Shona Lindsay: Hello and welcome to this 150th episode of Property Question Time. The show launched in 2017 and we are still here answering all your questions that you send in to us. We’re here today, filming from the heart of Docklands. I’m Shona Lindsay and I’m joined today in the studio by three experts.
We start by introducing you to Simon Zutshi, who is the author of international best seller, Property Magic, and the founder of Property Investors Network.
Next, I have to introduce you to a gentleman who was actually on the very first show. He has filmed 28 episodes, that means he’s answered 56 of your questions. Bizarrely and quite unplanned, he happened to feature in the 50th and the 100th episode. Welcome Paul Mahoney, who is the managing director of Nova Financial Group.
Last, but not least, please let me introduce you to Garrett O’Hanlon, who is the founding director of MAP Surveyors.
First of all, I wanted to ask you all individually what your memories were and any high points, low points, and how you felt about doing this program and the viewers questions. Perhaps I could start with you Simon.
Simon Zutshi: Yeah, I think that’s bringing up some great questions. There have been lots that have been ones that I’m sure other viewers have benefited from learning from and hearing the general advice that the panel of experts have been able to provide. It’s great that we’re able to share some wisdom and hopefully, save people some money and save them some time and really make sure they’re making the most of their property investing.
Shona Lindsay: Have you had any weird questions that you thought, “Why on earth am I answering this and how can I make this sound helpful?”
Simon Zutshi: There are some peculiar ones, I think. I think sometimes people like to ask one very, very long question. It seems like they haven’t taken a breath. They say, “This is my situation and this and this and this.” You try kind of think, “Well okay try and simplify it.” I guess human nature is we like to complicate things a little bit for ourselves. There have been some strange, but nothing really stands out. There have been some where you kind of felt, “Hm, that’s going to be a long answer.”
Shona Lindsay: It’s probably because people get stressed. Buying property and investing in property can be quite stressful so they’re trying to get all their thoughts out there in one go.
Simon Zutshi: I think so, yeah.
Shona Lindsay: Paul, you’ve obviously done lots of these episodes. Anything stand out to you?
Paul Mahoney: Yeah, look. As Simon was saying, across the 150 episodes, we’ve probably had every question there is to ask. I think it’s great that the depths of expertise across the different panelists that we’ve had across those 150 episodes as well, really gives a good, rounded take on how people can approach very different and various circumstances when it comes to both buying a home to live in and investing in property and the considerations from a mortgage perspective and all the other expertise that have been commented on. I think that’s great. I think it’s a really good starting point or refresher for people to watch these episodes and get a feel for what’s going on.
Similarly, there’s some questions that we simply don’t have enough information or time to answer. There’s others that are very detailed and again, we probably don’t have enough time to answer them. There has definitely been some great questions and I’m sure a lot of people, just from hearing those questions and the answers to them, have learned an awful lot.
Shona Lindsay: Brilliant, thank you. Garrett, anything to add to that?
Garrett O’Hanlo: Yeah. I think if you’re an intending property purchaser, you could do a lot worse than trying to catch up on as many episodes as possible. As Paul says, there’s been a whole gambit of questions and topics that have been covered across various disciplines. I think certainly, it’s great as a professional to get that kind of feedback from people. We’ve modified some of the things that we do on the basis of questions that I’ve seen in this program.
Shona Lindsay: Really? That’s interesting.
Garrett O’Hanlo: I personally have learned stuff from my co-presenters, panelists at different times too. It’s a fantastic resource for people, and I would catch up with as many episodes as you possibly can.
Shona Lindsay: How does it compare to your different worlds? Your real jobs if you like, coming in here and doing this sort of thing? Is it a very different experience for you than climbing into a loft space?
Garrett O’Hanlo: If you work in people’s houses, all life is there. This is a nice, clean, comfortable environment, so yeah this is all right.
Shona Lindsay: That’s what people can see on the camera. We’re not talking about what’s under the table. Let’s crack on with the questions. First of all, Simon, as you are at the head of the line, let’s start with yours. A nice simple question, or maybe not, simple in the amount of words. How do I get started on crowdfunding? It seems to be very complex.
Simon Zutshi: There are two basic things you need to be aware of. There are two fundamental types of crowd funding. One is where there are platforms that will go and find great property projects and you can actually buy into those as a shareholder, an equity stakeholder, and that’s crowdfunding. You can invest from small amounts to large amounts. It’s great for someone who maybe doesn’t have enough money to buy their own property. They can take their money and diversify among a number of different properties, so it’s a pretty good way to get started if you can’t buy your own. That’s crowd funding.
