Property Tv | Property Question Time – S1 Ep175 – Stephen Galpin, John Howard and Paul Mahoney

Bryony: Hello and welcome to Property Question Time. I’m Bryony Billson and this is the show where you get the chance to have your questions answered by our resident property experts. So, let’s see who we have on the panel today.

Firs of all, a warm welcome to Paul Mahoney, managing director of Nova Financial Group, welcome. John Howard, property developer and author.

John Howard: Hi.

Bryony: Thank you for joining us. And Steven Galpin, property consultant.

Stephen G: Hi.

Bryony: Thank you for joining us. Right, we’re going to go straight into our first question from one of our listeners and this is to you Stephen. It’s quite a long question, but it’s a really brilliant one at the end so we’ll stick with it. I’ve received three letters from a company claiming to be specialists in reclaiming stamp duty, advising us that we may have overpaid 6208 pounds in stamp duty when we bought our house because it was an annex, they have offered to make a claim on our behalf on a no win, no fee basis, but I’m not sure what the fee would be but assume it would be a percentage of the successful claim. So, we purchased our house in September 2018, and it does indeed have a separate annex which has two units with a bedroom and a bathroom each. One also has a lounge. The previous owner used this as accommodation for their sons and then more recently as a B&B. Have we overpaid stamp duty because the house has an annex?

Stephen G: Right, well, we’ve got half an hour. No, look I think there’s an overriding principle here. Is that stamp duty is another tax that we have to pay and it’s quite a delicate path to tread if you want to avoid or minimize that liability. Now look, there’s two things here, one the company that’s written to the viewer about offering this service on a no win, no fee. I’m not so worried about the no win, no fee and how much they get. What I’m worried about is the penalty if they’re found to be wrong which can be several times the amount that could have been potentially saved or claimed.

Bryony: Right, okay.

Stephen G: So, first thing I’d want to know is whether that company takes on the liability for any backlash from revenue. I think that’s the most important thing. I think there may, I did look into this question before the program with some legal colleagues of mine and there may be an opportunity to argue that because the construction is temporary and an add on to the building you could possibly attribute a value to it and then remove it from the overall value of the house. A little bit like what you would do if you were selling the house with your furniture. But, it just seems to me for the sake of six thousand pounds, and the risk of probably a fine from revenue if it goes wrong of several times that amount, I just wonder whether the exercise is really worthwhile and whether you wouldn’t be better having a good night sleep.

John Howard: Presumably there’s a loophole with the annex though, that’s the key isn’t it?

Stephen G: Well I think that is the key, but the trouble is it’s like a lot of these loopholes that people find or theoretical loopholes. Is that it might be one, two, three or four years later down the line when actually revenue have repaid you and then decide that it was a bad call. And they can come back at you, so you’re not only paying an increased fine, you’re paying interest on the amount that you should have paid in the first place. And you see the lawyers that deal with you on this, the solicitors, they’re going to say, “Look, it’s just not worth it. We’re the ones that are going to get in trouble for advising you wrongly,” or perhaps [crosstalk 00:03:58] so I’d just be very nervous. I’d really want to know who these advisory people are and where their standing is. But in my view probably not worth the risk.

Bryony: I mean do you feel like you agree with those points then?

John Howard: Yeah, I mean I think so. What you’ve got to remember is if a solicitor gets a stamp duty wrong, he gets double the fine of the stamp duty. So, when you’re doing the transaction in the first place so they are very cautious listers and they’re right, and that’s what you’re paying for. You’re paying for them to be professional and cautious and on the whole correct.

Paul M: It’s probably a good point there though rather than using this company and paying them a fee, go back to the solicitors you used initially because it’s their responsibility [crosstalk 00:04:40] did you do it wrongly?

John Howard: Yeah.

Paul M: And if so can we fix it?

John Howard: Yeah, good point.

Bryony: Fantastic, great advice there. Thank you very much from all three of you. Okay, so my next question is going to go to you John.

John Howard: Good.

