A Question of Property - Ep 20 - Paul Mahoney, Stefano Lucatello & John Howard - Nova

A Question of Property – Ep 20 – Paul Mahoney, Stefano Lucatello & John Howard

Lucia France:

Hi everybody, and welcome to our final episode of this series of A Question of Property. I’m your host for the show, Lucia France. And joining me are our usual panel of property experts ready to give the best advice for our viewers and all of their property questions. So, first of all, we have John Howard, our property expert developer, specializing in commercial property and over 40 years experience in the industry, author of three different books on the subject including Buying and Selling at Auction. Good morning, John. How are you today?

John Howard:

Well, good morning. And I’m slightly sad in a very bizarre way to be missing Stefano in the future, for what? A month or so probably. It’s almost my guilty pleasure. You, yourself, and Paul, I will genuinely miss, but with Stefano it’s a little bit of a strange relationship.

Lucia France:

It’s a big disappointment.

John Howard:

Genuinely, I think I’m going to miss him.

Stefano Lucatello:

You can’t live with me and you can’t live without me. Is that right John?

John Howard:

Well, there we go.

Lucia France:

It’s one of those tumultuous relationships. Yes, I can see that. Well, welcome to you Stefano.

Stefano Lucatello:

Good morning.

Lucia France:

Stefano Lucatello is senior partner at Kobalt Law International Property Lawyers, and our go-to for advice on buying and selling property abroad. How are you this morning, Stefano?

Stefano Lucatello:

I’m very well. I’m buoyed up for the last episode of the first series. So, yeah, let’s get on with it.

Lucia France:

Awesome. Okay, okay. And of course last, but by no means least, Paul Mahoney. He is a best-selling author, award-winning property speaker, and head of Nova Financial Group. So good morning to you Paul.

Paul Mahoney:

Morning Lucia, and everybody else.

Lucia France:

Have you struggled keeping the peace between these guys for the whole ten weeks?

Paul Mahoney:

I’ve done my best.

Lucia France:

It’s taking its toll, though, right?

John Howard:

I’m a little bit disappointed Stefano hasn’t mentioned me.

Stefano Lucatello:

Do I need to? Everyone else does.

Lucia France:

Right, well this brings us nicely on to our question for to kick things off for the final episode. It is our final show for the series, so what are the most important two things you have learned from doing this show? So maybe the best pieces of advice that have been given out, or things that you’ve learned just from us talking throughout the last 10 weeks.

Stefano Lucatello:

I think the most important piece of advice, and it covers all of us, whether we’re doing English property, foreign property, residential, or commercial, is do your due diligence, and get a good lawyer. Isn’t that right, John?

John Howard:

Absolutely. A good lawyer is essential. And I’ve had a partnership with my lawyer for over 30 years.

Stefano Lucatello:

He must be a saint.

John Howard:

And he’s a saint, obviously. But, yeah, no, it’s very, very important to have your team round you. I mean from my point of view, I think one of the things I’ve appreciated more … You’ve got to remember I come from a different angle to Stefano, or to Paul, is that there are a lot of people who are very happy to just invest in buy-to-let properties for the long term, and actually aren’t looking for anything that exciting to happen. I do appreciate that more now. And actually, when you look what happens over 20, 25 years, and the average of 5% increase over that period of time, I know there’s dips and all sorts in between. Then actually, probably for a lot of people that’s the right investment for them, and not to go cracking on trying to develop and buy and sell and all the rest of it, especially if they’ve got another income. If they’ve got a job, they haven’t got time to be doing all those other things. So I think I treat the buy-to-let investor with a bit more respect, perhaps, than I did 10 weeks ago.

Lucia France:

It’s interesting. What about yourself, Paul?

Paul Mahoney:

Look, I suppose I agree with John in a way. I think that between us, it’s been quite rounded. In that we’ve covered numerous different things that might work for various different people. So John approaching this from more of a entrepreneurial property development, buying, flipping, making money quickly but taking a bit more risk, versus me more so talking about the more passive buy-to-let approach. And then Stefano weighing in on that across the board from a legal perspective. So I think it’s been quite good in that regard, in that hopefully there’s been something in this for most people that are interested in property. To kind of take something away from that, and relate it to themselves, and hopefully try to implement some of it all.

Lucia France:

Yeah, absolutely. And anything else? Anything you’ve learned about each other as well? I think we’ve learned that John can definitely be quite incendiary when we wants to be.

Stefano Lucatello:

I’ve learned a lot of things, but it’s not repeatable on live TV.

Lucia France:

John’s remaining quiet there.

John Howard:

I’ve made no comment.

Lucia France:

So we shall move on to the questions. Okay, right, let’s go to John then first for your first question for today.

John Howard:

Yes.

Lucia France:

Sorry, this is making me laugh. I’ve heard you give solicitors on this program a very hard time.

Stefano Lucatello:

Never.

Lucia France:

Do you actually think it’s their fault that they take so long for property transactions to go through?

Stefano Lucatello:

Some of them do.

Lucia France:

Or do you think it’s the system? Exactly Stefano, it’s an individual basis, I’m sure.

John Howard:

Yeah, I would actually say-

Stefano Lucatello:

Oh, he’s gone. What a shame.

Lucia France:

We’ve lost your picture, John. There you go.

John Howard:

Yeah, I’m just disgusted with the question. No. It’s a good question, and I would say it’s six of one, half a dozen of the other. So I think the system does let them down to a point. However, there are really good solicitors around, and we have one on this show. I have to admit that.

Stefano Lucatello:

Can you record that?

