Dr James:
Fans of the Dennis who Invest podcast. If you feel like there was one particular episode in the back catalog in the anthology of Dennis who Invest podcast episodes that really, really, really was massively valuable to you, feel free to share that with a fellow dental colleague who’s in a similar position, so their understanding of finance can be elevated and they can hit the next level of financial success in their life. Also, as well as that, if you could take two seconds to rate and review this podcast, it would mean the world. To me, what that would mean is that it drives this podcast further in terms of reach so that more dentists across the world can be able to benefit from the knowledge contained therein. Welcome.
Harry:
Welcome to the Dennis who Invest podcast Welcome.
Dr James:
This is the hotly anticipated, I suppose, facebook Live Q&A session with Harry Singh. Harry’s podcast was a runaway success, so it made me think to myself wow, there maybe is a lot more dentists who are into properties than I first anticipated. So I thought who?
Harry:
better to get on the show.
Dr James:
I feel like there’s a lot of crypto questions on the group, but a close second or somewhere up there are questions on property. There is, of course, the received wisdom that you haven’t got a diversified portfolio until you’ve got some property.
Harry:
It affects every one of us because we need a house.
Dr James:
Harry has just quite rightly pointed out to me that the timing of this Q&A may not be exactly how can we say ideal? Because there’s a big football match on it, doesn’t it, which I was just watching a minute ago. We might have a little bit less in terms of numbers than anticipated, but it will be thrown up later on for a podcast for everybody’s view and pleasure. What I’m going to do feel free to throw your questions in the comments box. Guys, they appear momentarily after they’re typed, a few moments after they’re typed, because there is a little bit of a delay in the feed. If it’s okay with you, what I’ll do is I’ll just kick off with a question from the group. Yeah, welcome, Harry to the show.
Harry:
Thank you. I’ll give the listeners a bit of warning on big Liverpool fans If I start shouting, we’ve scored. If I start swearing, I may not just score.
Dr James:
Thanks for the heads up, Harry. Thanks for the heads up. Yes there is a question on the group here. It was posted anonymously not that long ago, so let me just see if I can scroll down and find it. I think it was the age old chestnut of buying Vitalex in a limited company or buying them as a sole trader. I’m sure Harry’s heard it a hundred times before. But let’s just get up the exact wording of the question here. We shall see. I won’t be too long. It’ll be somewhere down here, Somewhere somewhere. Oh, struggling to find it a little bit. Well, do you know what I can paraphrase? I know what it was in a way, you’re too interactive. Yeah, yeah, I can paraphrase. The question was what are the pros and cons of owning your own property versus owning specifically a Vitalex, owning specifically a Vitalex as a sole trader or owning it under your name versus owning it through a limited company? What would you say the pros and cons are? Throw those questions up in the question bar for us guys, and then Harry will answer this one for us. In the meantime, Okay.
Harry:
So I’ll see there’s a disclaimer. I’m not a financial advisor, I’m not a professional accountant, so I can only I’m not giving you any advice Always seek professional advice. Don’t take out your own teeth. Go to a dentist to see someone. But in terms of it all depends on what you want out of the property. So there’s two parts of this question. One is those that’ve got existing portfolio, like me, that’s been investing since 2002, spoke to my account and said, okay, if I transfer to the limited or get incorporated, what’s the plus side, what’s the downsides? So there is, because I’ve had them for such a long time, it’s a big capital gain. So if I did go incorporate with those, there’ll be big capital gain and stamp duty and be able to pay. So just be aware of that. If you are thinking about saying again, go to professional advice. If you’re buying new, then and the properties I’m buying now going forward, we are buying by limited company corporation, spv, special purpose vehicle. So what’s the pros and cons? So if you buy under your personal name? The advantages you can get access to that money. The rental profits you can get access to it for maximum cash flow if you want to replace your income. The downside is section 24 was the government introduced, where the mortgage interest does not count as a tax expense. So give you example your rent is, I say, say, £1,000 a month. You’re getting, and your mortgage payments are £500 a month. In the old system, before section 24, your profit was £500, you get tax on that. But now you get tax on that £1,000, there’s a 20% tax credit you get. So you’ll be tax-facing on £800, but it’s a higher tax bill. If you go incorporate a limit to section 24, that’s apply. So same example you’ve got a property within a limited structure. The rent is £1,000, your mortgage is £500, you’ll be taxed on the £500. But as we know, those dens that have gone limited with their business, it is much harder to get the money out once you reach the maximum salary and dividends that you’ve paid yourself. So it all goes back to what you want property to give you. So in a nutshell, if you need the income from property, then it may not be. The best is just to go incorporated. If you’re building a better pension pot and you don’t need the money from the property, then incorporated could be a good idea. But like anything, personal situations are different for everyone. You need to speak to your accountant.
Dr James:
Harry, I saw something on the group the other day. Somebody commented this. Now you’ll know more than me. I want it to run it by you. But someone was saying it can be advantageous to hold your property portfolio in a limited company Should there be an issue where the tenants come after you for some sort of liability and a health and safety issue. And if it wasn’t to be in a limited company and you were a sole trader, then your personal assets will be well. You could possibly lose some of your personal assets to fund that payout on a liability case. Is that correct?
Harry:
Yeah, because that’s why people go limited because it’s limited liability. So if the person can only make a claim or if you go bankrupt or insolvent, they can only claim on the assets within the limited company. So that gives that piece of mind. But the likelihood of you having problems with your property, especially residential property, we always use full management. So they’re going to check, make sure to go out safety check sign is comprised with health and safety, the actual. It’s never come across my mind to actually go limited because of that reason, because it’s quite a relatively safe environment and I’m speaking to other investors I’ve never heard any investors being sued by their tenants for any breaches of health and safety.
