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Show Summary
In this conversation, Richard Harrison, the founder of Caldera Capital, shares insights into investing in London real estate. He discusses his journey from being a property agent to running a private investment platform, highlighting the unique characteristics of the London market, the opportunities for smaller investors, and the challenges of urban development and affordable housing. Richard emphasizes the importance of trust in real estate transactions and shares his strategies for long-term investment success.
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Investor Fuel Show Transcript:
Richard Harrison (00:00)
No, you don’t have to be. don’t have to be. I’ve come about it firstly, primarily through capital appreciation. That’s my model for the first sort of two and a bit years, I would rather back what I know. So I have the opportunity here with a gentleman that I work with who has a sort ofvery decent sized portfolio that allowed me to jump in on some deals, use my
capital I get a very good return on my money in a sort of on a three or four month cycle,
Dylan Silver (02:00)
Hey folks, welcome back to the show. Today’s guest, Richard Harrison, operates Caldera Capital, a private office investment platform focusing on London and the surrounding areas. You can find him on Instagram at Richard underscore J underscore Harrison. Richard, thanks for taking the time today.Richard Harrison (02:18)
Thank you Dylan, my pleasure.Dylan Silver (02:20)
I typically like to start by asking folks how they got started in investing, but this is an area of investing I know almost nothing about ⁓ investing in London and the surrounding areas. walk me through that. How do you even get started investing in London?Richard Harrison (02:35)
So I’ll give you the short version. So I typically started out in property as most people do as an agent here. We obviously touched on before that the commission structure here is very different to the States. I made the natural progression from doing resales into what we would classify as new developments, new homes, that kind of thing. I started in a family company and then I moved to CBRE, who you will be familiar with. I know they’re very big in the States.Dylan Silver (03:05)
Yep.Richard Harrison (03:05)
I actuallyacquired one of the companies that I worked for. And then subsequently went to work for BNP Paribas, big French bank on the real estate side in London, in the UK, again on new developments. So I stayed there until I was associate director. We went through a couple of mergers and things changed for me. So I wanted a little bit more flexibility. I’ve always been quite entrepreneurial, I guess. So it was probably only a matter of time.
then took the leap out. before I got into investing, I already had sort of 10, 12 years of corporate experience to lean on. And looking back on it, you always think there are things you wish you’d bought now, obviously looking back 10 years. So it was just a matter of right place, right time, very much right place, right time.
Dylan Silver (03:49)
Yeah.When we talk about investing in the United States, it’s gonna be regional. And I say this, there’s gonna be some people who may say, well, you can do it remotely. To that I’ll say, if you’re just getting started and you’re in Texas, it’s tough to be looking at properties in Ohio, although people will do that. But the Texas market where I’m licensed is night and day different than Northern New Jersey where I grew up. And so you can kind of… ⁓
Richard Harrison (04:01)
No.Yeah, I’ll do it again.
Dylan Silver (04:24)
do more both because of the entry point and because of less regulation and because of less population density, more available land. So there’s more happening in Texas. Now, London is the exact opposite of that when I think about investing in London. So walk me through what it’s like being an investor in London and also what’s the avatar of an investor in London? What’s their typical back?Richard Harrison (05:37)
Yeah, so I think it’s, I think London’s probably not.As different as you were saying to your market, it is quite night and day. know, everyone, think from a possibly from an American perspective, you know, what you see of London and what we see is, I guess, two different things. I guess it’s like looking at New York City and then you guys think, well, actually, there’s a lot more than just that bit that all the tourists go to. So, you know, the market here, you can spend anything from, you know, quarter of a million quid to 250 million pounds, depending on what you want to buy. And all of that probably happens within the space.
that’s, you know, I don’t know, 20, 30 miles in diameter at most. So it’s quite a lot in a small space. London has a lot of international investment, a lot of international investment, especially from the Far East. That was a big experience when I was in new homes and new developments because it’s always seen as a safe place to park your money, for one. And the…
Dylan Silver (06:33)
Yeah.Richard Harrison (06:37)
It’s such a huge population density, ⁓ especially after we’ve had a lot of problems previously in 2008 with the similar financial crisis that you had and post Brexit here when we left the European Union, when a lot of European cities were trying to take the dominance that London has. But the two biggest population areas, I think in Europe, if I’m correct, but certainly in London are London and Canary Wharf, and they’re both within about four miles of one another. Canary Wharf actually employs, I think it’s a quartermillion people a day. So it’s the same during COVID, you know, it changed the market, but people need to be here. ⁓ So that kind of keeps it ⁓ interesting and it keeps the investment opportunity quite
Dylan Silver (07:09)
wow.Yeah.