John Howard:

I’m talking about my solicitor, he’s very, very good. And there’s others who are very good. However, they are let down by their colleagues, to be honest with you. So even if you’ve got a really good lawyer on your side, you’ve one who get it done quickly, if the other lawyer on the other side of the transaction doesn’t perform, and that’s the problem, it’s so … I can’t tell you how frustrating it is this year. And how many people lose opportunities, lose the property they want to buy. And that’s why I’m passionate about it. They lose the property they want to buy because their solicitor has taken so long. The seller has said, “Do you know what? Forget it. I’m going to go with someone else.” Or the lawyer has given advice in areas that they’re not experienced in, and not qualified in, and put their client off. And that’s criminal, absolutely criminal.

John Howard:

If you have a deadline to exchange next Friday at five o’clock, and your solicitor is, as have all the time, “Oh no, we’re too busy. We can’t do it by then.” And I pull out on the Friday at five o’clock when they could’ve done it. Don’t give them a … My advice would be always, never give another side’s solicitors something they can’t achieve, because that’s just silly. Make sure it’s achievable, the timescale is achievable and sensible. And if they don’t make that …

John Howard:

And I’ve pulled out of lots of transactions where I’ve given them a deadline, which is well within their capabilities, and they haven’t performed. And they have lost their client potentially a great deal in profit. And that cannot be right, Lucia. That is not right. And that’s why I’m passionate about it.

Stefano Lucatello:

Can I have the right of response here now? John, it’s quite often the case that us solicitors are put in intolerable situations by people like you who are clients, who demand something that is impossible, as you quite rightly say. Demand timescales which are impossible. And we can’t do anything, because at the end of the day, all we do is get back to the other solicitor and say, “Look, my client has demanded this, this, and this, what about it?” And then they have to go back and get instructions.

John Howard:

I understand what you’re saying. And in certain cases, that may be the case. But it certainly isn’t with me, Stefano, because I make sure they’ve already got the search, they’ve got this, they’ve got that, they’ve got the other. I can assure you, when we give a deadline, it’s a genuine, decent, sensible deadline. It’s not a silly, “Oh, it can’t be met” deadline. And that’s what really, really upsets me. And these people are doing their clients a terrible disservice. Terrible disservice.

Paul Mahoney:

I think both John and Stefano are right. Obviously some solicitors are very good, and they do the right job, and they’re given something that’s impossible to achieve. But I think a lot of the time, it’s more so the other way around, in my experience anyway. And I’ve had clients that we kind of … In the public transaction, kind of act as their agent, I suppose. And we’ve had many, many deals that have fallen through due to the reasons John just mentioned. Solicitors being slow, solicitors insisting on sending letters. In this day and age, letters that get lost in the mail. Things that need to be hand-signed that slows things down, and you end up losing deals because of that. Or people needed to go their office with their ID to get them certified when they live on the other side of the country, and all these crazy things that solicitors, in some cases, seem incapable of adopting modern technology.

Stefano Lucatello:

These are the country solicitors.

Paul Mahoney:

Potentially. Passing the buck as well, so far as sending off an email, and because that email is not responded to, feeling as though it’s not their responsibility. And we’ve had that happen so many times where deals have been lost, and clients have lost deposits because solicitors haven’t acted.

Paul Mahoney:

But even worse so, and I agree with John that this could be considered criminal is, solicitors advising on something they’re simply not qualified to advise on. Mortgages, for example. We do mortgages in-house, and I’ve had arguments with solicitors where solicitors have raised a point that something might cause an issue with the mortgage. And I’m saying, “I am this client’s mortgage advisor. I am qualified to give that advice, you are not.” And they’re disagreeing with me on it.

John Howard:

And you’ve got two degrees, and they’ve only probably got one.

Stefano Lucatello:

Yeah, but Paul you are giving advice on the basis that you’re getting a commission at the end of it. So let’s be frank here. You are giving advice either on annually chargeable basis, or on a commission fee basis, so you have something to get out of it. So if that mortgage doesn’t go ahead, you won’t get a commission. So you can’t blame it all, both of you, on something [crosstalk 00:10:28] totally wrong. Totally wrong.

Paul Mahoney:

No, but Stefano, you can’t say that just because there’s a commission in it for us that it-

Stefano Lucatello:

Absolutely wrong, going to put my foot down here, because this is … We might end on coming to blows really on this one. You cannot, both of you, put the blame on solicitors. Yes, there are still some solicitors who still work in the old-fashioned way of letters, and this, that, and the other. They are usually, as I said to you, in small villages in small countryside areas. They are not those of us who work in the conurbations, the main cities, and the big cities. We just can’t afford to work like that. I think definitely-

John Howard:

Stefano, Stefano, what we’re saying-

Stefano Lucatello:

John, let me finish, because you’ve had enough to say today, I think. I’m going to get annoyed now, I really am. Let’s end on a nice basis. You’ve both had it in for solicitors all along. We have a job to do. We have an obligation to do. We are regulated by possibly the strongest organization in the United Kingdom, which is Solicitors Regulation Authority, which will come down on us even for doing very, very silly things that nobody else would consider a problem. Neither of you, Paul especially, neither of you is regulated by such a strong authority. The FCA that regulates mortgage brokers is nothing compared to the SRA. So let’s get it right. And John, you’re not regulated by anyone, so you’re just a loose cannon. So get it right.

Paul Mahoney:

I don’t think either of us are saying this is the case with all solicitors. We were discussing our frustrations with [crosstalk 00:11:43]

Stefano Lucatello:

The language you’ve used, Paul, is a broad brush approach that all solicitors, da, da, da, da, da, da, da, etc. You can’t address them all like that.

John Howard:

No. [crosstalk 00:11:51] Stefano.