Dr James:
So what you’re saying is, in theory, yes, but de facto, in practice it’s not really so much of an issue. Yeah, yeah, and then really it depends on whether or not you want to just keep that money in your company and invest it or, you know, do whatever. Yeah, fair enough, go. Thank you so much for that. All right, so we’ll crack on some questions in the feed now, so we’ll just jump straight in there. We’ve got Wachow Lee evening. Wachow, I remember you from last week. Thanks for attending again. Ian Dunn has quite rightly pointed out could this not have waited until after the match? Ian, I think I’m going to have to take that one on the chin and just apologize for that offhand. I can only say sorry. Last week in my defense, some people asked me last week to have it on at six and I unwittingly agreed to it until I realized the significance of the occasion. I’ve just had to turn myself away from Liverpool, my United myself. Apologies to anybody listening. Who that is affected? That is completely my bad. Moving swiftly on Gershied Carr. Good evening, gershied. How are you? Hope you’re well as well. Then we’ve got Liam Boyle next. Liam would like to know is it best to buy property with a repayment only mortgage or with an interest only mortgage. I think this is a bit of an old chestnut as well. Is it high yeah?
Harry:
and I love answering questions, because it’s going to be yes, no and maybe Same again depends on your situation. So I have my bike network, just interest only because I want to match some cash from the properties. So the biggest problem people have is they don’t understand the difference between good debt and bad debt. So bad debt is credit card debt, personal loans, car finance that you’re paying out of your own pocket. I agree, you want to clear that bad debt as quick as possible because it’s not on a asset. Good debt is one, it’s on appreciating asset, which is property, and two, the debt servicing does not come out of your own pocket. The tenants are paying you rent, which will cover the mortgage payments. So, as Stephen Covey said, instead of having it’s highly effective, people start with the end in mind. What is your end goal? Do you want to create generation growth, where you pass the properties onto the kids, which I do? So I want to keep the debt and the mortgage on the property, because it’s one way. There’s different ways, like trust. There’s one way to save inheritance tax, because that debt is taken to account when the government works on the inheritance tax. So I want the maximum cash, though, and I want to pass it on to my kids with the debt onto it, if some people, obviously as a psychological reason, they can’t steep at night until they’re paid off their mortgage. So if it’s going to stress you out by having the debt on these properties, then obviously it makes sense to have a capital and repayment mortgage. So there’s an individual situation depending on what you’re comfortable with and also what you want to box you, to give you and create what is your end game.
Dr James:
I think as well as that, we had Vinay Rathod on a while ago. He was talking about interest only mortgages. There are a lot part of the peculiarities days as well, from what I know For a buyer today there’s not a problem.
Harry:
I’ve not had a problem with buyer today, mortgages being into a Sony Wow.
Dr James:
I was a very gentle.
Harry:
It depends on your, your broker. If you go all to market broker, then you should have no problems getting an interest only mortgage. Oh okay, I did one last month, so there’s definitely no problems.
Dr James:
Okay, liam, hope that was helpful. Joe Bach. Good evening, joe. Joe, would like to know if you could remind us when section 24 came into existence. When was that?
Harry:
at least two, three years I think maybe five years really get to my age. Time just flies. At least five years. They gradually reduced mortgage tax relief that you could get. So it started off at least five years ago where they said only you could claim 80% of your mortgage. Then they went down to 75 or 50%, then they went down to 25%. It’s been the lowest, which is 20% tax credit or 20% on the mortgage that you can claim back. So yeah, it’s been around for good four or five years.
Dr James:
Interesting stuff. Adam Pringle has asked with the huge amount of quantitative easing that’s money printing to anybody who’s unfamiliar with that term do you predict a bit of a boom in the housing market over the next few years? Or do you personally think, now the stamp duty holiday has stopped, furlough will eventually end and an increase in unemployment will cause a correction?
Harry:
Okay, so if anyone gives you predictions on what’s going to happen in property market, run them on, because no one knows say one quite long it’s locked down and saying we’re going to have a crash, but because obviously the government is sending the stamp duty. My take on it is, if the stamp duty exemption ends on the 31st of March, as the sponsor said, I expect for Q1 to be a solar boom or upward trend, q2 to be a slow, maybe a bit of a decrease, and then Q3 and Q4, going back up again. So I don’t see a dip in the property market at the moment because one of the things that affects mainly property is interest rates, and interest rates are really low. Stay, vacation, service apartments. I think we’ll do a lot of work because people may be scared to travel overseas, but we could be completely wrong. People might say I need some sun now, but you see all those pictures on Insta people in Dubai partying around there. So no one knows human emotion, human nature, what’s going to happen. In the first lockdown people were booking more stay vacation. That was that plan, but they may be all found out the window. What I would say is sounds boring. I would say stick to bread and butter. So I go for feed bedroom houses, families, first-time buyers. They’re not going to go out to monarchy, they’re going to stay in that property for six to seven years. Once you’ve got that foundation, then look at the ice in the kek. Then you can experience holiday net service apartments and those kind of things. But I wouldn’t start off with those straight away.
Dr James:
So that hard limit on when to jump Judy’s ending is that the end of this month? Yes, yes, I just didn’t catch that 31st of March is where the extension. Awesome, Go, Adam. Hope that helps. We have Sarab next. Sarab, welcome to the show. Hope you’re having a good evening. Sarab would like to know what’s the best advice for someone just starting out slash hoping to get on the property ladder General on this.