Bryony: I’m a first time buyer with a budget of 250 thousand, looking for a property in England. What are my options to maximize the money I’ve got available.

John Howard: Goodness me, that is a big question.

Bryony: It’s a broad one isn’t it?

John Howard: Broad question, okay, well on the whole I’ll stick outside London because for 250 you’re not going to get a lot inside London. Well it doesn’t say whether they used the help to buy scheme, which the government had brought out which is absolutely fantastic. 10 billion they’ve put into that scheme. And it allows you to borrow a deposit, because if they haven’t done then they might be able to pay to go to 300 thousand. So, I think that’s one of the questions I’d like to ask and if I met them. Certainly anywhere else in the UK just about they can buy something. And I would go always go for the best area you can afford because that’s likely to go up in value than a weaker area.

Bryony: Okay, interesting. Anything from either of you two?

Paul M: I don’t think they mentioned whether they’ve got 250 cash or whether that’s [crosstalk 00:05:57] they can buy.

John Howard: I’m assuming that’s with the mortgage [crosstalk 00:06:00]

Paul M: It might be with a mortgage, but if it’s not my best advice would be use a mortgage.

John Howard: Exactly, yeah.

Paul M: You better utilize your money, mortgages are pretty cheap at the moment. Compared to the returns you can get from property. And leverage as much as you can really in most cases, you know obviously seek advice but the best utilize your money it will go a lot further with the use of a mortgage.

Bryony: And Stephen do you agree with the advice of it’s good to buy in an area that’s already [crosstalk 00:06:28] okay.

Stephen G: My colleagues accuse me weekly of London [crosstalk 00:06:34]

John Howard: London centric.

Bryony: A wrong person for that question [crosstalk 00:06:38] well no, it’s interesting to hear. What would your take on it be then?

Stephen G: Well, I just think my advice on it would just be a general one. You buy, you control your asset in an area where you can see it, touch it, feel it, you’re able to control it. If you start buying out of area wherever that may be.

John Howard: But they’ve only got 250 thousand [crosstalk 00:06:58] first time buyer. I know Stephen you’ve never been out of London in 10 years. But London, there is other areas apart from London to buy in.

Stephen G: Really?

John Howard: Yeah.

Stephen G: No, but I mean Paul’s right. It depends whether it’s a 200 thousand pound cash input [crosstalk 00:07:15] yes. You’re going to 200 thousand if you want to pay cash you’re going to have to look outside of London. If it’s a matter of gearing it up then [crosstalk 00:07:27]

John Howard: But I’m assuming it’s a first time buyer.

Bryony: Yeah. Do any of you have any areas outside of London that you’re keeping your eyes on at the moment that you?

John Howard: Yes.

Bryony: That you feel like sharing with our listeners?

John Howard: Well I would always go, if you’re looking to look at an area that’s going to improve then you want to find something nearby that’s going to make it improve. So for instance it may be a new railway line, it might be better access, it might be a new draw carriage way. That’s always a good angle.

Paul M: Yeah.

Bryony: Thank you.

Paul M: Yeah, you know I like major cities with depth, you know major that actually have their own economies within them. Lots of employment and that sort of thing. So, yeah if you’re looking at the UK places like Birmingham, Manchester, Liverpool are hard to overlook I think.

Bryony: Fantastic, well I’m going to keep you talking Paul because the next question’s coming to you. I have two properties that I bought for cash, one of which is my primary residence and one is a flat I rent out. I’ve just taken a buy to let mortgage on the flat and wonder what’s the best way forward to building my property portfolio? Do I buy one property with that money and then mortgage it again or do I use that money to buy two properties putting down a 20% deposit and get two mortgages?

Paul M: Okay, good question. It’s similar to the point I made on the last question or the one before it. Was utilize mortgages as much as you can. I think a lot of people’s mind they struggle to separate the difference between good debt and bad debt. You know bad debt is your home loan, your credit cards, your car loan, it improves your life style but it hurts your finances. Whereas good debt is investment debt, it helps you better utilize your money, it’s generally tax deductible and especially when it comes to property it’s the differentiating factor between property and other investment options.