Stefano Lucatello:

And if that’s the case, you must change your solicitor. And I suggest that both of you, if you think that … If you want to give clients the best deal, why don’t you take a solicitor on board that you know can be trusted, that will do the job quickly, such as us. Come and see us, we’ll do the job for you quickly at a fixed price, and a good price, and we’ll do the job quickly. And we will communicate. We have [crosstalk 00:12:13] enough. Listen, Paul, John, we have a motto in our firm, we communicate with clients, even when we don’t have anything to say to them. So we write to them and say, “Nothing’s changed since last week.”

Paul Mahoney:

And that’s great.

John Howard:

No, that’s fine Stefano. Listen you’ve-

Paul Mahoney:

That’s great [crosstalk 00:12:24] we’re not saying this applies to everyone.

John Howard:

Exactly, we’re not saying that. And you’re really trying to defend the undefendable, to be honest with you Stefano.

Stefano Lucatello:

I hate you.

John Howard:

We’re not talking about my solicitor, we’re not talking about you, we’re not talking about the good solicitors. I’m saying those good solicitors are let down by the other side’s solicitors on many, many occasions.

Stefano Lucatello:

Yeah, but there are always bad apples.

John Howard:

There’s some great lawyers about.

Stefano Lucatello:

They’re bad apples. There are bad apples in Paul’s sector of market, and bad apples in your sector of the market.

John Howard:

Yeah, but what I’m saying is, Stefano, there’s too many of them. And what happens is, it stops young people especially, what’s really passionate about, young people getting on the property ladder, getting the dream home they want, because they, unfortunately, picked the wrong solicitor who’s slow, lazy, disorganized, and couldn’t care a shit. And that cannot be right. That’s what I’m saying. That cannot be right.

Lucia France:

I think that was our first swear of a question from you.

John Howard:

Sorry, I apologize. I apologize.

Lucia France:

You’re all right. I’m sure [inaudible 00:13:21] now.

John Howard:

Next question.

Stefano Lucatello:

You should, as with any professional … Just let me close it down. As with any professional, you should go to regulatory body, as you can with solicitors … If you go to the Law Society website, you can choose a solicitor. You can put a solicitor’s name in, you can a type of the area they practice in in, the geographical, whatever. And you can choose one. It’s up to the client. The client has got to exercise a certain amount of due diligence on who he’s going to use. Mortgage broker, lawyer, surveyor, architect, developer, whatever. They’ve got to have some input into the process of buying a house, buying a building, buying a commercial … whatever it is. You can’t just say it’s the solicitor’s fault.

Lucia France:

Do you know what, I think-

John Howard:

May I just have the very final word?

Stefano Lucatello:

No.

John Howard:

I have got a qualification, NVQ3 in Racehorse Management, I’ve told you before.

Stefano Lucatello:

So you keep telling us, but it’s got nothing to do with property.

John Howard:

It hasn’t, no.

Lucia France:

I think, as we have said so many times before on this show, due-

Stefano Lucatello:

I love him really, he’s all right. Don’t worry.

Lucia France:

Yeah, we’re going to try and get them to make up on the next [inaudible 00:14:27] Due diligence is what it’s all about, and going to the right people and taking the right advice. Of course, in any industry there are people out there that aren’t doing it as well as others. And I think we’re going to leave it there.

Lucia France:

Okay, let’s move on to our next question then, is for Paul. So Paul, this person says, “I’m very interested in getting into the investment property market, but rent arrears concern me, as I hear there are insurance products out there who will pay for any rent arrears. Surely there has to be a catch to this solution.” So Paul, any advice there?

Paul Mahoney:

Well, just to stir the pot further, I’ve actually had a solicitor advising on the rentability of a property, because it was in a big block. So that’s another area they overstepped the mark. But anyway, yeah, so I understand this concern, because renting your property is very important. Especially when you’re taking on a mortgage that probably the most important thing is that you have a tenant all the time, or most of the time. Because when you have a tenant, you’re safe.

Paul Mahoney:

So I’d say, if there’s one key fundamental when it comes to selecting the right property in the right area, it’s rentability. And how you give yourself confidence in that, is understanding that location, and who your target market is, and making sure there is an abundance of them in comparison to the availability of property.

Lucia France:

Right.

Paul Mahoney:

So generally, in my view … I suppose taking a simple view on it, is major cities in relatively central locations, you have land as a limited commodity, and therefore the ability for supply of properties is limited. But the amount of reasons for people to want or need to live there is abundant. And therefore, those areas usually have the lowest vacancy rates. So vacancy rates you can find out from a number of different property reports, or the Office of National Statistics, the ONS. If you have a low vacancy rate, then that shows that there’s a strong demand in comparison to supply, and that’s a positive thing.

Paul Mahoney:

Desirable properties as well, in good locations close to transport facilities, amenities, employment, infrastructure. All of those things, the boxes that people look to tick when it comes to renting or buying a property. You want to have the most of those things as you can. And if you, then that gives confidence in demand.

Lucia France:

Okay.

Paul Mahoney:

Does that make sense?

Lucia France:

Yeah. That absolutely makes sense. Just going back to the question though, Paul, where he said that, “Are there insurance products out there which will pay for any rent arrears?” Is that-

Paul Mahoney:

Good question. There are. So there are landlord insurance products that will pay for rent arrears. So meaning that if your tenant stops paying, usually-

Stefano Lucatello:

Not under COVID, unless it’s got a pandemic clause in it.

Paul Mahoney:

Might have a pandemic clause in it, yeah. But keeping in mind at the moment, if tenants aren’t paying at the moment, then usually your lender will give you a mortgage holiday as well. So you’re able to cut your outgoings substantially. And also, I’ve also heard of, for example, if you have a flat, most freeholders are giving service charge and ground rent holidays as well. So allowing you to push-

John Howard:

We’re not.