Harry:
Yeah, okay. So the first thing is, if you, it depends if they’ve got their own residential property or not. So I would highly recommend to get their residential sorted out first, because it does open you up to more lenders. If you haven’t got your residential, you can still get lending, but it’s very few and far between lenders that will lend to you a buyer to that mortgage if you haven’t got your own residential. So they do prefer someone with a residential property. So if you haven’t got that, then save up, get your residential property. Then I would say, just educate yourself. You can self-educate and go on training, learn the 70s, free resources on YouTube, facebook groups, podcasts, et cetera. Educate yourself and work out what kind of investing you want to be in terms of do you want to invest for cashflow or capital gain? Because the investable cashflow you’re going to be going for higher yielding properties, so it may not be in London or the Southeast, it may be in Midlands, northeast, northwest. If you’re going for capital appreciation, I would say a better pension pot than you would be investing in the Southeast or London. So that would be my tips residential education and work at your investing area, depending on what you want property to give you.
Dr James:
Wachill has got another question. Second question from Wachill. Wachill would like to know do you have any thoughts, harry, on using a SIP to buy property? Real quick guys. I’ve put together a special report for Dentist entitled the seven cost and potentially disastrous mistakes that Dentist make whenever it comes to their finances. Most of the time, dentist are going through these issues and they don’t even necessarily realize that they’re happening until they have their eyes opened, and that is the purpose of this report. You can go ahead and receive your free report by heading on over to wwwdentistuneinvestcom forward slash podcast report or, alternatively, you can download it using the link in the description. This report details the seven most common issues. However, most importantly, it also shows you how to fix them Really. Looking forwards to hearing your thoughts.
Harry:
Definitely is very. Speak to your accountant again. Sips and SASH are really tax efficient. In terms of buying property, I always love to be controlled on my own money. You cannot invest in residential property with those. It would have to be commercial property. But I would say financing on James will go with this. It’s like raising a kid, sending the kid to a stranger for 18 years and hoping to have a really rounded adult. When they come back you are going to take more care of your money. You’re going to learn about it. Invest there. If you’ve got more control, you’re not relying on someone else. Definitely a good point to do and way forward.
Dr James:
Cool. Dan Hardy-Punia said hello. Hello, dan, I hope you’re well. Dan is the boss of a new job that I’m starting tomorrow. I better be on my best behavior tonight. Dan’s looked after me very well. I can’t wait to go and meet them all in a clinical setting tomorrow for the first time. It should be fun. I haven’t gone dentistry for about five months, so it’s going to be a bit weird, but I’m looking forward to it. I’m looking forward to it, are you sure? Well, yeah, I tell a little bit of a lie. I suppose I’ve been on a few courses, I suppose, between now and then. Yeah, I’m just really looking forward to getting back into it. If I’m honest with you, ryan Fisher would like to know what about buying into a block of flats. A friend of mine has shares in a company that runs flats. He reinvests his rent payments into more flats. I’m not sure of the details beyond that. I’m just throwing these at you as I read them, harry, I hope that’s. Can I make sense? Is that all right?
Harry:
Yeah, I personally tend to stay away from flats. A couple of reasons. You’ve got extra costs per month going in in terms of unless you’re buying the free holder of the building and you’re the free holder. So, assuming you’re not the free holder and you’re the leaseholder, you’ll have, obviously, service, child and rent to pay on a monthly basis. Also, what I find, unless you’re in a major city like London, manchester or Leeds, you wouldn’t get stable tenants. You’d get more temporary tenants because normally a couple that are going to move in together for the first time realise they’ve got bad habits that they like, hate each other, split up and move out there. Also, you’ve got to be wary If you don’t own the freehold, how long is the lease? Then there’s a game or stripping terms of. They want like 999 year leases to give them protection. But on the other side, if you are the free holder and you own the block of flats and separate them to lease, that’s a really good profit strategy to do.
Dr James:
Awesome, brilliant. We’ve got Kazeera. Next, kazeera has just said hello. Good evening to you as well, kazeera. Hope you’re having a great weekend. Next up, we’ve got Thana. Thana has said hello once again. Hello, thana, as an associate, is it okay to have the dental income and properties under the same limited company? Does that make sense, harry?
Harry:
Yeah, I would probably say that limited liability. You don’t want the assets mixing up with your income. Same again go for professional advice. But there may be a reason we never know. We’re not professional accountants. There may be a reason why you’d want to suit your situation, but personally and as a standard rule you would separate them. So I have not got phasor aesthetic clinic, my training academy, the property they’re all separate companies.
Dr James:
Yeah, yeah. So that’s to minimize your liability should one go wrong. Essentially, is what you’re saying fair enough, cool. Next, any disadvantages of doing that really, or any reason why you might want to have them all under the same company?
Harry:
Not that anything that can come top of my mind.
Dr James:
There’s always, of course, the fee that you have to pay to set up another limited company. But I mean, there’s, the massive benefits are outweighed by that, I guess. How much is it to set up a limited company these days? By 1100 quid? I don’t know, I’m like that.
Harry:
Do it, for I’ve forgotten the name of the website 45 pounds to set up. No way Get your accountant to do it. The accountant’s going to hate me for it. I never. Swift Formations is the website. So I do all of my Swift Formations, unless it’s a really complicated structure. Yeah, your accountant’s was charging you hundreds of thousand pounds. If you go to Swift Formations, they would do it for under 50 quid, unless it’s a bit complicated, maybe a couple of hundred quid.
