town, Tatton Park on the doorstep, very eclectic kind of bars and restaurants scene. You know, a really nice little town that people come to 20 minutes from Manchester. So, yeah, it's got quite a broad appeal.

and there's a lot of wedding venues around here as well, which is obviously one of the reasons why we've kind of done what we've done with this property. When you were sourcing this deal, were you looking for, was this on your vision board? Did you know what you were looking for or did you cast a white net? No, I mean, we'd done obviously commercial to residential before. We'd done a social club in Macclesfield into nine flats, which still have that one and that's leased

supported living for adults with learning disabilities. So they take on that whole. The registered provider takes on that whole building and has leased it for us for 10 years. So that's kind of, it's very straightforward in terms of, you know, we've made apartments out of it and stuff. So with this one, no, when we looked at it, we thought, well, it's not something you could turn into residential. A lot of the time, you know, people are buying buy up pubs and think they could get planning straight into having HMO or.

It's a struggle, Yeah, it can be a struggle, especially if it's classed as like a community asset. And we knew going down that route wouldn't work, so we'd have to maintain some part of the pub element of it. So when we looked at this, was very much, we're not going to be able to turn it into flats. Definitely not. Did that put you off in the first instance? We've never really been like, we'll do HMOs or we'll do apartments or we'll do this. We've kind of looked at the building more and thought, right,

what could we develop this into? It's a great project that we could take on what would be the best value for it at the end, which is what we did when we looked at this because we're local in the area, we'd walk past it, we knew it was up for lease and it was free of Thai lease originally from the brewery. But we were like, well, we came to have a look at it and it was in such a state that we didn't want to keep hold of it in terms of...

keeping it within the brewery and just leasing it off them. So we went back to them and said, look, would you sell it? And they were like, well, make us an offer. And of course, this was just after COVID, it been shut for about a year and a half, nearly two years. So we knew kind of we'd probably get it for quite a good deal, which we did do. So that was kind of on our radar, right? Okay, we can get this building, but what can we make it into and what

be the best way of getting your income from it. Sure. You said it was in a bad condition. How bad are we talking? Basically, we rebuilt the whole building. It's listed. So we had to obviously go down the listed route and get Heritage on board with what we doing. But we were actually quite lucky because it was in such a poor state that Heritage were very much like, yeah, we'll agree to that. We'll agree to this. So we re -roofed it, completely gutted it.

put steels in all downstairs to re -support the whole building. It was pretty much collapsing from one side to the other. So actually the condition kind of helped in some ways then? There wasn't too much to protect? No, but also we had some structural conservation guy on board with us who kind of listed through all the problems with it which was then

heritage. So he was employed by you? He was employed by us to kind of like... specialist? Yeah. And you find that helped? Definitely, definitely. And did you come into it with a clear idea of what you wanted the amp product to look like? Did you know that it was going to be six rooms and downstairs? Yeah, I think because of the way it was laid out, obviously downstairs was always going to stay as a bar pub down there. Originally it had internal stairs up to here because it was like...

know, manage as accommodation in this area. We knew we'd have to get external stairs for this to have it separate upstairs, downstairs. But the layout up here isn't hugely different in terms of it always had a room off a room. So that kind of benefited us with doing a room with a bathroom. Yeah. So that's always kind of worked in that way. Okay. And from a planning point of view, I mean, you said it's a listed building that introduced some challenges

the aesthetics and protecting the building itself. What about the use class and changing it into more of a kind of hotel style? Yeah, I mean, again, because of being a, it's history is it's, you know, this was built in 1754. It was part of the silk industry, three sort of cottages together, but then developed in the 1800s into an inn with rooms above. So in some ways it's always been an inn with rooms above. So when we went

into the hotel kind of route with it. It wasn't that difficult to get the use class change for up here. I can sense from the way you're like reeling off these dates and the history, the buildings almost become part of you. Has it been a bigger project from an emotional point of view? I love hate with it. You know, I think when we first took it on and then all the problems with it in terms of, structurally and

yes, we have to get listed on board and not always been easy to get some things agreed and it took a lot more time to get the planning through. Yeah, I think now we've developed it and we've got this building, I think we've really brought it back to life and we're kind of quite proud of keeping it as it is with the character of it and stuff. Talk to me about the duration then. you found

pre -COVID or just as COVID? No, was just after COVID. So we first saw it in February 2021. OK. And then we bought it and it completed in October 2021. Put the planning in, although we were allowed to do some works because the roof was pretty much coming down, et cetera. Yeah. So between sort of December of 2021 through to probably

February, March time, we could do some emergency works on the building, which we did. And then we got planning through in July, 2022. And then we finished it with the rooms done in April, 23. So the actual project itself was pretty quick once you got going. Once we got going. It's just all that other stuff you can forget about, it's the buying it, it's the planning and waiting. Yeah.