Then you also have peer to peer lending, which is where, instead of actually getting an equity stake in a property, you lend money to someone who’s doing a property project and they’re going out to the crowd to borrow some funds instead of going to a traditional bank. The developers quite like that, because they like to give some return and share some of the profits with individuals or just normal people, instead of the banks making the money.
It’s very important that when you go to a platform, it’s done properly. It’s got to be FCA regulated to make sure they’re doing things in the correct way. I’d always look into the experience of the people who are behind the platform and I’d make sure that they understand what the property is all about. You sometimes get people who are financiers or technology people applying that to property. There’s nothing wrong with that, but if they’re assessing that and doing due diligence on a project, you want to make sure they really understand what they’re doing.
I’d also encourage you to accept some personal responsibility and do some due diligence yourself. If a project looks good, you can check out what’s of value, what the rents, make sure it’s going to make money and be a viable project to support. The other thing you need to consider is how long you’ll tie your money up for in a project.
If you’re putting money in a project to get some equity, typically it’s probably going to be probably a five year hold, at least to get some capital growth over time. If it’s peer to peer lending, it might be a much shorter period of time, maybe 12 or 18 months. Again, thinking about the money you’re putting in, you’re probably committing on tying that money up for a reasonable amount of time. There’s risk with any investment you make, so make sure you understand the risk, and weigh it up against the reward. I suggest putting your toe in the water with a very small amount of money.
Shona Lindsay: What’s the smallest amount of money?
Simon Zutshi: It really depends on platform to platform. There are some peer to peer lending platforms where you can put in as little as 500 pounds and maybe get as much as an 8% return on that money with some good first charge security. If you invest in other platforms that may be equity, I think from as low as 100 pounds you can put some money in and get a small stake. The return’s going to be pretty small.
Shona Lindsay: Of course.
Simon Zutshi: I think it’s good to put some money in and just check out the platform.
Shona Lindsay: Less risk and see how you feel about it.
Simon Zutshi: Exactly. Also, ask other people. It’s a growing industry. Many people have never made this kind of investment before. Ask family and friends have they ever done it? What’s their experience? Try for somebody who has got some experience and see what you can learn from them. I’m sure the other guys might have some comments on it as well.
Paul Mahoney: Yeah. I completely agree that having confidence in the platform and who’s involved in the platform, very important. One thing to be wary of if you are investing in development projects is, in some cases, the actual people who are doing the development can have very little skin in the game if the platform isn’t doing it right, which can be risky. If something goes wrong, they walk away and lose a very small amount of money, whereas it’s the investors that are taking the risk. Be aware of that if that’s the case, and have confidence in your own due diligence, the platform’s due diligence and the actual people you’re giving your money to. Aside from that risk, I think crowdfunding is great. It’s excellent that those smaller amounts of money can help contribute toward a greater project. In the right circumstance it can be brilliant.
Shona Lindsay: And a great way, perhaps as you say, dipping your toe into property investing for the first time.
Simon Zutshi: Yeah, I think so.
Shona Lindsay: Excellent. Well, Paul let’s give you your 57th question. This is a person who has moved back home after a few years and they are letting their flat out, and they now want to buy a small, free hold house to live in. My tenant doesn’t want to move, but I’m finding it impossible to sell to an investor in the current market, so if I do sell she’s going to have to go. I have no pension plan and had thought that the flat could replace that. However, I’m finding it difficult to refinance the flat in order to release the equity to buy the house. I would also have to find the 3% stamp duty. Based on all of the above, should I try and keep the flat or sell it? No longer be a landlord and have much more equity in the house that I intend to buy?
Paul Mahoney: It’s a very common question. I believe about half of the landlords in the UK are accidental landlords, people that have kept their previous home. I think a few things to be aware of there is when you’ve bought a place as a home, you’ve usually bought it using fairly emotional criteria. The place that you like, it might be where you’ve grown up or the place where you want to live and you’ve bought it because you like the shape of the house and it makes you feel comfortable.
That’s generally a fairly different criteria when it comes to making money from property. That should be very unemotional and commercially minded and literally, to be crass about it, about making money. The two don’t usually gel in my experience, but they can in some cases. It seems from what this person said that perhaps it’s not the best property investment. There’s limited information there. They’re struggling to sell it, they’re also struggling to remortgage it.