Dr James:
That is absolute gold dust that I was actually just on the cusp of paying a lawyer to start a limited company. So I’m glad you told me that. Yeah, and it was a round the figure that I said I haven’t no money has changed hands just yet. I’m really glad you told me that. Thank you, Thank you.
Harry:
Yeah, there’s a simple structure and you can do it yourself and you’re the only shareholder directed in Swift Formations. It is a bit more complicated. Yeah, obviously professional.
Dr James:
That is an absolute nugget of advice that. Thank you so much. Jay Patel would like to know if you have a limited company, spv, that holds property and you have an outstanding mortgage, does the company still report a profit for the year and therefore pay corporation tax, or does the company not turn over a profit until the whole mortgage has been paid for?
Harry:
I’m going to go for that standard response from who wants to be a millionaire phone offender? That is a question which your counter will need to answer.
Dr James:
Fair enough, no worries, no worries. Parag would like to know. Could we ask Harry his thoughts on HMO based on COVID? Is it still worth looking into or do you think there will be a shift to standard three bed semi?
Harry:
In theory, yes, there should be a shift because people don’t want to share house, share rooms and houses with strangers, and some of my HMO landlords did find there’s more vacancies. But that would be the ideal situation. But the people that normally go for HMOs, they can’t afford to rent a house by themselves. They can’t afford to rent a flat by themselves. So there will always be a market for people that can only afford a room by room basis. So there was a temporary and slump in HMOs, but I don’t think it will be long darling and people have short term memories. Once COVID is out my sister maybe once got the vaccine, people will forget about it. They’ll go back to normal. You’ll just see, on the first night of clubbing and pubs, people just forget all about social distancing. So I think there may be a short term blip, but long term, because the market’s there, people will still be a certain market that can only afford HMOs and they’ll sort be renting room.
Dr James:
It depends on whether or not I mean not to get too morbid or deeply into it, but whether or not the vaccine works long term. I’m sure it will. I mean, it depends on the virology and you’re kind of getting it’s a bit of a complex and on it’s one that’s a little bit hard to predict that. But yeah, should everything go back to normal, then, just as what you said there, harri, I shouldn’t imagine whether it should be any long term issue, I guess. Dan Hardy Cunier, I find that interest on mortgages when getting under a limited company is much higher.
Harry:
So yeah, I’ll just I respect to turn off. Did I cut off?
Dr James:
So all I said was Dan has noticed that when he’s buying, when he seeks a mortgage through a limited company that he reckons the interest is higher. Is that an issue?
Harry:
Yeah, a lot of people say that out of the conversation at lunchtime on Godfors, my and Broker’s not had a problem. We’ve actually got the same interest rates compared to what I would have done if I was buying personally. So I would just check so with the mortgage broker just make sure they’re full of market in terms of the access for the markets. So there may be certain restrictions certain brokers have that they can’t have access to full market. So but no, my brokers have never had a problem but getting mortgages under the same rate as if I was investing personally.
Dr James:
So might just be a specific issue with here, where you sought a mortgage from there by the sounds of it. Would that be fair to say yeah, yeah, maybe worth shopping around on that one? Dan Joe has asked another question. There used to be advice by our forefathers that one should stretch yourself as much as possible to buy your primary home to reside in, as that’s devoid of capital gains tax. Dgt is a presume that Joe means capital gain tax there. If there was growth in the future, is that still the advice given?
Harry:
Yeah, yes, used to be. So yeah, it’s a tricky one. So definitely he’s one in terms of capital gains tax on your residential property. You don’t pay any capital gains tax. Also, the advantage is because you’ve got this extra stamp duty, the first house you buy wants to be the most expensive house because you’re paying the no stamp duty rate. So definitely, yeah, the first house. But then you don’t have to stretch all your money. You’ll see, in terms of, let’s say, I don’t know, you’ve got 200,000. You don’t want to put all that down on deposit on one property. I would say, get a lower price property and then use some of that money for investment purposes.
Dr James:
Fair enough. So not not black and white, but something to consider, I guess, fair enough. The next question we have who won? You win Welcome home. Congratulations on being on British Bake Off. By the way, who on have you seen that floating around on the dental cakes and baked script? So we’ve got who on in the questions tonight. She’s going to be on British Bake Off, which is amazing. Yeah, I was. I was impressed. Yeah, I can’t wait to see on TV how long we’d like to know she’s. She’s simply put in corporation relief and question mark. I’m presuming you know what that means. I know what you’re going to ask, how long? If you care to just elaborate slightly on that, then maybe we can answer it. I’m not sure what that is either. I was banking on Harry knowing what that is, but I’m not sure either of us do. If you could just elaborate on that slightly, I’m sure we’ll be happy to talk about it. Then we’ve got ZChan up next. Is it better to cash by one, cash by one or two by two lats, or to buy to that mortgage and buy five? I hope that makes sense. I think it makes sense, does it?
Harry:
Okay, this is quite. This is a debate that always happens within property circles there. So one we normally say never use your own cash or buy by cash because you’re not getting scaled there, because then you can only invest in two properties instead of five properties. You miss out the capital appreciation on the extra three. But there’s a good idea to if you want to buy multiple properties is maybe do you have one property that you bought by cash or have it encumbered. It’s encumbered means there’s no mortgage debt on it, because then you can use that as collateral when you buy other properties, for example, bridging finance or mortgage where you may not get the mortgage on that property straight away, but you’ve got incumbent property. So we have used that numerous times to advantage. So, depending on if they want to scale the business and buy multiple properties in the long term, it may be advantageous to have one property encumbered with is no debt onto it. If they’re planning only to have two or three properties, then I would say no use I’m using up all your cash on one property is to spread the risk over three or four properties. And also the more properties you’ve got, the less risk you’ve got of negative cash rate because you’ve only got one property and a tenant doesn’t pay your bugger. If you’ve got five properties and the same one tenant doesn’t pay the four other extra cash flow positive cash flow we’ll cover that one that’s gone into deficit.
