After leaving school at the age of 16, Graeme Carling worked his way up the ranks of the corporate world, specialising in logistics and distribution.
Promotion after promotion came – but he still found himself wishing he worked for himself, rather than other people.
Mr Carling started three businesses in the early 2000s, all of which failed.
“I was skint, I had no money, and I was really at a low ebb. My confidence was dented, my ego was bruised, and I had to go back to mainstream employment and rebuild myself financially,” he says.
His “lightbulb moment” came when he read Robert Kiyosaki’s bestselling book Rich Dad, Poor Dad, which focuses on how to increase your wealth by investing in assets and being smart with money.
The book gave him the financial education he needed to set off on a fourth business venture in real estate, now known as The Carling Group.
Mr Carling, 49, now has one of the largest portfolios of landlords in Scotland, with more than 300 properties worth over £10m. Working with his wife Leanne, they have also expanded into other investment areas and maintain other rental properties for social housing providers and local authorities.
Mr Carling, who is Scottish but lives in Dubai, says they bought their first buy-to-lets during the financial crisis that began in 2007, when properties became available at discounts.
“When everybody was getting out, I started buying properties using the funding and the financing that was available,” he says.
They had no money or capital to start with, but were able to take out mortgages worth 100pc of the purchase price or more, which used to be widely available.
They also used same-day remortgages and bridging loans to help them finance their purchases.
“We were able to refinance quickly, take out a capital amount and reuse that for the next purchase,” he says. “We just kept on repeating that. There was no grand plan on becoming uber-wealthy, it was simply to replace my net salary through income generated through the properties. We managed to do that within 12 months.
“I thought it was going to take two or three years, but we just kept going. We upped it from buying one property, to six properties, to 50 units.”
In the last five years, the couple have been selling single buy-to-let properties, with plans to offload them all and refocus on buildings where they own all of the rental units.
Rent controls and an increase in regulations in Scotland, combined with a jump in mortgage rates, have made it harder for Mr Carling to make a profit on a single home. He says the “numbers don’t work at a small level” for buy-to-let.
“The strategy is completely different to when we started all those years ago,” he says. “Our strategy of just buying for income on individual properties: I would not recommend that to anybody. That is a quick way of going bust. Do not do that. It’s so difficult on a small scale basis to make any yield if that’s the business you’re trying to create.
“If it’s a hobby or a pension and you can afford it, and you’re looking at long-term capital gain, fair enough. But for me, if you’re looking to get into the property business… I am so concerned that there are so many of these property gurus out there telling people to ‘go quit your job’ and telling them all the old ways. It is so tough.”
How renters are paying the price for Nicola Sturgeon’s war on landlords
His advice to aspiring investors? “You need to go in and partner with people at scale. That way is, for me, the safest and quickest way of getting in. Most people want to do it individually – I get that, we started that way. But it’s so difficult and so slow.”
Nowadays he says it can take six to 12 months to get a loan from a bank, so you might as well get a bigger loan for many properties.
If you’re just starting out, a bank won’t give you the money, but they will if you partner with more experienced and wealthier people. “That’s what we do: we partner with people bigger than us on the bigger deals,” he says.
Mr Carling, who now focuses on acquiring entire buildings, says following the advice of others telling him to start small held them back for years. He does not buy new builds.
Instead of paying off mortgages, which other landlords are doing, he finds he can get more value for his money by reinvesting his profits in companies and businesses.
The benefits of buying off-market
Carling usually buys off-market properties where he can negotiate good deals without competing with offers and getting into price wars. “We don’t like to get into auctions or competitive bids because it then just gets ridiculous,” he says.
He has built up a network of commercial estate agents who will tip him off about residential buildings that are becoming available.
He recommends being mindful of both cash flow and capital gains. Being able to flip some properties and make some cash was something he did not do at the outset, but thinks is now a useful part of a strategy when building a large portfolio.
Choosing the right tenants – and learning to ‘fail fast’
Mr Carling’s tenants are often people on benefits who have had difficulties finding affordable places to live. He says it is a common misconception among some landlords that these are the riskiest tenants.
His worst-paying tenants have been working married couples – for instance, in cases where they split up or one of the two get made redundant.
“They just disappear and you try to track them down,” he says. “It costs thousands in legal fees. That rarely happens with people on lower incomes because they have nowhere else to go.”
He and Leanne have also found it fulfilling to provide homes for people who are less well off.
“We’ve got people that have been with us 16 years that have moved three or four times,” he says.
“They couldn’t get a property to start with. We’ve seen their kids grow up and go to school. They’ve lived in our properties for years and years. They couldn’t get a council house; they couldn’t get a private let because most landlords frowned upon it.”
He says there’s “overwhelming demand” for affordable housing, which presents an opportunity for investors who can make the numbers stack up and get good deals on large numbers of properties.
Another area of the rental market that is still profitable for him is student accommodation. In 2017, they bought a site from the University of Dundee which includes 144 rooms, as well as offices.
Mr Carling says their student accommodation units are still performing well. He has also invested in commercial office space which offers higher yields.
They sometimes buy office buildings and convert them into residential sites, but he warns that the process takes too long in Scotland and is better done in England, where planning rules are easier to deal with.
Looking back now, he wishes he had started his businesses sooner.
“Fail faster,” he says to aspiring investors. “You’re going to fail; I failed many times and will continue to fail. All the top entrepreneurs in the world have failed.”