Songwriter uses royalties from global hit to invest in property – with help from Samuel Leeds
Property Investors’ founder Samuel Leeds got to meet one of his musical icons, Errol ‘DJ Paleface’ Reid, when he interviewed him for his Winners on a Wednesday YouTube series. Errol, who wrote the chorus to Drake’s huge international hit One Dance, is also a big fan of Samuel, having ‘binge-watched’ his videos and has now become a property investor himself.
‘I was refused a mortgage twice despite the huge success of One Dance’
DJ and songwriter Errol Reid has built up a portfolio of buy-to-lets from the proceeds of One Dance which is one of the best-performing singles of all time. It broke a world record in 2016 for more than one billion streams on Spotify and also topped the charts in 15 countries including the UK, USA and Canada.
And yet, despite this phenomenal success, Errol and his singer-wife Kyla, who features as a guest vocalist on the song, were twice refused a mortgage as they tried to get into property.
The reason, he explains, was simple. Due to the way the music industry works, songwriters have to wait for their royalties to start rolling in before they become wealthy.
Errol has made a lot of money as a producer of house and garage music – his catalogue of songs was recently valued at £1.2m. But initially he found it hard to get a loan.
“The Performing Rights Society is my lifeline. If you write a song, you don’t even have to perform it. You can write the song down and the lyrics and give it to someone. Every time it gets played on radio or TV or broadcast in a shop, that shop [or station] has to pay a PRS licence fee.”
The PRS collects the fees and then distributes that income in the form of royalties to the members whose music has been used. But it can take several months for the payments to be made.
“Say One Dance gets played on the radio today, you’ve got to wait at least six months for the PRS to hit and come back round,” says Errol who owns the Northern Line Records label.
The Society also pays out royalties on other uses of music on streaming services such as Spotify, for example, which again take several months to be processed. This directly affected his mortgageability – just as the couple were trying to buy their first house.
Initially, they wanted to put down a deposit of £100,000 and obtain a mortgage of £200,000. As they were self-employed, the bank demanded to see all their accounts including evidence of their earnings for the past four years.
“They also wanted a letter from the accountant saying we were going to be capable of earning a certain amount of money. We jumped through all these hoops but then we were told we’d been declined a mortgage,” Errol recalls.
By this time three months had passed, and they had raised another £100,000. So, this time they applied to borrow £100,000 but were again turned down. As a result, they decided to buy the house with cash. They also paid the Stamp Duty and bought their first buy-to-let outright after saving a further £100,000.
Since then they have bought three more buy-to-lets and are looking forward to expanding their portfolio as the money continues to flow in from One Dance and other music.
Samuel’s YouTube videos win Errol’s wife over to property
Errol was training to be a train driver to give himself some security when the opportunity came along to collaborate on what was to become a life-changing event for both him and his wife. He watched the track rise up the US charts in astonishment as it overtook another single released by Drake on the same day featuring Kayne West and Jay-Z.
One Dance, which also features Nigerian singer Wizkid, became the best-performing single worldwide of 2016 and remained number one in the UK charts for 15 consecutive weeks.
“It still doesn’t feel real,” says Errol who is the entrepreneur of the two of them.
They always make decisions together, but Kyla doesn’t involve herself in business. So, when Errol decided he wanted to start investing in property, he knew he had to win her over first.
“I said to her there’s no point in me just doing this and you not understanding what’s going on. I knew she wasn’t going to read the property books, so I said to her one night, look at this video. This geezer’s going to shout at you but at the end of it you’ll get it. Everything [about property] I’ve been trying to tell you he summarises.
“At the end she said, he’s good Errol, I get it.”
The ‘geezer’ was Samuel who received a message afterwards from Errol, encouraging him to keep on producing the videos because they ‘worked.’
Errol says Samuel’s free content on YouTube provides a hugely valuable source of information without having to trawl through ‘a massive book’ to find it.
“For example, on HMO licensing, you’re going to find contradictory information simply because the rules vary from one area to another, depending on the council. Samuel comes on and tells you exactly what to do. It’s just concise. Those videos helped me to get my missus on board to start investing in property.”
Their strategy is to buy three to four-bedroom properties for between £160,000 and £180,000 and rent them out as affordable housing to workers.
All the buy-to-lets they have bought so far have been in the area where Kyla grew up which has given Errol a keen appreciation of house prices and how much to pay.
He is also a tough negotiator. He works on the principle that sellers put their homes on the market at inflated prices to achieve their target of what they are actually willing to accept.
“The last house we saw was on for £180,000 but wasn’t worth a penny more than £165,000. I told the estate agent I’ll make an offer but tell the owner if he doesn’t accept it then my next offer is going to be £10,000 lower.
“If you want to be greedy and hold out for someone else to come along then OK, but I’m not waiting around because at the moment I’ve got that money set aside. It’s potentially going to take a minimum of two months on average to complete the house sale. It can even be up to five months, especially at the moment.
“Cash is king in property. If you’re a cash buyer, you negotiate because that’s the way the whole market is set up.”
These days they can show that they have enjoyed a high income for the past three years which makes raising finance for property investing much easier.
“I’m about to do a royalty financing deal at the moment so that I can free up some funds to invest in more buy to lets,” says Errol. “It also has the advantage that any interest you pay is tax-deductible.”
‘Property has helped me and my celebrity friend’
He regards property as a far better investment than stocks and shares, which are volatile and require research, or gold.
“I bought a couple of gold bullion coins because there is no UK Capital Gains Tax (due to it being legal tender). It’s a good way of saving money but not a good way of making money.
“Property is the only thing where in my opinion if I put £50,000 down now then in five years’ time that £50,000 is still there but it’s made me £7,000 a year [in rent]. And it’s a passive income, barring the roof coming down or leaking. There’s not really much you have to do if you get a decent estate agent to manage it.”
Errol, who has Asperger’s, doesn’t usually appear on shows, but he made an exception for Winners on a Wednesday. He says he likes Samuel’s content and the fact that he ‘cast off’ Alan Sugar after proving the billionaire businessman was wrong in stating he had never given Samuel business advice.
“Samuel has helped me with what I’m doing, and he’s helped a lot of other people I know, including my friend T2 (who produced the hit single Heartbroken). He told me he’s been to one of Samuel’s crash courses and was on point. I feel honoured to speak on the show about property.”
- Find a good estate agent who you have an honest relationship with because estate agents can pressurise you into buying things that are not good.
- Find a decent solicitor who specialises in property investment. It will save you a lot of time and headache. We hear nothing from our solicitors till the day before completion. They sort out any issues before that.
- Unless you’re buying a house for yourself, don’t rush out and buy the first property you see. Wait for the property to be on the market for six months.
- Don’t put all your eggs in one basket. If you get a dip in one of your income streams, like you always do, that can’t have a knock-on effect in the way you live your life.
- Try to surround yourself with positive people, rather than energy thieves who leave you feeling tired because they’re constantly saying you can’t do this or that.
- Watch Samuel’s videos. Educate yourself with someone you can understand. Process the information and apply it.
Samuel Leeds’ verdict
“It’s great that people like Errol are not only investing in property but speaking out about it. There are a lot of people in the music industry making very good money but don’t know how to invest it.
“Errol got educated and put his PRS money into the private rented sector which gives you a stable income. That then makes you more mortgageable and it has enabled him to get better leverage on his finance. Now he still has that money coming in, which is unlikely to stop, but he’s also got the capital appreciation from his properties and cash flow. So, he’s in a good place.”
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