Dr James:
Cool, Cool. Anna Montero was set. I’m so happy I didn’t miss this. Anna, we’re really happy to have you here. I’m sure Harry will agree. When Harry talked about sorting out residential first, does that mean trying to pay all of it before owning other properties as an associate? When do we know it’s the right time to change to a limited company? Two questions there, really, Harry.
Harry:
Yes and no, you wouldn’t pay. But you wouldn’t be paying off your residential. You just have to get by on a mortgage. That will be enough for you to get access to much more wide enders. You wouldn’t want to be paying it off straight away. Obviously, long term we do encourage. Well, this is my personal view because if you read Rich Dad, poor Dad, he always talks about your residential house being a liability because you’re paying the council tax and utility bills. Same again, grant condoned, business guru from Melka. He doesn’t buy his residential, he rents it because it’s a liability. You want to be buying your residential but getting a normal mortgage on that and then obviously using the funds available for investment. The second part was to do yeah, rent should be incorporated. There is no right answer. It’s saving the counter. What their long term plan is short term plan Except for, for example, if associates saving up money to buy their residential, it may not be the best to go limited because obviously it doesn’t show their true income. They may not be to get the highest residential mortgage that they want to. They may be better to be sole trader individual while they’re buying their residential. Once they’ve got their residential, then go incorporated. That’s an example. But as I said, same again, speak to your, that’s enough.
Dr James:
It depends on your individual circumstances. I’m going to guess on that one. Ryan Fisher has said Ryan’s just concurred with something that was said earlier. Pierce has said sorry I’m late, it’s okay, there’s no big deal. This will be recorded and it’ll go up on the group later so you can see anything that you’ve missed. Huang oh, huang’s got back in touch. She’s just expanding on her earlier question Incorporation relief to move properties from your own name to your limited company, properties in own name to. Yeah, she’s just said she would like to know what incorporation relief there is to move properties from your own name to limited companies. Is what she’s said there.
Harry:
Yeah, I mean in terms of an aspect to my account as many years ago about this. They said they mentioned anything about incorporation relief, but they said they worked at a metal capital gains tax and stamp due to how they would have to pay. It was a worthwhile Same. Again, I’m not expert on taxing purposes. So incorporation relief, speak to your account and so obviously have each situation different. So they will work at this figures saying, okay, you got your current portfolio at the moment. If you move it to incorporation, this is how much capital gains tax, how much stamp duty there is in corporation relief. I don’t think it does relate to residential investment property, but just double check that. They will work out how much it would cost in terms of taxes for you to move to limited and they go okay. If they say in my example they said you would have to hold a property for 200 years to get your money back from the capital gains tax and stamp due to say it wasn’t worth the while. If they say, okay, you’re going to pay I don’t know, £10,000 in capital gains at stamp duty but you’re going to get that back in tax relief within three years, then it may be worthwhile to do it. Same again. Speak to your account, fair enough, fair enough.
Dr James:
I hope that’s helpful. Dan would like to know Dan’s back again. Dan would like to know who your broker is. Harry, I think you mentioned about your broker earlier that was able to get you the comparable interest rates with regards to borrowing individually or through a company.
Harry:
Yes, if you message me or message James, he answers me and then I’ll give the details out. I don’t have to give them out in public places. In terms of, I just need to speak to him in terms of one. If you’re accepting clients, Normally they don’t unless they’ve got quite high net worth individuals in terms of, they’re quite a premium broker service. If you message James and then that will remind me to message my broker and see if they are taking on new clients and what the minimum requirement would be.
Dr James:
Wonderful. Ryan Fisher would like to know what about handling buildings personally versus through a management firm. That’s a good question.
Harry:
In terms of the refurbishment or managing.
Dr James:
Ryan hasn’t actually specified here, but I guess what he means is in terms of liability and in terms of actual day-to-day management. Do you think it’s worthwhile? I’m guessing that’s what Ryan means.
Harry:
In terms of? I’ll answer that question. So the first one is to get a project manager in. I only got the time to see if they’re doing deadlines, what materials they’re sourcing. So it’s worth the investment in a PM. Obviously it depends on the size of the project. The second one is the bug in red. I always get a fraud management. So fraud management from the netting agent. A couple of reasons that I don’t want to be shamed tenants around. I don’t want to have direct access to tenants. That’s why I gave up dentistry. So tenants don’t own it but they don’t know who I am, how to contact me. They will pick better quality tenants because they will do more vigorous credit checks, employment checks, bank checks, except for the I would. Then they’ve got skin in the game because the full management the netting agent or management agent doesn’t get paid until the tenant pays. So they’ve got skin in the game. That’s not my. Your time is better invested getting the next deal instead of managing tenants there you are.
Dr James:
You might have heard a little bit of feedback from my phone there, harry. I was trying to get a second feed up because you might have heard your voice playing back to you, so apologies for that. I hope it wasn’t too distracting. I couldn’t get it off, so I just had to put it on standby straight away. Never mind, ryan, I hope that was what you were after there. Let me see who we’ve got next. Rachel, again with the use of incumbent property. Wouldn’t that property get hit with inheritance tax? I was told not to pay off and keep in debt with property.