Richard Harrison (07:22)
Broad, you know, there’s everything from the super high end stuff to the, we call them HMO, so houses of multiple occupancy. So probably not too dissimilar to the kind of condo model where, you know, you can look at things for student accommodation. You can look at renting things out. We have companies here that guarantee your rent for five years. So you can look at kind of buying big blocks and putting them together and kind of moving them out.plenty of places that are probably not too different to how you do things. Where I live here, there’s a hospital around the corner. So there’s a lot of things around here that will cater for nurses and doctors and things like that. it’s very much, there’s one market, but lots of microcosms within that that make the sort of greater piece.
Dylan Silver (08:10)
Now, is there an opportunity for, you know, a smaller investor or someone just getting into the space to invest in the surrounding areas or do you really have to be like an institutional player?Richard Harrison (08:22)
No, you don’t have to be. don’t have to be. I’ve come about it firstly, primarily through capital appreciation. That’s my model for the first sort of two and a bit years, which is, you know, I had enough that similar as you were saying, I could probably buy a little bit further away from where I would want to, but I don’t know that market. So it’s not a dive I would make. I would rather back what I know. So I have the opportunity here with a gentleman that I work with who has a sort ofvery decent sized portfolio wants to probably worth about 20 million currently. He does a strategy which buy and hold so he will buy things at a good price below market value, do them up, retain them, rent them out usually on large scale and then refinance them. So that allowed me to jump in on some deals, use my
capital because he’s obviously buying lots to aid the other deals, I get a very good return on my money in a sort of on a three or four month cycle,
which means over a period of time, I can appreciate my capital with the plan to be to do joint ventures with him and then probably to mirror that model that he already does. But it’s a stepping stone process. I could do it right now, but
Dylan Silver (09:25)
Yeah.Richard Harrison (09:37)
The benefit I get from growing the money is greater right now than having the asset. So I look at it as a kind of two-step process, because then I’ve got the ability to diversify and do some capital appreciation and some ⁓ asset holding.Dylan Silver (09:55)
I think, you know, we’re dispelling some myths here, because as I’m listening to this and I’m realizing, OK, I had a preconceived notion that that’s incorrect. know, I’ve heard it’s you’ve got to be an institutional player in order to to invest in some of those markets. Are there and is there an abundance of interest from folks who have jobs outside of real estate in investing? Or does it seem to be like, if you’re going to be an investor in London, this has got to be your focus?Richard Harrison (10:05)
Thank you.I think there is. I would say there’s probably quite a big age gap. think it’s either the kind of, know, couple of my investors are 50 plus, which makes sense because they’ve kind of made their money and been around. And then I think there’s a lot more of the sort of, I guess, Generation X type thing, know, young money that kind of is…
wanting to work for themselves and kind of has an idea of what they want to do and they are probably learning things or more interested in learning things, younger, earlier in that phase than maybe a lot of us were at that time around. So I think there is, you know, there are means and ways of doing it, as I say. ⁓
prices here vary so dramatically that you do get what we classify as super prime. So anything in central London where I had a client I was working with a couple of years ago who was looking for a house for 70 million pounds, which is crazy, like in the grand scheme of things. But you can also still buy really, really interesting stuff. think like anything,
There are plenty of good deals, they just have to stack up and the hardest thing is finding ones that stack up because everyone thinks that they have the greatest thing since sliced bread. And I apologize because my phone is just going off. Is that bothering you? Do want me to stop that?
Dylan Silver (12:12)
Yeah.Yeah, when it’s their home, right?