You've got to factor that in on these bigger projects. It's not just a case of, convincing will be eight weeks and planning will be 10 weeks. It rarely works out like that. Factoring in that time, it took us a lot longer than we thought it would. We'd finished the rooms, but we still hadn't tentative the bar downstairs. And that took us a long time. We had someone interested when we first bought it who was going to take on the downstairs. And they pulled out. It took us probably another, I'd say, year before we got

someone interested with a tenant downstairs. It's surprising given where it is, the affluence of the area, the fact that, as you said, there's lots of bars and restaurants, there's somebody emptying a glass bin as we speak. So, I mean, we're in the heart of like a kind of hospitality area. What do you think impacted? It was, you know, not that long after Covid, so people were still kind of recovering from that, increasing in minimum wages have gone up, cost of crisis. We just hit the market completely in a long time.

find a new tenant, but then things obviously slowly have started to improve and then we've got someone on board Signed on the dotted line? Signed in May of this year. But now you've got a commercial tenant in place. mean, typically you're looking at three, five, 10 year leases, so very different from the resi market. Yeah, you're pretty much hands off after that. You kind of hand it over to them, they take it on and then you don't have to deal with tenants, you don't have to deal with managing agents, you don't have to deal with any of that.

What can you tell me about the numbers on the deal? Purchase price, renovation costs? The actual purchase price was around 625, but then obviously fees, bats, stamp duty, et cetera. So we were over 700 on it, buying it. Fair chunk on architecture fees and planning and all that sort of stuff. And then on top of that with the renovation of it, and that's been over 600 grand. Yeah, it was a fairly extensive refurb, whole new roof.

et cetera, scaffolding around the whole building and it was covered as well. So that was a costly expense. yeah. So what does that work at then about 1 .3? 1 .3 near 1 .4. Yeah. Okay. And the end result, you've brought it back to life, right? It's an amazing looking building. Downstairs is going to be really commercial. Yeah. It's sort of a craft beer slash gin slash cocktail place with a pop -up food kind of

It's 45 grand a year for the rent, but it steps up over the next sort of three or four years to around 47. And then we've got a review in year five. And then upstairs, which I think is probably the most interesting. Yeah, we've got the six boutique hotel rooms. Most guests tend to stay maybe one or two nights tops. Room remote access, so you've got smart locks that you can let in. There's minimum of anyone having to be around to manage this.

So it is kind of hands -off, essay type. There's quite a few hotels just down the outskirts, but not right in the center. I think when we looked at this, took the project home at the beginning, we were like, well, hotel rooms would work because there's not a lot of overnight accommodation. And to prove it, we were 83 % occupancy last month. How has that grown? I mean, that's phenomenal. Was it a gradual process to get there? We turned on end of April. We had a soft launch, April, May.

Instagram. mean, most of our business comes through bookings .com or direct via weddings, partnerships with venues and areas. you know, when you're building, you know, knowledge of it and marketing it and then bookings .com, when you start getting really good reviews on, then it's like a bit of a snowball effect. you know, if you've not got much competition around, then, you know, you're always going to start to build and build occupancy level. I

Nightly rates or however you look at this from an income point of view, how do the rooms compare to the pub and what do the income on these look like? Our night rates vary, you know, depending on obviously demand and what, when in the week and how far in advance people are booked to it. But there's anything from 100 to, you know, over 200 on a night rate. We're hoping for this year to be around the revenue around 230 ,000.

sort of around 73 % occupancy. All your costs that you've taken out, whether it's cleaning, know, provisions, commission, we'll net around 130 to 140 net profit. I mean, still kind of three times what you get under the pub. Yeah. So worth that extra work. Yeah. I have a VA virtual assistant that does most of the work, nine to five, Monday to Friday.

And this weekend I had no one call me, know, the weekend before. Yeah, brilliant. A lot of it's, you know, two minute conversation on the phone. Yeah. And talk to me about your plans with this because a lot of people may be thinking, you know, this is great, Kath can put her fee up and retire now. But you're thinking about maybe exiting? Yeah, it'd be great to keep it and run it. And the income is very good. But we're coming off a bridge, we have to refinance. We had a lot

Private investment when we bought the building, when you look at the market at the moment, interest rates are as they are. So the equity that we would have to leave in this building, if we kept hold of it and ran it with a mortgage, you know, it just feels as if we're leaving too much money in the deal. Or we have already put it on the market for sale. The whole building. And there's two options in terms of anyone buying it. It's buy the whole building.

You've obviously got the rent from downstairs coming in, hands off, run the upstairs, great income. Yeah, established, reviews, trading history, all that stuff, okay. The other option is you get two guaranteed rental incomes and we lease the upstairs. So you would remain in place as the tenant on the roofs. Yeah, so we would therefore get equity back out, but also carry on as running it with And almost be completely hands off for the buyer then.

Interesting. Okay. Is the view then to move on to more projects or what's next for? We'll sell up, know, pay our investors off that we need to and then, yeah, look at what's left over and what our next project would be. But for somebody sitting at home watching this thinking, you know, what do we do next? Maybe we want to take on bigger projects, more complex projects.

Would you advise against it or would you give them any tips to make it a little bit easier for them? Obviously don't jump from doing a small project to suddenly a big project. I'd advise when you're looking at a building is just to work out. Don't be narrow minded about, I've got to make this a HMO or I've got to make this an apartment or I've got to, you know, think outside of the box of what will get me the best income from this building. In terms of what you've got going on online, people want

get in touch with you maybe about the sale of the property if they want to see what projects we need to in future. Are you active on social media? Is there a good place people can find you? Yeah, so we are under Annetto -N -E -T -O Properties on Instagram and I'm under Katherine Giebb on LinkedIn. And then we're linking all our social media with the sales brochure, et cetera, for this as well. Fantastic, awesome. Well, thank you for joining me today. Thanks for showing us around. Thank you. And good luck with the sale.