Harry:
Yeah, obviously, yeah, eventually we would put a debt on that property so early on, as we talked about. They missed a conversation earlier on the Facebook Club where we talked about that’s why I have interest. Only I don’t pay the debt. I’ll pass it on to the kids because they’ve got less inheritance tax. So there’s different ways you could protect or reduce your inheritance tax by putting the property into a trust, but same again, you need to speak to a professional accountant, Because I know me and Jane have been talking about getting an account, a specialised property account on board, because I know dentists don’t love tax or paying tax and they always have tax questions. And then if you can get an accountant on the call of Facebook Live or your podcast and obviously they can answer, which is directly in there, obviously fully compliant to do so, yeah, a lot of the kind to see questions on here tonight, which is great.
Dr James:
And yes, harry and I, sort of behind the scenes, were discussing about making a live pass out of that at some point. If everybody thinks that sounds like a good episode, please do, of course, let me know and we’d be happy to arrange that for you at some point. Anna Montaro from earlier has said thank you, you’re very welcome, anna. Thank you for being so polite. Both answers helped a lot. Early stages of learning how to invest. You’re very welcome, anna. Ryan Fisher, he has said read the question about when to incorporate, ask your accountant. Mine said the amount of private I do isn’t worth it. I believe it comes into play or it becomes more efficient when you’re earning the higher tax rate. So over 50 grand, ryan, but again, one for the accountant’s hat and by no means a tax expert. That’s just secondhand information from well accountants that I’ve had on the show. So definitely one you might like to ask your accountant about, just as we were saying earlier, zaid. Good evening, zaid. Are there any parts of the country you look to buy investment property or locations to avoid? I think we talked about this on our podcast, didn’t we Harry. Yeah, way back in the day Seems like it. So, yeah, you might like to expand on that.
Harry:
Yeah. So I would always say in visit local to you within a half an hour, do I not think you’re going to be managing the property, but you’re going to be doing multiple site visits. You know the areas, you know the good parts, the bad parts, the Bronx, the good schools, what the tenants are looking for. The biggest mistake and I made these mistakes I was investing in Aberdeen different areas. The best story I’ve ever heard was an investor I met in London who invested in Liverpool in Kensington, because he thought Kensington sounded good, because he was comparing it to Kensington in London and if you’ve been to Kensington in Liverpool you wouldn’t let your dog live there. So hopefully that was on Kensington A bit lit.
Dr James:
No apologies to anybody who’s from Kensington in Liverpool.
Harry:
Sorry about that, yeah you’ve got the local knowledge, so don’t be. People have that shiny object syndrome, but they think it’s going to be. The grass is green on the other side. The grass is green on the other side because the grass is fake. That’s what I’ve been told. The best local to you. You will find an area within half an hour that you can do your property deals.
Dr James:
Smashing. Ryan Fisher has said spot on with regards to our answer to the question earlier. You’re very welcome, ryan. I hope that helped. Stanna has jumped back in to say just to elaborate on the question earlier regarding the associate income. Do you recall which one that is off the top of your head, harry? I’ll just scroll up a little bit here. So yes, stanna earlier asked yeah, it was one about having a limited your income, your personal income, going into the same limited company as what owns your properties. So let’s just see what Stanna said. Now. My accountant said it will half the account fees as it will be just one account rather than two. Is it worthwhile to keep it separate? I don’t think it’s just as simple as that, but I’ll throw that over to Harry.
Harry:
Yeah, yeah and I get the best professional people best and they’re not the cheapest by far, but their advice and rate is in gold. So actually good, well, good ethics on account and say it would use the fees, but it’s not. Definitely I don’t know anyone that does that. And as we talked about is the liability. So if a patient goes after you and they see you’ve got five properties as well, they could go after those as well. So they definitely keep it separate, but same again. There may be a reason and if the counters don’t use the scheme used to reduce his fee, then that would be good. That shows me it’s not good enough reason to make them all in one.
Dr James:
Yeah, I mean, even from what I know about it. I don’t think making this decision solely on that basis would be the right thing to do, but definitely want to get some advice on that account not here yeah, maybe Narender has said welcome to show Narender what’s the best way to source BNV properties. What are your thoughts on using a broker for this? Thanks, Okay.
Harry:
So I’ve done both my own marketing and using broker. The best deals I’ve done is my own individual ones that I found. The brokers ones I’m a bit skeptical because if the deal is good enough, why are they passing them over? And to the deals that they pass over, they’re not actually below market value. They’re market value. They’re in areas I don’t know about. So I strongly recommend to do your own marketing, build up relation with estate agents, letting agents and mortgage brokers in your area. It is more time consuming but the results are much better because you get much better discounts and they’re true discounts. I did a webinar this morning for Dentropoptic Hub and we were talking about deals that I didn’t do and there was a deal in Manchester. He said worth 100, spend 10 grand doing it. Be worth 140,. It wouldn’t go above 80 grand all day long. So there are a lot of bullshitters excuse my language in this industry because it’s not regulated and our deal finders are, after many years, not being regulated but there’s so many sharks in that business. Source your own deals. They’re going to be the best yielding. You’ve got controlled over it Brilliant.
Dr James:
Parag has said thanks guys for setting this up. You’re very welcome, parag Hari. What sort of yields do you look for when buying investment properties?