That’s okay. It’ll probably resolve on its own. ⁓ I do want to ask you about some of these opportunities in the urban sprawl in London. So when you’re mentioning like, you may have this perspective, London is this area, but it’s also encompassing this greater surrounding area. Is there an opportunity, you mentioned like Generation X and newer money, is there an opportunity for folks to either…
Richard Harrison (12:47)
Yep. Yep.Dylan Silver (12:50)
pool their capital or themselves invest in their personal portfolio in some of those surrounding areas as a developer? Meaning, could they do ground up construction over there? is everything pretty much, everything has already been built up in the surrounding areas?Richard Harrison (13:01)
I see.I don’t think it has been built up. We’ve expanded a lot of infrastructure here. there’s sort of new train lines and things that have gone in. And that’s kind of obviously opened a lot of other areas up that were probably previously secondary or tertiary or worse to…
making them a lot easier to get in and out of central London and therefore obviously they have seen that natural increase in development. I think here with development, I don’t know how it is in the States, but there is a lot of red tape here. So for instance, you know, if you are buying something, say without planning, you’re buying a site that you want to develop planning on. London has this thing called the London Plan, which is essentially the kind of planning rules.
The problem with it is that it’s kind of taken on the opinion of each borough within London, how they interpret that plan. So sometimes what you will get permission-wise in one location, you will not get permission-wise in another location. And therefore from a developer side of things, it makes things quite tricky. So most, you can obviously then buy things with planning, but obviously you have to be…
you have to have the construction element down pretty tight because if you don’t and that runs over, people are working on probably a 20 % profit margin ideally, but you are still determining depending on how long the scheme is, right? It might only be five or six units. So it might be seven, eight months worth of nine months worth of construction, but we live in a very fluid market, especially on the sales side here. So it makes it a little bit more risky from a ground up scheme.
Dylan Silver (14:48)
Yeah.Richard Harrison (14:49)
So I think that sort of, you if you can buy things that kind of slightly run down or have that opportunity to you know, get a refresh in them and get them done and get them out and rented, you’re then in a position where you can borrow against and leverage that in the future for probably something bigger. And I think that’s the smarter way to do it. Putting, you know, with my business partner, we have looked at a couple ofreally, really interesting things, but you’re then going, it changes the risk profile because you’re then going, if you this, we can’t really do another deal for a year because we need to kind of focus on this one. In which case you look at the basis of going,
If I can make X doing this, but actually I’m making Y or similar, just very, you know, doing something that we can almost do with our eyes closed and keep moving, then in some respects that feels a little bit safer from a wrist profile point of view for me.
Dylan Silver (16:31)
Yeah, I mean, look, if you’ve done it before, you have something to rely on versus trying something new. And, you know, in Texas, where I’m licensed, talk about development. It’s still not something like you snap your fingers and there’s an apartment complex. You still have to get zoning and permits, and that can be tricky. And people have lots of stories about how difficult that process is. But there’s also so much development happening that very quickly the pro forma changes for theeveryday investor and then also for someone who may be slightly larger. An example of this was like in the capital of Texas in Austin, you had rents stabilize or even go down, which was like unforeseen. How could that happen? Right. And I probably contrast that how often do you rents go down in London? Probably not often, right?
Richard Harrison (17:09)
Yeah.No,
no, I mean, sometimes with the rates that they go up, you know, I’m living here at the moment, I have another place which is rented out and, and, and, you know, the agent was like, it’s got like, I think they were saying like, 200 pounds a month. And I was like, so a year ago, like, it makes no sense to me.
how logically that can be the basis. And to be fair, I’ve got, in that place, I’ve got very, very nice tenants. I would rather have a little bit less and much more comfort from someone that I don’t have to worry about than kind of chasing things. But no, I don’t think rents have ever gone down in London, if I’m totally honest.
Dylan Silver (17:52)
Yeah.You know, that’s a huge issue in the States is this idea of affordable housing and they’re trying to tackle it so many different ways. And that’s actually good to see because I think the general public may think like nothing is happening anywhere. It’s just getting more more expensive. If you’re looking at, you know, New York City and, you know, Miami, then it’s going to be tough to find affordable housing. But I do know that in many places, they’re doing some innovative things in Los Angeles.