Paul Mahoney:

Well, that’s because you’re horrible. Allowing you to push back your costs. So I think in general … Okay, at the moment is a unique scenario. And most people … I’m sure, if somebody went to John and said, “I can’t pay you now, but I can pay you in three months,” he’s be okay with that.

Stefano Lucatello:

Would he?

Lucia France:

And would you John?

John Howard:

I would look at the situation and the circumstances they were in, and try and help them.

Lucia France:

Okay, that’s a very fair answer.

Stefano Lucatello:

Try being the optimal word. When you try something you never succeed.

Paul Mahoney:

But also Lucia, so far as rather than trying to put a band-aid on the problem, so far as having an insurance product to cover you if that happens, I would encourage this person to start with the right intentions in mind, and focus on the locations and the type of target market where you’re unlikely to have that problem. So for example, centrally located, desirable properties where your target market are young professionals, that sort of person is very unlikely to not pay rent. Because they value their credit score, they value where they live, they want to stay living there. All those sorts of things. They value the ability to get finance, etc. etc. etc.

Paul Mahoney:

Most of our clients, for example, haven’t had any issues collecting rent over the [inaudible 00:19:11] period. [inaudible 00:19:15] any issues at all.

Lucia France:

We used robot translator there for a second. You said that they hadn’t had any issues-

Paul Mahoney:

Haven’t had issues collecting rent over the lockdown, because the people that they are renting to are financially switched on enough to know that they’re going to have to pay the rent at some point in the future anyway, so what’s the point in not paying it now?

Lucia France:

I guess, and as well from what you’ve said there, Paul, there’s two points. It’s to say that a lot of the holidays are … They’re a rent holiday, they’re not a, “You can have it for free,” kind of thing. You will-

Paul Mahoney:

You’re not getting it for free, you’re going to have to repay it. Generally I’ve seen what most people are doing if they’re giving rent holidays, is they’re saying you have to pay an extra 25 or 50% a month to make up that lack of rent that was paid previously. For most people, that’s only going to hurt you financially, because when you don’t pay rent, you have the cash sitting in your bank account and you spend it on silly things.

Lucia France:

Yeah, exactly. Can I just ask here as well, Stefano might be someone that can add to this. Do you think that going forwards, given what’s happened with COVID-19, will there now be pandemic clauses in a lot more contracts going ahead?

Stefano Lucatello:

Every large insurance company will now have to review its terms and conditions, and the conditions of applicability, and the risks covered. It’s got to be the case, because many landlords, John included, will have been bitten by the fact that insurance companies are trying to wriggle out of it, because it doesn’t say pandemic in it, or such other language. So they’re all going to have to revisit it. Because COVID-19 is more than likely to come back as COVID-20, or 21, or whatever it’s going to come back as next year, they will have the same recurring problem next year.

Stefano Lucatello:

So what are we going to do? Over and over again, landlords are going to be put out of business because they can’t claim on the insurance. After all, an insurance is there as a safety net when other things go wrong, whatever they may be. In this case, it’s a risk. Many insurance companies say, “I’m sorry, but it doesn’t say the word pandemic or such other word that covers a pandemic, so we’re not going to pay you.” So many landlords have gone out of business. They’ve been foreclosed on. And remember, that the commercial rules on foreclosing is slightly different on the residential ones. Lots of landlords are going out of business. So that, yes, I think the big insurance companies will all have to change their language, change the risks covered, and they will have to cover for this sort of thing. Mind you, they’ll probably get out of it in some other way, shape, or form.

Paul Mahoney:

Stefano, am I right in assuming that you’re talking about commercial landlords then?

Stefano Lucatello:

I’m talking about both landlords. Well, I mean-

Paul Mahoney:

I haven’t noticed any residential landlords going out of business because of COVID-19, as of yet.

John Howard:

Early days.

Stefano Lucatello:

I can’t comment. You’re possibly right, Paul. [crosstalk 00:22:02]

Paul Mahoney:

I suppose the reason for that is it’s only two to three months. And most lenders, they’re giving holidays on payments. So most landlords, even if they’re not getting rent, aren’t yet in a tough financial position, but they might be if this goes on for much longer.

Lucia France:

Yeah.

Stefano Lucatello:

I mean at a moment, nobody … As I remember, unless they changed it the last few days. Nobody in the residential sector can evict anyone at the moment until September.

Paul Mahoney:

They extended it, yeah. So it was June I think, and they extended it to September.

Stefano Lucatello:

Yeah.

Paul Mahoney:

Yeah.

Stefano Lucatello:

But it doesn’t mean to say that you don’t have to pay it. You’ve got to catch up with the payments that you have to pay.

Paul Mahoney:

Yeah, you’re definitely right.

John Howard:

Stefano, is that the same on commercial?

Stefano Lucatello:

No.

John Howard:

It was June wasn’t it?

Stefano Lucatello:

The big debate … Not only June, but there is a big debate because lots of people are getting around it. I can’t remember what the act is, there is some other commercial act which allows a … Which on the one hand, you’re not allowed, and you’re quite right to sue and get possession of commercial property. Lots of landlords are going round it, because there’s another act, which allows you to go round it, and they haven’t thought about this other act. So lots of landlords are actually getting round it, and they are instituting legal proceedings. And they’re just waiting for June to arrive before they just get the final order in.

John Howard:

Yeah, okay. Thank you.

Lucia France:

Thank you. So that was an extra question there for you Stefano. So we’ve got your actual question now. If I purchase a new property in the UK it comes with a 10-year warranty. However, if I purchase a new build in Spain, would it also come with a similar warranty, and are all these warranties really worth having in the first place?”