Harry:
Okay, so the ones I’m going to be keeping. So the yield is the annual rent divided by the market value, and in the common climate I don’t go for anything below 6%. So the annual rent divided by the market value, minimum 6%, that’s enough cash flow. So if interest rates went up by 2%, 3%, I still got a buffer. I still got a lot of cash flow coming in. I still do deals that are below 6%, but then I would do a buy to sell, flip them. I wouldn’t keep them long term. So 6% yield, that’s close, awesome.
Dr James:
Iida said thanks for research. The podcast is the very first episode. In case you’re interested, as I eat, harry was the very first person who was gracious enough to come on my podcast when I was just setting it up, when it wasn’t really anything yet, so I’m very much in grace. We had it to him. Very big Thanks to Harry there. What you said, no problem, no problem. They should be me saying thanks to you really. What truly has said Thanks for the advice. You’re welcome. What you, the one has said thank you to you both. You’re very welcome. Long Ryan has said just in addition to the point earlier from Anna about the accountant Saying that you purely might like to make that decision based on the fact that it will have your accountants fees, ryan has said he can’t think of any reason why you might want to expose your investments to dental law partnership as well. I think I might tend to agree with Ryan on that one. You might just want to Research that one a little bit more and not make a decision fully on that basis, anna, at least from my understanding of it as well. Joe back has said a good question. Yeah, you’re welcome. Joe Narender has said thanks guys, you’re welcome, narender. Thank you both so much. You’re welcome. Thana, all right, dentist in the court, we’ve got 70 here tonight. It’s amazing, which is cool. And we’ve got what Mandy Bering has said. Thank you as well. You’re welcome, guys. Thank you so much for being so polite and everybody’s saying thank you. Um, I actually think we’ve run a bit dry on the question from here. How are you so? Is there anything? Oh wait, we’ve got one more. It’s just popped in just just as the door was about to close. We’ve got Geron. Uh, he said I’ve been paying into a lifetime. I said before getting my first time property. Is there anything else I can do as an associate to set me up for investing in a few years, apart from doing a lot of UDAs Getting a bit broader than put properly there? Hurry, isn’t it? But uh, would you like to answer that one?
Harry:
Yeah, I would say, yeah, there’s two. I talk about the PISS formula. So the first two plus I’ve passed an income investment, income in savings. And simplify, so save as much as you can is basically, um, reduce your lifestyle. So I made sacrifices. I had a pain of discipline living at home, cheap car, no fancy designer staff, so I had a pain of discipline. So don’t get the pain of regret later on, because you can always upscale your life later on. So, yeah, reduce your expenses to bear minimum, have a couple of years of Not hard slog but in terms of living modestly. There’s a book called the millionaire next door by tom astan. They really good book and he interviewed loads of millionaires. The med county said they had the same house, same car for 20 years. He invited them to a Luncheon. On one side he had all the posh shoes, caviar lobster. South on outside he had burgers, hot dogs. Most of them went for the burgers and the hot dogs. That’s what they were used to then, Really good book, the millionaire next door. But I said, yeah, we did lifestyle Expenses that can come later, so my lifestyle is funded by my rent. It doesn’t come out my own pocket, um, and then obviously, yeah, it’s making sense, we’re making investment decisions, but then I would say the best one is education, get educated, get knowledge.
Dr James:
Just to add to what Harry was saying there, I’ve read a few books, uh, by three or four books on long-term investment and money management, and pretty much when you’ve read three or four, there are certain details that each one, each one of them, mentioned consistently. And one of them is saving, because if you can save money, reduce your lifestyle creep and not begin to enter that rat race. Well, you’re trying to compete against other people, because that’s a black hole as well. If you just pull yourself out of that and adopt this mindset where you live, not frugally, but you’re living, living and preserving this money that you’ve created, then that is so powerful and that is the stuff that you can use to have an amazing lifestyle further down the line. Every single one of them Mention that just in addition to what Harry was saying there. Hope that was what you were looking for there. Yeah, joe bat, we’ve got two more questions. We were hoping to finish up. Seven o’clock was squeezing. As many as we can here, guys. Joe bat has said last question which property acquisition has taught you the biggest lesson? I think that seems like a really good question.
Harry:
The one I made the biggest mistake by over Dubai, overseas new build and a flat. So everything I preached not to do, I did so overseas. I bought on the impassals on the holiday 2005 Um, overseas. It was a new bill, so overpaid. Um, it was a flat, so temporary tenants. And also because it’s overseas, you don’t know the regulation, the guidance, the laws there. So went back home after it got built, rented it out first six months or five years. Family on air condition year is broken. Can you send us to grand? This is broken. Tell us to complain about this. Obviously, because I don’t live locally. Um, I couldn’t just fly out and say, okay, deal with it, etc. So, buying overseas, buying new build, buying a flat and buying on impulse, buying on emotion. So now take the emotion out of it, just go on the spreadsheet.
Dr James:
Yeah, I kind of mind Well, so I thought you might have learned that the hardware there a little bit Did you, did you eventually move?
Harry:
it on upside down. So remember 2005, 2008, recession, credit crash went down. Luckily, the tenants were good because the only plus point was we were renting to air emirates and they paid a year. They rent upfront, so there was only yearly contracts. So that’s the only good thing about it. But, yeah, prices I think it was 250 grand. I bought it for them one time it went down to one 120,000 credit cost I don’t use this Christ and then, luckily, it went back up to 250 and I sold it. 2012 didn’t make any money, made money on the rent. They didn’t make any capital gain, so but yeah that’s an important lesson.