Richard Harrison (18:19)
Mm. Mm.Dylan Silver (18:27)
you can build what they’re calling ADUs, alternative dwelling units in your backyard of your home. And they’re doing this in multiple places. And then I’ve also seen too, there’s this huge movement towards like RV parks and modular homes. Is there any discussion out there of affordable housing or is it kind of a thing where, well, if you wanna live in London, you’re gonna have to pay the price?Richard Harrison (18:42)
Yeah. Yeah, yeah.I’m
It’s on every ⁓ sort of manifesto of any time an election comes up. There’s two problems really, mainly going back to what I mentioned about the planning permission route, it takes too long. from a sort of providing what we would call affordable or social housing, two slightly different things, from a developer perspective, it’s quite difficult to make money out of. ⁓
at which we need them being built.
is nowhere near kind of what they’re doing. Part of the problems we had years ago was, so this fell under what was called section 106. So if you didn’t want to build, if you didn’t want to give a proportion to affordable housing, local authority, they would figure out what the viability of it or what the cost was, and you would pay a sum. So what sometimes would happen in places like Canary Wharf is you would obviously build, you know, 150 units and you don’t want to give 25 % of them away to social housing.
because
it’s going to affect the sales prices on your premium ones, which used to be 600 pounds a foot and are probably now 1200 pounds a foot. So they used to do this thing where the local authority would say, OK, cool, if you give us five million, then we won’t worry about it. ⁓ And then they build them six miles away. So it kind of negated its own problem. It just kept that cycle going around where…
If the person telling you to build the stuff is also willing to build them further away and take money for you not to build them where you were originally going to build them, then yeah. And that’s part of the issue. There aren’t any incentives apart from the moral run, which there does need to be places.
Dylan Silver (20:29)
you doing.Richard Harrison (20:41)
gentleman you may be familiar with on YouTube called Rory Sutherland, who’s a big marketeer. And he was saying how, you know, what a banker would spend now in Fulham, which is, you know, sort of very central London is probably what a postman would would have lived in 10 years, 100 years ago. It’s it’s all that kind of perspective. And, you know, so it’s, it is interesting. I don’t know what the solution is. Everyone’s been trying to figure it out. There is a big need for it, especially if rents keep going up.Dylan Silver (21:05)
Yeah.Richard Harrison (21:10)
It, it, it, yeah.Dylan Silver (21:11)
Yeah, I mean, when wetalk specifically about this idea of like affordable housing, I can speak from the state’s perspective and from living in multiple different areas, it is regional. So like if I’m talking about affordable housing in Texas, that seems like ⁓ a easier ⁓ hurdle to overcome than affordable housing in New York. And as an example of this, you you used to be able to go through, you know, Manhattan.
Richard Harrison (21:28)
asked in New York City. ⁓Dylan Silver (21:38)
right? And walk through streets of Manhattan or really through so many of the boroughs in New York City. And you could find what felt like was, you know, the ability to kind of fight and work your way up. Maybe you just got out of school, but you were going to make it work. I don’t see that. And I could be wrong because I haven’t lived directly in New York City. But from folks who I know who are living there and from having seen the way things have gone, I don’t see that being realistic right now. I feel like wherever you are,Richard Harrison (21:53)
Yep.Dylan Silver (22:07)
in New York City, you really have to be a heavy earner in order to survive. Otherwise, you’ve got to look at, I’m gonna commute in, which is what a lot of people are doing. And where I grew up in Northern New Jersey, there’s what feels like a commuter town now. I mean, it was not that way when I grew up, but now it’s, you’re living here and you’re commuting into New York. And so…Richard Harrison (22:24)
Yeah.Dylan Silver (22:31)
You know, this it changes not just London, right, but it changes how the surrounding area operates as well.Richard Harrison (22:37)
Yeah, yeah, I think, yeah, obviously, I can’t necessarily speak to New York, but I have a very good friend who’s a hotelier out there. yeah, I think the stories that kind of from when he was a kid are very different to the reality now. It is hard because, you know, here we have what they classify as gentrification, right? So like, it’s what brings an area up and it’s a little bit of this synonym, a little bit like trickle down economics, right? In the theory that if it’s gentrification,here and the prices go up and then we’ll expand the transport and that will make the next place further down. Look, I think realistically nowadays, what I would classify as zone one, sort of prime central London, you’ve probably got to be a multimillionaire to be able to afford a home outright or even probably on some mortgages. What I used to sell in Canary Wharf, which is probably zone two, three, back in the day for like