The selling might be due to the market at this point in time, or it could be just because it’s just not very attractive as a property investment. The remortgaging could be partially again due to the yield perhaps or perhaps it’s just not very attractive to lenders. Again there’s limited information. It would all come down to whether that property makes sense as an investment, depending on what their goals are, whether they’re looking to make cash flow from it, are they looking to build an investible asset base and is it therefor likely to grow in value, or is it even viable for them to keep it, given that they’re struggling to remortgage it. It seems it’s either or.
Shona Lindsay: There’s got to be a reason why.
Paul Mahoney: They need to sell it or they need to remortgage it. It might come down to which one of those two options is the easiest for them. Yes, I’m always against telling people to sell properties, because it’s an expensive way to release equity. I’d much prefer people to remortgage and release funds to them build, because a property should be a mid-to-long term investment.
Essentially, remortgaging to release equity is a tax free way of accessing your cash, whereas when you sell, you pay agent fees, capital gains tax and a whole range of things. Definitely seek advice. Speak with somebody who can look at the figures, look at the property, and tell them whether it stacks up. Then based upon that advice, follow the path that works best for them.
Shona Lindsay: And take the emotion out of it. That’s where bringing another advisor in would do that wouldn’t they? They would just literally look at the facts and figures, as opposed to as you say, they bought that house because they loved it and they lived in it for a while.
Garrett O’Hanlo: I know, 30 years ago we didn’t really have these questions. We’ve become this kind of property owners democracy with, as you said, accidental landlords and things like that. I’m always at pains to say to people, “Think about your fallback position.” The points you make are very valid about disposing of property but sometimes your fallback position is more important if the market changes, if your circumstances change, are you still covered?
Shona Lindsay: I love the way that this question starts. The first one says, “We might be slightly mad.” We might all be, but anyway. We are seriously thinking of buying a solid, 1960s house that hasn’t been updated for decades. It needs new double glazing, new kitchen, new bathroom, new rewiring, new decoration and carpets. However, it does look structurally sound. Would you get a survey if you’re going to do everything anyway?
Garrett O’Hanlo: Okay. On a technical point, I don’t think you can be slightly mad as you can’t be slightly pregnant, but that’s a side issue. It’s interesting that people often talk about a solid house and structurally sound, when with due respect, they may not be aware of whether that’s correct or not. They’ve also said in the question, “We want to do everything.” There’s a whole myriad of things not mentioned there that might need attention. Roofs and all kinds of boundary issues.
A ’60s house is of an age where there’s a fair chance there could be some asbestos containing materials within there. There are various forms of ’60s houses of which the construction is not the best. Many ’60s houses are fine, I hasten to add. There are others which aren’t. The very fact that the things they’re talking about are improvements wouldn’t perhaps inherently improve the insulation capability of it or the structural adequacy of it, compared to what some lenders may view on certain types of ’60s housing.
Like I’ve said before on the program, that people often come to us and say, “I’d like a survey, I’m concerned about A, B, and C.” Well, actually when we get there A, B, and C are fine and it’s X, Y, and Z which are the problem. That’s because it’s not their area of expertise. To say, “What could go wrong?” Is a bit like going to the doctor’s and saying, “What could be wrong with me?” There are lots and lots of different things. Yes, you’ve got to have a survey. Even if you’re going to do all of those things, there are many, many, many other things.
Shona Lindsay: Possible hidden that the laymen aren’t going to see.
Garrett O’Hanlo: Exactly. People aren’t even thinking about them at all. Even things like protected species in the roof or in the eaves that could stop you doing things. It’s our job to pick that up. Japanese Knotweed is another thing we’ve spoken about before in the program and other plants and other issues like that. Trees, all kinds of things. It is a myriad possibility option, so certainly do get professional advice.
Shona Lindsay: You mentioned about 1960s houses. They’ve said that this is a solid 1960s house. When you were talking about that before, did you mean that it’s a non-standard construction?
Garrett O’Hanlo: Not necessarily. It could be a non-standard by current definitions, but equally, in my view, there were elements of ’60s housing that were not put together in the best possible way and have not stood the test of time. I’ve seen lots of ’60s housing estates being demolished. That’s crazy, we’ve got houses that last 150-200 years, that we’re demolishing houses 40 or 50 years later. It may be a solid house, it may be a house which isn’t fantastically put together but it’s still basically reasonably sound. Get the advice and be sure.