Stefano Lucatello:

Well, yeah. When you buy abroad, every European jurisdiction obliges the developer to fulfill a certain number of requirements. From the extreme ones, which is Morocco, where a developer cannot start to sell to the public until he has funded, out of his own pocket, the foundations, and the foundations are ready. So, yes, every country has its own rules and regulations, but every country does have a, it’s called a decennial policy. So it’s a 10-year, almost the same as an NHBC agreement we have in the United Kingdom, where you have major defects and minor defects covered 10 years, and two years.

Stefano Lucatello:

Yes, they are worth the paper it’s written on, and you cannot buy from developer … Sorry, you should not but from a developer who is not offering you these security and this safety net as it were. He is obliged to by law in each of the countries that they work in, but sometimes they try and get out of it, and you must check two things when buying abroad from a developer. The first is that you get a bank guarantee, which is insurance policy backed by the developer’s bank, for every staged payment that you make. So that if the developer fails to complete for whatever reason, whether it’s his own bankruptcy, insolvency, or whatever, that you get your staged payments back.

Stefano Lucatello:

And secondly, that at the end you will get some form of valid 10-year policy which will assist you in selling … You can’t sell a property abroad if it doesn’t have a 10-year policy, or the remainder of a 10-year policy, if it’s less than 10 years old.

Lucia France:

All right, that’s very-

Stefano Lucatello:

Like you can’t if it doesn’t have an energy performance certificate.

Lucia France:

Yeah.

Paul Mahoney:

That’s really important for mortgages as well. The Council of Mortgage lenders have a list of approved insurers for these latent defect insurance policies, is what they’re called in the UK. So it’s really important that that be in place with an accepted insurer. Otherwise it can be very, well impossible, to get a mortgage unless you have it.

Stefano Lucatello:

Abroad in Spain, for example, the main two insurers that deal with this sort of policy are Aon, and AXA, and Zurich. The third one is Zurich.

Paul Mahoney:

Yeah, and in the UK it’s similar Stefano, however, they’re not called that. They are just the ones that back the companies that offer them.

Stefano Lucatello:

Right, okay.

Lucia France:

Okay, so basically from that you would say that, just again, check how long the warranty lasts. Would you recommend then, Stefano, that buying a new build like with a warranty is a preferable thing to do, if you are buying abroad?

Stefano Lucatello:

It’s an obligatory thing to do. You’ve got to have a 10-year warranty. The law states in Italy, France, Spain, Portugal, when you buy from a developer, he has to, or it has to, the company, give you a 10-year warranty.

Lucia France:

Oh, sorry. No, I meant as opposed to buying an existing building that had been there for 20 years, or whatever.

Stefano Lucatello:

Well, if you buy an existing build, second-hand property, that’s been there 20, 25, 50, whatever years, you’ve got no guarantee whatsoever from the vendor. What you must do, and what we always say to our English clients, is that you must have the equivalent of a full home buyer’s report. So we always say to clients, “Go and get a local surveyor to do not only a valuation, but also a full report on the property. And we always put that in as a condition into the contract. And it only applies for English people, because abroad when my lot in Italy, for example, buy a house, they don’t have a survey done. Whether they’re using their own money, somebody else’s money, or a mortgage. They don’t have a survey done. It’s not done.

Lucia France:

Why?

Stefano Lucatello:

So when I send English clients to buy a property and I say to them, “Go and get a survey done.” The estate agent says, “What do you mean you want a survey done? We don’t have that sort of thing.” Well they do, but they don’t want to have it done, because it’s not done, if you see what I mean. But English clients need to have it done because we run transactions as much as possible in parallel with English transactions, so they understand exactly what’s to be done, and what has to be done, and when and where.

Stefano Lucatello:

So yes, my advice is, when you buy a second-hand property, first thing you need to do is have a survey done on the property. I’d rather you lose … In fact I said this to a client last night. I’d rather you lose €1000, which is approximately what that it’d cost, than you buy the property, and you then find that there’s an inherent or a latent defect, which then means you have to litigate against the vendor, and then prove that-

John Howard:

Very good advice.

Stefano Lucatello:

… they sold it to you knowing that there was a problem at that time when they sold it to you.

Lucia France:

And Stefano, why were you saying that your family or friends that you know in Italy wouldn’t have a survey done?

Stefano Lucatello:

Because it’s just not done. In France, Spain, Italy, and Portugal, when you buy a … When a Portuguese guy in Portugal buys a property, he doesn’t have a structural survey done, he doesn’t have a residential survey done or whatever, they just buy it, and that’s how it works. In fact, in France and Spain predominately there is now a body of English RICS surveyors who had enough of this country, or they flip backwards and forwards, and they are now qualified and recognized in France and Spain. And we have fortunately this group that we count on. So when an English client goes to France, I’ll say to them, “Well you’re in the Dordogne, you’re in the South-West. I can recommend X, Y, Z.” And they, as an English surveyor will go and do a redbook valuation and-

John Howard:

That’s clever.

Stefano Lucatello:

Well you need it. A redbook valuation, and also a full survey, structural and otherwise. They go into the loft, they go into the foundations, everything. And they come back to you with a proper photographic, and a written report. So that’s what I always advise. But when I talk to estate agents abroad, they say, “What do you mean a survey? Why do you want a survey doing?” Because the client wants to know that he’s not putting his money into a black hole, basically.

Lucia France:

Yeah.

John Howard:

Yeah.

Lucia France:

Absolutely. Very good advice. Thank you Stefano. Thank you very much. Okay John, on to your next question.

John Howard:

Is this my last question of all the-

Lucia France:

Your last one of the whole series. Do you feel emotional?

John Howard:

No.

Lucia France:

Okay.

Stefano Lucatello:

Typical Conservative.

Lucia France:

Right. So Peter asks, “John, I know you have enormous experience in the property industry, but what would you have done differently if you had your time again early on in your career?” Interesting question there.

John Howard:

Very good question.