As a cash buyer property returns are quite similar to shares for example but with leverage, nothing really touches property. You know the fact that you can get 20-30% returns on your cash per annum, that you’ve cash invested, by using mortgages whilst only achieving relatively average returns on the asset, is pretty incredible in my opinion. So, for this person particularly utilize as much of that investment debt as they can.

So I think they gave two options as well, whether to buy essentially with the cash they release or whether to take mortgages on two. I’d say you’re better off taking mortgages on two, something they didn’t mention was that it sounds like their home is debt free as well. They could also look to utilize an equity within the home and they could do four or five.

Bryony: Yeah.

Paul M: So, yeah don’t crazy all at once but seek advice. The fact that you can borrow at two or three percent and achieve returns of far, far greater than that means that you should have borrowings. Well, most people should have borrowings in my opinion unless you’re already very wealthy.

Bryony: Fantastic, yeah. Thank you, brilliant advice there.

Okay, well, a fantastic start to the first half of today’s show. Thank you for all your advice on those three questions. We’re going to take a short break now but don’t go anywhere because we’ll be back with more of your Property Question Time questions.

Speaker 5: The tax system has evolved significantly over recent years for property investors and developers. You may think that you and your accountant have a grip on these changes, however, unless you’re receiving specialist tax advice from a specialist tax advisory firm then it’s unlikely to be the case. At ETC Tax, our team of highly experienced chartered tax advisors work with private individuals and companies to deliver effective tax planning whilst meeting HMRC compliance requirements. Let us help you to meet your personal or commercial objectives in the most tax efficient manner. ETC Tax, making the complex simple.

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Speaker 7: Property is a great investment option, but it’s one of the largest purchases that you’ll ever make. As individuals, we’re all limited by our resources and regardless of our experience, knowledge, or time, we can achieve much more with the help of a qualified team and extra resources being available. Nova Financial specialize in assisting clients to achieve financial freedom through property investment, with over a 100 years of experience we shape your family’s future. To invest in property with absolute confidence, call us, on 0203 8000 600, or visit nova.financial.

Speaker 8: If you’ve got a question about property, why not ask an expert? Property Question Time gives you the opportunity to ask anything you want, whether it’s about planning, finance, conveyancing, moving abroad, literally anything that’s property related. The property TV panel of experts are available to answer your questions no matter how complex they may seem. Simply email your question to info@propertytelivison.tv and join us on Sky channel 189 to hear your questions answered.

Bryony: Welcome back to Property Question Time, I’m Bryony Billson and with me today on the panel we have Stephen, John, and Paul. And I’m going to go straight to you Stephen with one of our questions. I understand that the buy to let market in the northwest is really buoyant. I live in the south and the idea of investing my money in a property in the north is quite scary. As I know nothing about the area and would very rarely be able to see the house I invested in. Is this normal? And how do others manage this geographical problem?

Stephen G: Right, well I know I’m going to get berated by my two colleagues [crosstalk 00:13:57] right. Well, first of all let me say, nothing wrong with the north of England, nothing wrong with property investment there. But, but, if you live in the south of England just think about the practicalities, I think the questioner actually answered their own question in the first two paragraphs, it’s a long way away, I can rarely visit it, so how are you going to control it? Now, if you’re prepared to put that in the hands of agents up there, agents that you trust that will work well with your property, absolutely fine. If you’re not sure then I’d say steer clear.

I mean the obvious attraction is that the further north you get, the better value you get. And in some cases the higher return. But there is that risk with that, if you can’t manage it yourself then you’ve got this problem. Now I mean I do have a colleague who’s very well known in the property business that would say, “If you can’t see the telecom tower don’t do it.” In London, but it is harsh advice. And see what I would say the questioner asked at the end, “Well, how do other people manage it?” I think it’s a question of volume in a way. You know if you’ve got 10 properties in Manchester, then it very much become worthwhile for an agent up there to look after you, to care about your properties, really give you the service you need. If you’ve got one relatively small flat, a one bedroom or something, with a fairly modest income attached to it, you’re just not going to get the service. You’re going to have to provide part of that service yourself at least, and in that respect I’d steer clear.