Shona Lindsay: Have the survey.
Garrett O’Hanlo: Have the survey, says the surveyor of course.
Shona Lindsay: Thank you Garrett. That’s all we’ve got time for this half of the show, but join us after the break for more questions for our experts here in the studio.
Welcome back to this 150th episode of Property Question Time. Just to remind you, I’m joined today by Simon Zutshi, Paul Mahoney, and Garrett O’Hanlon. Gentleman, let’s crack on with the next lot of questions.
Simon, for you. “I am looking at options at the moment as to what to do. My grandmother has early dementia and is moving in with us in an annex. She owns a bungalow at the moment, worth 250,000 pounds and we are looking at what to do with this bungalow. It could be rented out for about 700 pounds per calender month, but that doesn’t seem to be a very good return on the 250,000 pound value. If we were to sell, what are the options open to investing it to produce a better income? We would look for a long term investment and we need the income to cover carer fees for home visits.”
Simon Zutshi: A couple of things here. First of all, a 750 pound return on a 250,000 pound property is not a great return. I would think it’s probably worth selling that asset. If it’s been her own home, there’s no tax to pay on it, and in fact, it might be a good time for her to distribute some of that income through the family. However, if there are fees to be paid in the future for care, I personally would take that money and invest it into some high cash generating, cash flow properties that will give an income that could be used to cover some of those expenses in the future.
I’d really want to sweat that money and work it as hard as possible. It’s not a huge amount of money, so it would come with the inheritance tax personal allowance, so unless she’s got lots of other money and pictures and things that might be valuable, there probably wouldn’t be an inheritance tax liability. Sorry. It’s just about getting that money working hard and probably houses of multiple occupation, subject to being in the right area, that is a bit more work and effort than a normal property, but fees for care homes and care can be very expensive. To create the most income is what I’d want to do.
Shona Lindsay: It’s whether the grandchildren that she’s moving in with have actually got the time and the energy to actually do that for her?
Simon Zutshi: Yeah. You can find certain letting agents who have the skills to look after those kinds of properties. I think doing some research would be really important to find the right area for that kind of property, find someone who can manage it for you so they’re not taking on the extra burden of responsibility and you can still generate a good cash rate, even if someone else is managing it for you.
Shona Lindsay: Great. Thank you. Paul, this is quite a long question, but we’ll fire through it. “I’m due some inheritance in the next week or two, and I’ve been thinking hard about what I want to do with it. One, should I pay off the majority of my mortgage. Two, bank it and just use it for an easier life, more holidays, fun for a few years, or three, a buy-to-let? I do love the idea of being mortgage free myself so number one is super appealing. However, I know for a fact that if I pay my mortgage off, I will end up being just a little lazier with work and earning less, so I won’t really notice the difference. The second option would be amazing to do for a few years, but I have no doubt that I would regret it long term.”
“That leaves option three, the buy-to-let. I could get a property with around an 8% yield fairly easily in my city, and I know I still will work hard if I do this option, but then I’ll also have an asset of another home and an addition of extra income to start paying down my own mortgage or maybe even go towards a second buy-to-let. However, I know nothing about rentals. Will I not be making as much as I think, and is there anything else I should consider before doing this option?”
Paul Mahoney: Okay. Good question. I think they did answer their own question a little bit there.
Shona Lindsay: I think so too.
Paul Mahoney: The logical answer in my mind is three. We’ll go through each though. Wait, let me clarify that. They haven’t said much about the rest of their financial position.
Shona Lindsay: No, they haven’t.
Paul Mahoney: It sounds, from the way that it’s been worded, that this would be their first buy-to-let and they probably …
Shona Lindsay: It also sounds like they might be self employed, if they might not work as hard.
Paul Mahoney: Yeah. On point one, if they are already quite wealthy and are in a strong financial position, have all the income they need from their investments, then maybe paying off their mortgage is a good idea. Debt is cheap at the moment. Most mortgage rates, especially home loans, are one and a half to three percent. They’ve said that they can achieve an 8% yield in their area. If they’re going to leverage that cash they have, the yield on the cash would probably be much better than that, 10%+ ideally. By paying off their home loan, they’re going to save themselves between one and a half and three percent on that money, or they can invest it and get 10%+. In my mind it’s logical to invest it, especially if they aren’t quite in the financial position as yet as what they’d like to be in a few year’s time. That would better utilize their resources. It would not only give them a better yield, but hopefully allow them to start building their investible asset base so that in 10, 15, 20 years hopefully, they’ll be able to replace their employment income with their investment income. That would lead to number three being the most suitable option. Number two is essentially financial suicide. It’s a personal choice. If they want to go and blow the money …
Shona Lindsay: Perhaps they could take a bit for a spa day.