Stefano Lucatello:

We already heard [crosstalk 00:29:57]

John Howard:

I got asked this about a couple of weeks ago on an event I did. So I think the biggest regret I have is that I didn’t buy in London. I’ve always bought all throughout the UK. I’ve bought nearly most places in the UK, not every place obviously, but a lot. And I’d never bought in London, partly because the backer I had in my early to mid-20s had developed in London and wanted to develop elsewhere. That was the first thing, for whatever reason. I can’t remember what the reason was now.

John Howard:

And the second thing was, of course, my money that I had didn’t go that far. So I was always conscious that I’d rather buy a block of 10 flats in Walsall or somewhere like that than I would perhaps one property in London. In retrospect, that was probably a big mistake. Because I’d probably be in Jersey now with you, as a tax exile or something like that. I think that’s my biggest regret is that not buying in London, when I could possibly, possibly could have done, just.

Lucia France:

So and he says, “If you …” Sorry, let me just get the question back up here. Would you have done anything else different in terms of your career?

John Howard:

No. I’ve survived the three recessions. I’ve got one more in me, I think, to survive. So, no, I don’t think I would to be fair. I think probably I’d have done less with backers and more on my own, probably, but when you’ve got backers, and lots of people watching this show will appreciate, you’ve got to look after them, keep them engaged. Because if not, they go and off and find someone else to invest with. So I’ve always tended to have to give up some of my best deals to invest which [inaudible 00:31:58] backers, which is only fair probably anyway, because they backed me, rather than done them just on my own.

Lucia France:

Okay. Thank you very much John. Very honest answer there. Okay, let’s go back to Paul then for your last question of the series. Do you feel very sad, Paul?

Paul Mahoney:

No, I think it’s been good. I think if anything, I’m proud of what we’ve done so far.

Lucia France:

Awesome. Okay, well this question, this sounds like a dream come true. This person says, “I’m fortunate to just have inherited 500K. How would you spend it for me, Paul, please? And what return could I expect?”

Paul Mahoney:

Okay. So I think the right person to ask, because we do deal with this situation quite a lot. Whether that be an inheritance, or the sale of business, that’s a situation that a lot of people come to us an say … A lot of the time they’re quite worried about coming into this money. They’re worried about losing it. And often we find that they’ve probably sat on it for a year to three years not really knowing what to do with it. Because they’re concerned about not having dealt with that level of money before, and therefore wanting advice on how best to utilize it.

Paul Mahoney:

So quite often when somebody is wanting to invest that amount of funds into property all at once … And it’s interesting, that level of money is subjective, whether that’s a lot or not. Because some people come to us with that sort of money and say, “Is this enough?” And obviously it is. Whereas other people come to us with that level of money and they’re really swinging their weight around. So it’s quite funny how different people perceive different levels of money as a lot.

Paul Mahoney:

But, okay, so, to give you [crosstalk 00:33:44]

Lucia France:

Just like to say, I’d be happy with that amount. I’d gladly take it. If someone doesn’t want it, I’ll have it. It’s fine.

Paul Mahoney:

I think anyone would. I think for anyone that is a lot of money, but I’m, I suppose, just saying so far as some people are much more humble about the level of money they’ve got.

Lucia France:

Yeah, of course.

Paul Mahoney:

All right, so to give you a bit of an idea, so far as the locations and the types of properties that we’ve been focusing on of late, and if we were to advise this person on how to spread that money. We’re looking at [inaudible 00:34:12] thousand into a property.

Lucia France:

Really? Sorry, just say that once more.

Paul Mahoney:

Sorry, you’re losing me. So somewhere between just below 200,000 and maybe up to just above 250,000 have been the sort of property prices we’ve been focusing on of late. Predominately in Birmingham, Manchester, and Liverpool, in and around the city centers. And therefore, we’re looking at deposits, including all costs, of somewhere between 50 to £80,000 per property. And therefore, if we were to apply that to this person, we’re probably looking at seven to 10 properties, let’s say.

Lucia France:

Okay.

Paul Mahoney:

What we would usually do in that scenario, is try to simplify it. What I mean by that, is maybe you could look at three properties in a similar location, or even the same building across three different cities. And what that does, is it means that rather than having 10 different properties in 10 different locations, which causes headaches with management, but also having to understand the reasons why you should be making 10 different investments in 10 different locations, with all different driving factors. By simplifying it, it’s almost like only making three investments, especially if they’re all in the one building.

Paul Mahoney:

You might have a one bed, a two bed, and a two-bed duplex, for example. Three different types of property, and different target markets. But they’re all in the one building, they’re easy to manage, and that’s almost like just having one investment.

Lucia France:

Right. Yeah.

Paul Mahoney:

To help simplify it in this person’s mind, especially for somebody who’s inherited the money, and therefore probably … I’m making a large assumption here, but maybe doesn’t quite have a business or investment mindset. And this might all be new to them. They don’t really want to take on too much all at once. So if they were wanting to invest the money quickly, and get involved in property quickly, we would generally aim to simplify the portfolio to enable them to make easier to manage, and easy to understand.

Lucia France:

And do you think buying, say like you said, three flats in the same building or whatever, do you think that there’s a chance you could reduce costs there as well?

Paul Mahoney:

You can get a bit of economies of scale, yes. With property management for example, usually you should be able to negotiate a bit of a better deal if you have the same agent managing numerous properties for you. They’re easier to maintain. They’re easier if you want to visit them. You don’t have to visit properties. Some people talk about wanting to drive past their properties every now and again. I often ask why. It hasn’t disappeared, it’s made of bricks. It’s still there.

Stefano Lucatello:

I agree.