John Howard: What I would say-

Stephen G: Is that balanced enough for you Mr. Howard?

John Howard: Not really, no. Not really. What I would say is that I mean I’ve got properties in the Isle of Wight that I haven’t seen for 25 years.

Bryony: Wow, okay.

John Howard: So, you don’t have to be there to control the situation or so on, okay, yes, we’ve got reasonable sized portfolios but different properties to someone starting out. And my advice normally for starting out is to be local. Because you know you’ve got my confidence in the area and for your first purchase at least I would always try and stick to relatively local. Now, Paul might say something totally different in a minute.

Paul M: Yeah look, I think if you’ve got the luxury of sticking local.

John Howard: Yeah.

Paul M: And local makes sense as an investment.

John Howard: Yes.

Paul M: Fine.

John Howard: Yeah.

Paul M: But, I think when it comes to investing it should be unemotional and commercially minded.

John Howard: Absolutely.

Paul M: And I encourage my clients not to worry about where it is, invest where it makes the most sense.

John Howard: Yeah.

Paul M: And I agree with the question asker, that north west is a good place to invest at the moment. If you have the right people around you, you don’t have to go at these things alone. You know property isn’t a DIY activity any more in my opinion. You should seek advice when doing it. And if you’re working with professionals that know the area, that know the right team for you in the area, there’s really no reason that you should ever have to see your property. And in fact it’s a little bit silly that you should feel like you have to see it, because what are you going to do? You know if you’ve got a property manager in place, driving past it every now and again to make sure it’s still there is just when you think about it a little bit silly. So, I would say identify the right location, identify the right property in that location, and invest in it regardless of how close it is to you if you’ve got the right team and the right advisors around you to give you the confidence that I will look after itself.

Bryony: Yeah, I think that’s all brilliant advice there. I think it partly also comes down to perhaps what you were touching upon is maybe to do with the personality behind, or what stage you’re at with developing.

John Howard: Yes, I think so.

Bryony: And personally I started with two properties in London, when I moved to Manchester, I actually did find it quite stressful having two properties in London.

John Howard: What a worry that is, hey? Two nice properties in London. We’d all love that.

Bryony: But I was also managing myself [crosstalk 00:17:52] it was too hard work.

Stephen G: You know this really does come down to, there’s a good lesson here [crosstalk 00:17:58]

Bryony: Okay.

Stephen G: There’s a good lesson here that I think we’d all agree on. Property whether it’s one property or 10, it’s a business.

John Howard: Yes.

Stephen G: And if you’re not business minded bare that in mind.

Paul M: Yeah.

Stephen G: [crosstalk 00:18:10] because sometimes you’re going to have to make some tough decisions, and you need professionals around you, you need a team around you. And I would say my earlier sort of fear is that going into a strange area, whether you’ve got the confidence or the business ability to be able to choose those professionals.

Paul M: I think Stephen without the support is key.

Stephen G: Yeah.

Paul M: If there’s support there then I can understand it.

Bryony: And perhaps also that business mindset it’s quite hard to get that in your first couple of properties, it develops as you develop your property portfolio and you’re able to make more of those decisions that don’t bring so much emotion but I think if this is a new venture for [crosstalk 00:18:51]

Paul M: By the way it shouldn’t be any emotion, no emotion.

Bryony: None.

Paul M: It’s business.

Bryony: Yes. Excellent, thank you. I think we answered that question well for that person.

Stephen G: I think you wrote the question.

Bryony: It’s me. Okay, so we’re going to move on to John, this question is for you. My daughter and husband recently inherited a small property from her in laws, and wants to move their family into a bigger house.

John Howard: Right.

Bryony: However, they are also toying with the idea of refinancing completely, and instead of just moving keeping their current house as one to let out. Is there any advice you can offer before they make this huge step?