Paul Mahoney: That’s completely up to them, but yes without a doubt, they would regret spending the money on holidays and a more expensive lifestyle. Again, in my mind, it would be logical for them to try to create that better lifestyle by investing the money. That could be very passive or it could be more proactive depending on their skillset and the time they have available to them. Yes, I think three is the most logical point and they’ve almost answered that for themselves. It helps them better utilize the money, get a better return on it, they keep working and maintain their own personal expenses separate to that, whilst building something that’s hopefully going to create a passive income at some point in the future and allow them to be a bit more comfortable without having to work so much.
Shona Lindsay: They’d actually be having one and two from three.
Paul Mahoney: Yeah.
Shona Lindsay: Great, thank you so much. Finally, a question for you Garrett. We are in the process of buying our first property and we want to get the roof specifically checked. I’m happy with the rest of the house. It goes back to your earlier point doesn’t it? I originally wanted to get a full building survey done, but on looking at some examples a lot of them end up saying, “The roof will need looking at by someone else anyway.” Do I go for a full roof survey? I’m struggling to make a decision. I don’t want to make a mistake by getting the wrong thing and then having someone else have to come in and have to spend more money anyway. The building survey with one company will cost 500 pounds, or a roof survey will be 380 pounds with someone else. Obviously, I wouldn’t want to end up having to get both. Any advice?
Garrett O’Hanlo: Yes. A few interesting points there again. Once again, we’ve got somebody who feels confident that they know enough about a very complicated building to say it’s okay, but they don’t know about roofs, which is a worry. The point, we don’t do partial surveys or bits and pieces, because the thing is a building is a fully integrated element. Every part interacts with another part. If, for example, somebody says, “Could you go on and just look at the roof?” If we turn up and we can see that there are tiny, hairline cracks, which indicate cavity wall [inaudible 00:23:52]. Do we just ignore that? Because that’s critical to them and as professionals, we really should be following a trial, even if we’re not being paid for it, which we don’t really want to do. I think the partial surveys is a dangerous thing.
In terms of what they were saying about seeing reports where people just say, “Refer to someone else, refer to someone else.” I hate that. A surveyor’s report should not say that unless they’re suggesting that, “Here’s the problem, which we’ve identified. Now you need to go somewhere to get prices for it.” Which is a different thing. I think if they read carefully the reports that they’ve seen, hopefully they’re couched in those terms. Again, with roofs there are many, many things that can be right and wrong, not just with the roof itself but with the framework and again, all elements interact together. Do get the detailed survey. Do as they seem to have done, check out people’s reports and see what you think of them, ask questions, but I would at all costs avoid that partial survey because I think it’s very misleading.
Shona Lindsay: Yeah. As you say, well you are, but we’re not experts when we go into a house. There would be something that we could miss so easy.
Garrett O’Hanlo: Yeah, and it is that. It takes a minimum of five years to qualify in what we do. They will say, “My friend’s a builder and he says it’s okay.” He might be a fantastic builder but that’s his expertise. I can’t lay a brick wall and I doubt that he can do a detailed survey, in fairness to the both of us. Go to the right people for the advice, which is what comes through this program all the time really.
Shona Lindsay: Brilliant. Thank you very much. Well, ladies and gentlemen, that’s it. We’ve come to the end of our 150th episode. Thank you so much for being with us today. Don’t forget, if you’ve got any questions for our experts, go onto the website, www.property-tv.co.uk, or send us a direct email to firstname.lastname@example.org. All that’s left is for me to say thank you to our guests for today, so thank you Simon Zutshi.
Simon Zutshi: Thank you.
Shona Lindsay: Paul Mahoney.
Paul Mahoney: Thank you.
Shona Lindsay: And Garrett O’Hanlon.
Garrett O’Hanlo: Thank you very much.
Shona Lindsay: I’m Shona Lindsay and we’ll see you very soon on Property Questions Time. Thanks very much. Bye.