Paul Mahoney:

But yeah, it’s something that I do, to be honest. If I’ve got some cash that I want to invest in property, I’ve just bought two properties in Birmingham, both in the same building, a one bed and a two bed. Total cash investment of just over 100 grand. And I could’ve spread that out, but it’s just simple. It’s almost like one investment there that I can … I’m in the process of doing the mortgages on at the moment, to the mortgages are both done at once. All that sort of thing, it just makes it a bit easier.

John Howard:

Bit easier, yeah.

Paul Mahoney:

Rather than spreading things out all over the place.

Lucia France:

So this person has asked what return they can expect. I guess it’s like how long is a piece of string, really? It just depends on what you’re investing in.

Paul Mahoney:

It depends on what you’re investing in, depends on what your strategy is. I can talk about types of things that we aim for in the current market. But that’ll different to someone who wants to property develop, or buy and refurbish, or do HMOs. Whatever strategy you follow. I’m always very upfront that our way isn’t the only way by any stretch of the imagination. I suppose we just feel as though that our way is best way for people who are looking to be more passive in their approach. What I always refer to as mum and dad investors, that don’t necessarily want a second job, investing in newer, more passive properties in major cities that rent really easily. And you can have confidence in relatively good performance over the mid to long-term, makes sense in our mind.

Paul Mahoney:

So for that type of approach, they can expect to be getting about five to 10% net yield on the cash invested. So using the 500 grand as an example. That would give them between 25 and £50,000 of net passive income per annum. And then assuming the properties are growing in value, and they want to continue to invest, they should be able to remortgage their properties every three to four years, to take back their initial investment. And essentially that enables them to double up. So take that 500 grand back hopefully within the three or four year period, and reinvest it. So hopefully, assuming that’s what they wanted to do, they should be able to double that income within about three to five years.

Lucia France:

Great. Do you find that, Paul, when people come to you in situations like that, where they’re perhaps not used to dealing with levels of money like that, that they’re kind of paralyzed by choice. There is so much you could possibly do with it.

Paul Mahoney:

Paralyzed by choice, and often paralyzed by varying opinions online. There’s so many different opinions. Sometimes two completely opposite opinions can both make sense, because there’s logic to both. I think that’s part of the benefit that we offer to our clients, is giving a bit more clarity. But I think at the end of the day, regardless whether you engage with a service like ours or not, you kind of just need to pick what you feel as though works best for you, and run with it.

Lucia France:

Yeah, stick with that. Thank you very much, Paul. That’s great. Let’s go to Stefano then for your last question of the series.

Stefano Lucatello:

Ah.

Lucia France:

Ah. Stefano, this person says, “I’ve remortgaged my house in the UK, and I’m looking to spend €300,000 in the best possible area of Italy. What am I likely to be able to buy please? Where should I go? And am I being over ambitious?” So three questions there really.

Stefano Lucatello:

How long is a piece of string? It depends what … I mean, you can’t just say, “I want to invest in Italy and I’ve got 300,000.” I think what you need to do is, what you must do is, you must identify which region. In this case, there are 21 regions in Italy.

Lucia France:

Well they’ve said the best possible area. So would your thought-

Stefano Lucatello:

As I say, I can’t say that. I can’t tell them, because do they want countryside? Do they want ski resorts? Do they want seaside? So that’s the first … Do they want inner-city living? What sort of returns do they want? Are they happy with a lesser return over a longer period? Or do they want a higher return, for example, in an inner-city living, where they rent the property out to, I don’t know, a young professional couple.

Stefano Lucatello:

So, and the other thing is, is 300,000 … Did you say pounds or euros?

Lucia France:

Euros.

Stefano Lucatello:

So is €300,000 the amount they want to invest in a building, or is that including legal fees. Because let’s say Italy, as we’re talking about now, unless it’s going to be what’s called your prima casa, which is your main, or only, or principal residence within 18 months, and therefore you will leave the United Kingdom for Italy, then you will have to pay 13% taxation. 12 to 13% taxation on top of the purchase price. So the 300,000, does that include the 13%, or is it exclusive of it? So that’s the other point we need to talk about and understand.

Stefano Lucatello:

So they then have to choose the region. Ski resort, sunshine at the seaside, or sunshine in the countryside, or a mixture of both like they can do in certain areas. Sorry. So it is a personal choice. My choice would be different from Paul’s, and Paul’s would be different from John’s. It certainly would be different from John’s, because he’s different from everyone.

Stefano Lucatello:

But at the end of the day, it depends what you want. My view, as I said before, I want to buy a property in Italy because I have a particular ambition in mind. So I’m choosing Tuscany, because Tuscany is the region where my father was born. He was born in Florence. So I like Tuscany, but prices are higher in Tuscany, and I’m buying very close to the Tuscan-Umbrian border, because in Umbria, you can lots of the same things but for a cheaper price, and still have the kudos of buying in that sort of area. But yet many people will say, “Hold on a minute, I want the heat of Africa.” Okay, in which case go to Sicily, or go to Puglia, or go to Calabria. Or, “I want to go skiing.” Well in which case go to Sestriere, or whatever it is, Madonna di Campiglio in the North of Italy. So it depends what we want, and it’s a personal choice that’s all I can say.

Stefano Lucatello:

Sorry, I’m losing my voice. Direct the person to me, and I will then investigate, as we always do, why do you want to buy in this particular region. Are you sure you want to buy in this particular region? I wouldn’t advise you to buy … The other thing is, the buying strategy should always take 12 to 18 months. Wherever you buy, you should go there in winter, summer, autumn and spring and see the property at its best, or the region at its best, and at its worst.

Lucia France:

Yeah. And I guess, like we’ve said before on previous questions, it totally depends on what you want, on what you’re after. I mean this person says as well that they’ve remortgaged their house in the UK.