John Howard: Yes, do it.

Bryony: Okay.

John Howard: Be brave.

Bryony: Bold, brave.

John Howard: Bold, brave.

Bryony: Not emotional?

John Howard: And not too emotional, obviously you can afford to be emotional when you’re going to live in the house yourself.

Bryony: Yes.

John Howard: So, it is a very different purchase.

Bryony: It is, yes.

John Howard: And you don’t need to be looking saying, “Well, how much money can I make on this house?” If it’s your home it’s your home. I’ve lived in my home 26 years, I didn’t buy it thinking, “Oh great, I’m going to sell it in a few years time to make more money,” because it’s my home. Totally different to business. So, if they can afford to keep one and rent it out and buy another one on the back of it, by refinancing on both probably, then absolutely. Please do so. Excellent.

Bryony: Okay.

John Howard: Yeah. Very much so.

Bryony: Anything from either of you to add to that?

Paul M: Just from a finance perspective consider the fact that because they’ve kept a place that they didn’t buy as an investment, it won’t be a straight buy to let mortgage. It will be what’s called a consumer mortgage or a let to buy.

Bryony: Okay.

Paul M: So, it’s not the same as your traditional commercial buy to let mortgages, a few extra hoops to jump through. So again, seek advice, find out [crosstalk 00:20:35]

John Howard: Will interest rates be similar Paul?

Paul M: Interest rates are quite similar.

John Howard: Yeah.

Paul M: There’s just more hoops to jump through because it’s a regulated mortgage as opposed to a commercial mortgage.

John Howard: Yeah, yeah.

Paul M: So just be aware of that and make sure you deal with the right broker, don’t just go down and speak to your local bank, because that’s just one of your many lenders out there that you might be able to get a better deal elsewhere.

Bryony: Thank you. And Stephen is there anything you would add to that in terms of perhaps managing that balance between this is a business decision, this is a property development business choice and when you’re looking at property that’s for your home?

Stephen G: Well of course there’s great difference there, as John said he’s lived in his home for many, many years. The only thing I would say is don’t forget that we do have in this country, whether it lasts or not I don’t know, the marvelous opportunity of being able to take a profit on our home without paying any tax at all.

Paul M: True.

Stephen G: And so as long as you don’t go down the path of changing home three times a year and have in line revenue jump on you for trading your home. As long as you do it in a reasonable manner and there’s some reason for your move then it’s something that should be taken advantage of I think.

Paul M: Yeah.

Stephen G: I think Paul, would you go with that Paul?

Paul M: Yeah, I agree. I think one thing that I didn’t mention as far as the business mindset to it is does the one that they’re going to keep make sense as a buy to let?

John Howard: [crosstalk 00:21:57] but I’m assuming they were happy with [crosstalk 00:22:01]

Paul M: Who’s the target market, all that sort of thing to make sure it actually makes sense to keep with something worth considering.

Bryony: Okay, thank you, some brilliant advice for that person there. Final question is to you Paul, I’m seriously concerned about a large tax bill, I can only really release equity in my home to pay it, because the interest HMRC charge is huge I’m feeling there’s no option. Is there a better way to do this?

Paul M: Okay. There’s a number of different ways you could do it, so far as releasing the equity from home or securing a loan against your home. To my knowledge, most lenders don’t like you taking a traditional mortgage to clear a debt.

Bryony: Okay.

Paul M: They want to know why you’re taking the mortgage and that will be a red flag to some of them if it is being taken for the purpose of clearing a debt. To be honest I’m not completely sure whether the fact that it’s HMRC makes it better or not, but I can look into it. There’s other things like short term loans, they could take, like bridging type loans against their home.

John Howard: Expensive.

Paul M: That would be expensive. They could approach their bank for a personal loan, there’s a number of different avenues they could explore on the sort of finance product spectrum. But I’d say first off, the home loan probably would be the cheapest option, but keep in mind that a home loan is supposed to be a 20 or 30 year loan. So, if you’re using it to clear a short term debt perhaps there’s better options. And yeah, that’s why lenders don’t like you using it for that purpose, because essentially by you taking a mortgage you’re committing to them that sort of period of time.