two or three hundred thousand pounds for a studio flat is probably now six, seven hundred thousand pounds for a studio flat. And I guess the theory is when does it stop? Right. Because we went through this in 08 when banks here, especially obviously, but part of the global piece, were just giving out
Dylan Silver (23:42)
Right.Richard Harrison (23:54)
money on houses left right and centre and it obviously collapsed the market. I think the market here is very cyclical. I don’t think we’ll necessarily see a collapse. think we will see there’s a bit more of a plateauing and a kind of you know levelling off and obviously we’ve had interest rates change here over the last couple of years with some very strange government decisions which I think has probably tapered it slightly and it did need that but Ithink everyone’s been trying to figure out what the solution is. think, I don’t know about in the States, but I think certainly in the UK and in London, you know, if you’re in property for long enough, you’ll always win. It’s very much a long-term gain. Yeah, it’s very much a long-term gain. You know, there are people now that in the 80s here that you were allowed to buy, you know, your council property. So there were people that bought what were considered
Dylan Silver (24:32)
Yeah, buy and hold. Yeah.Richard Harrison (24:46)
rubbish council properties that are now worth £800,000 because they’re in central London and you know people might have paid £80,000 for them in the 80s which at the time seemed like a lot but you know now it isn’t so it just boils down to that trying to find the right opportunities and for me the right people to kind of work with and kind of guide you on those things isDylan Silver (24:59)
Yeah.Richard Harrison (25:16)
is paramount, is paramount because it’s, I imagine the same as you, it’s a big trust business over here. I do need people that are experts, but really, especially if I’m investing my money, I’ve got to be able to trust them, right? Because I’m my money where my mouth is. that’s always been paramount to any decision I’ve made. I have to trust you before there’s even any point in us discussing a deal in the first place.Dylan Silver (25:42)
You know, it’s interesting, my whole career in real estate has been built off of relationships, even unconsciously, you know, so I might not have been going into something like the reason why I’m talking to you on this podcast is because of a deal that I had that didn’t end up going through, but someone connected me with, you know, this show. And that’s just how these things happen. You know, it’s a real estate is as much as you have to know how to underwrite a deal and, know, transactionally how to operate, whether you’re buying or selling, you also have to haveRichard Harrison (25:47)
Yep. Yep.Yeah. Yep.
Dylan Silver (26:11)
these relationships and be nurturing them as well. But we are coming up on time here, Richard, any new projects that you’re working on or how can our audience reach out to you or your team?Richard Harrison (26:14)
100.⁓ I think, you know, obviously you’ve got my website there, is calderacapital.co.uk or probably my Instagram is good. Yeah, we’re looking at, I’m probably ⁓ trying to look to do about eight deals this year, six to eight deals is kind of, you know, on a three to four month cycle, if I can get a few of those through. We’ve agreed to this week, and doing this the first week of January is a lovely way to start. Yeah, I’m more than happy to talk to anyone that
just has a general interest in London. know, as I say, I’ve got a couple of friends out in New York, so I always try and kind of point things in their direction when they need it. So I’m very happy to talk about that. We do take in investor money. I try and keep that very small because obviously it’s people that are having work corporate. I like to make money for people I like now as opposed to who I don’t have to. So it’s very much like that. But I’m very happy to talk anything. And as we said, eventually I would…
Dylan Silver (27:15)
Hey, I hear you there.Richard Harrison (27:22)
The American market is something that interests me as well. What I see on Instagram for what you can get for your money in some parts of Texas in comparison to here is crazy stupid. So you may be trying to find me a place at some point.Dylan Silver (27:40)
Hey Richard, I like the sound of that. We’ll have to stay in touch. Thank you so much for your time today. Thank you for coming on the show.Richard Harrison (27:47)
No problem. My pleasure.Thank you, Dylan. Thanks for having me.