Stefano Lucatello:

Right, okay. Well that’s the other point, thanks for reminding me. The other point is this, I always say to people, if you are buying a property abroad, try not to remortgage your home in the United Kingdom in this case. Why? Because you may have a young family, and you may stand to lose the main, or ornery, or principal residence that you have. Why risk the roof over your head to buy a property abroad? Secondly, you can get a much cheaper mortgage, well cheaper mortgage as it stands at the moment, abroad than you can here. Thirdly, the loan to values are higher, and fourthly the periods over which you can get a mortgage are longer. So those are four reasons why you should not risk your home.

Stefano Lucatello:

The other thing is, if it goes wrong and you’ve hocked your property abroad, then of course the first point of contact the bank or the creditor will go to is the property abroad. It’s not to say that they won’t come back to you in the United Kingdom, and they will do if the debt is high enough after they’ve sold the property. Because remember, the properties abroad go to public auction when they’re not paid for, and someone can pick them up at a stupid price. They will go at 20,000 even though it’s worth 2 million, if there’s someone there offering 20,000.

Lucia France:

Yeah.

John Howard:

Stefano, with all due respect, and I want to finish on a good note, I genuinely do. But Paul has just said that earlier, you’ve got lawyers advising on financial matters such as where someone should go in the UK, or mortgages. I mean you’ve just done the same thing.

Stefano Lucatello:

No, no, no. I was just-

John Howard:

I mean Paul is a qualified financial-

Stefano Lucatello:

No, no, no. No, no, no, no. I can’t … No, no, no, John. No, John.

John Howard:

… advisor.

Stefano Lucatello:

I always give a personal opinion. I always stress that what I’m going to say to them is a personal opinion. My opinion given your circumstances is whatever it is. You’re free to make the choice you want. At the end of the day, we’re lawyers, quite rightly that. We only comment on legal. And in fact in many occasions-

John Howard:

Well I think that’s a good idea.

Stefano Lucatello:

John, just let me finish. On many occasions, the end of my report on title, as I do one I report on the contract, is, “This is a commercial decision, it is not a legal decision. The decision must be yours and not mine. I can only advise you on the legal point, I cannot advise you on the commerciality of what you want to do.”

John Howard:

That’s a very good point. Very good point.

Paul Mahoney:

Think perhaps sometimes the issues arise, I find always, when someone goes one step further than you giving their opinions, strong opinions, on things that they probably shouldn’t be.

Stefano Lucatello:

Yeah, yeah. I agree with you. I agree with you. But we can only … Many a times, the client will ask me, “What do you think?” And I say to them, “Hold on a minute, it’s you that’s buying, not me. You should be … I can only give you my view. It’s my view, I’m not going to be bound by it. As long as you understand that, I can give you my view.” I can only go on my personal recollections, or my personal experiences. The fact that my father was born in Florence, my mum was born in Rome, so I can give experiences of the two regions. Where my families live in Italy, my personal … It’s like Lucia having lived in Spain, she can tell you what she’s experienced when she was living in Spain, and what happened when she developed in Spain and all the rest of it.

Stefano Lucatello:

As long as you caveat those comments with, “It is my personal opinion.” Or even if you write them down, just say, “Look, this is my personal opinion, I’m not going to be held to it.”

Lucia France:

I think what I’ve really learned from doing this show with you guys, is that there’s so many options out there, and it’s kind of becoming clear, and having clarity on what you actually want to get out of the situation, and out of your investment, and out of your property that is the most important thing, and then work from there, and as you say get the best advice that you possibly can.

Stefano Lucatello:

You’ve almost got to work backwards, from the exit all the way to where you are now. What is it you want? And I suppose Paul and John do ask those questions of clients. What is it you are attempting to achieve? And it will go on how much money they’ve got, where they are in life, how old they are, whether they have a job, whether they’ve quit the job and they’ve got a lump of money to invest. John and Paul are the experts, not me. They’ll tell you what it is. But every one of us is different. Each one of us is different.

Lucia France:

Exactly. So well that brings us to the close of our final episode for this series of a Question of Property. Any closing thoughts there from you guys?

Stefano Lucatello:

Look forward to coming back to doing more battle with John.

Lucia France:

Good.

Paul Mahoney:

It’s been enjoyable. I think it’s pretty good.

John Howard:

Yes, but that’s if we renew everyone’s contract of course.

Paul Mahoney:

Stefano might be up for transfer.

Stefano Lucatello:

I might be up for transfer, I might be going to Juventus, mate. No problem, yeah.

John Howard:

Well if you need a good agent-

Stefano Lucatello:

I might be doing the next one-

John Howard:

If you need a good agent, I’m here. So to negotiate your [crosstalk 00:48:20] for you, Stefano.

Stefano Lucatello:

I might be doing the next lot from Tuscany. You might be getting me-

John Howard:

Very nice too. Very nice too. Well look, personally I’ve really enjoyed it. I’ve learned a lot as well from Paul and Stefano, and you Lucia as well with your comments. So I’ve broadened my horizons, and I’ve enjoyed working with everyone. And I’m sure within a month or so, we’ll be back on air with the second series.

Lucia France:

Absolutely. And maybe further out of lockdown, let’s hope, and keep our fingers crossed for that.

John Howard:

Yeah.

Lucia France:

Thank you so much guys. Paul Mahoney, Stefano Lucatello, and John Howard, it’s been a pleasure. I’ve really, really, enjoyed chatting to you all every week, and thank you so much. Thank you for watching at home. If you do have any questions, please just write in the comments below or send us an email, ask@aquestionofproperty.co.uk. Thanks for watching, and we’ll see you next time.

Stefano Lucatello:

Bye.

Lucia France:

Bye.

John Howard:

Bye-bye.

A Question of Property

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