Bryony: Okay, and what I’m hearing from you is that there are actually a lot of options and that’s what this person was saying, “I’m feeling there’s no option,” but actually they’ve got a load of [crosstalk 00:23:46]

Stephen G: There are a lot of options, but you know I think there’s something more fundamental that needs to be looked at here. Is how did they incur this tax [crosstalk 00:23:55] and why didn’t they take provision for it from the profit that they made on whatever [crosstalk 00:24:00]

John Howard: You’re sounding like my accountant then.

Stephen G: I wish. But no I think it’s important, and again when you’re dealing in property don’t forget the tax liability.

John Howard: Yeah absolutely, really important.

Stephen G: You’ve got to cater for it, it’s no good just taking all your profit and shoving it into the next deal and then running out of cash.

John Howard: Yeah.

Stephen G: You know you [crosstalk 00:24:23] can’t buy a loaf of bread with bricks and mortar. You know?

Bryony: Yeah, okay. Fantastic, well take advice then so you [crosstalk 00:24:31] professional advice before you get yourself into that kind of situation.

Okay, well unfortunately that is all we’ve got time for. Huge thank you to all three of you for giving some really fantastic and valuable advice to our listeners there. And thank you to you at home for watching and we’ll look forward to seeing you next time.

If you have any questions you’d like to send to the experts at property question time you can submit them via our website, on social media, or email us on info@propertytelivision.co.uk.

Speaker 8: Now we’re here today to talk about your book, it’s John Howard’s Inside Guide to Property Development and Investment For Newcomers. So, John is an expert in property, he’s bought and sold over 3500 properties. Can you tell us a little bit about what motivated you to write it in the first place?

John Howard: Okay, so it’s a really good guide I believe from the very start to the end of the process. In the book I actually explain the pitfalls I’ve had and so after every chapter there’s an example of what to do, because I’ve done it.

Speaker 8: And what would you expect a reader to walk away, the main sort of pieces of information that they come away from.

John Howard: This book can save them a lot of time and a lot of money and if they’re serious about getting into buying and selling property or buying and renting property out I go through how to fund things, I go through picking the agent, about picking the solicitor, about picking the builder, about the pitfalls of builders. They always have three jobs on at once.

Speaker 8: Now the property market is always changing so it’s very important to keep up with things like this isn’t it? If you’re looking to get into property.

John Howard: So, in the book I explain what to do in hot market, and what to do when things start to go wrong. And that’s the most important advice in the book, totally I think. What to do when it goes wrong, I’m not going to tell you now, you can buy the book and read all about it. Because I’ve done it, I’ve survived four property recessions, three or four.

Speaker 5: The tax system has evolved significantly over recent years for property investors and developers. You may think that you and your accountant have a grip on these changes, however, unless you’re receiving specialist tax advice from a specialist tax advisory firm then it’s unlikely to be the case. At ETC Tax, our team of highly experienced chartered tax advisors work with private individuals and companies to deliver effective tax planning whilst meeting HMRC compliance requirements. Let us help you to meet your personal or commercial objectives in the most tax efficient manner. ETC Tax, making the complex simple.

Speaker 8: If you’ve got a question about property, why not ask an expert? Property Question Time gives you the opportunity to ask anything you want, whether it’s about planning, finance, conveyancing, moving abroad, literally anything that’s property related. The property TV panel of experts are available to answer your questions no matter how complex they may seem. Simply email your question to info@propertytelivison.tv and join us on Sky channel 189 to hear your questions answered.

Speaker 9: Meet the author is a brand new mini series involving leading experts in the property industry, including mentors, developers, property lawyers, and other industry experts who share insightful stories about their journey and their books, each books is compiled by authors with years of valuable experience, tips, and observations. Providing you with new knowledge about the property industry. To find out more visit the website, property-tv.co.uk/library.

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