Dr James:
I have to get rid of it by the signs of it, john. Let me just see here what John has said. John Christill, welcome, john. Hope you’re having a great evening and a great weekend. Do you plan on keeping your rental properties for many years?
Harry:
Yeah. So my plan is anything I buy for long term I will keep them in, definitely, and they’re going to be passed over to the kids there. So that’s how Generations like Duke of Westminster owns half the properties on Oxford Street he’s been put there were passed on from his dad, his dad was passed on from his granddad, etc. So that’s how the wealthy get wealthier. They pass on the assets down to the kids. So, yeah, the ones, because when you sell you got pay capital gains tax and you lose the asset Appreciation. So I will hold indefinitely, pass them on and they’re in trust there, so they’re protected. The kids will get them and then I’ll talk them. They’re going to pass them on to their kids brilliant.
Dr James:
Ryan, I said nothing wrong with breaking even on a bad investment. I guess you’re right, fair enough. I mean, it could be worse. You could always sell for a loss. So yeah, breaking even, breaking even and learning the lesson, like that Actually might be invaluable, I suppose, if you look at it from that point of view. We have, we’ve got, we’ve got 10 minutes. Unless you need something to be somewhere, do you hurry? We’ll wrap it up by seven, that’s a Nail Nail score line so. Anything, then, fair enough or more. Would like to know do you have any price limit, limit, slash, spec for the properties you buy? Eg2 bear prices under 150k. So yeah, does that make sense? Maybe some hard limits based on the specifications of the property in terms of price?
Harry:
Yeah, so because we gained for a gross yield of 6% on our buy to net. It rules out Dependent is dependent. For my area it rules out anything above 250,000 as a buy to net. So once you’ve done your figures, so what you want to do is research what average free bedroom houses in your area average free bedroom Rent and then get the 6% and then anything above that. We still do deals. So we still do deals on four or five bedroom houses but we don’t keep those. But because we’re after that 6% yield in my area of esteem in top of sure, that rules out anything above 250,000. Cool, brilliant.
Dr James:
I think that we’ve just run dry the question. Well, is just run dry, although I did say that before, and then some popped up on the screen. What we’ll do. We’ll give it a few more minutes, but in the meantime, harry, is there anything you’d like to say? Just to conclude or wrap up.
Harry:
Yeah, so obviously James has set up a perfect group, excellent group in terms of be active on the group land. There’s no stupid questions. Obviously, you can reach me if you’ve got any property questions. I’ve just been swamped over the last few weeks. I will spend more time in the group Answering any property or giving some tips. Yeah, it’s educated if it says if you’re not working, use that as downtime education, get noises, loads of free resources, podcast, youtube videos, etc. Um, property and there’s some people say by to let is by to date the property. We have changed our strategy so that traditional by to that may not be as profitable, so we are looking at more hmo’s. Permitted development is a really good strategy. So the government changed planning regulations. So if you’ve got a two-story house, you can build two extra floors and planning is guaranteed. You’ve got bungalow, you can build an extra floor on top to convert into a normal house. That’s guaranteed. Commercial property can build two extra floors on top to make it residential. So it’s actually much more creative and much more opportunities available now compared to when I started 20 odd years ago. Interesting.
Dr James:
Was there? There was something you shared in the group as well, wasn’t there, harry? Uh, it was a like a telegram group, except it was something else, about property, wasn’t it? Did you want to talk a little bit about that, or Happy enough?
Harry:
Oh yeah, clubhouse. Yeah so Clubhouse. You said Telegram again.
Dr James:
I knew you. Oh, no, no, sorry, no, no, no, no, no. What I meant was there’s a messaging app called Telegram. You see, not a literal Telegram. Sorry, just to clear up confusion, guys. Yeah, I meant the messaging app. Sorry about that. Back to you. Harry Got to need to talk Botox if you’re saying that.
Harry:
So yes, it’s an app called Clubhouse, from America started last summer. I found out that from my property contacts, but it’s really good in terms of it’s free to join at the moment, but there’s different chat rooms. Obviously they call it real estate. I’ve learned quite a lot in terms of marketing, social media, marketing, leaderships, presentations. There’s thousands and thousands of chat rooms. I know a few things have got involved in those. Well, I was saying to James that there’s quite a few on cryptocurrency as well, and Bitcoin, etc. So be interested to see their viewpoints on what they think is going to happen. But no, it’s a free resource. I’ve got nothing to do with it. I’ve got no shares. I wish I did have shares in it. It looks like an exciting platform to basically get free education, but obviously it’s quite time consuming. You do get hooked on to it. I use it like a radio station playing in the background. Obviously, I don’t do any clinical work, but for the days at work it may be a bit harder to active listen to it while you’re treating patients.
Dr James:
Guys, if it sounds like your thing, we have just got one more question. We should have planned to answer this one actually, harry, because it’s not very long, and then we’ll wrap up and we’ll call a hard limit on the questions from now, if it’s alright, guys? The final question we have here is Chandni. Chandni has said sorry if this question has been asked earlier. How does Section 13 seem to make vitality properties less appealing than it was back in the day?
Harry:
Only temporary at the moment because obviously you cannot evict a tenor and it’s a backlog for court cases. So a couple of things. So if you go for a gross yield of 6%, which is the annual rent divided by the market rent, you are going to have a flood of tenants. You can pick the cream or the cream. So because the yield is 6%, you know there’s a demand from tenants. So we’re very careful on who we pick. We always ask for government tools. Obviously deposit is normal. We ask for government tools and also what I do is I slightly go below market rent. So let’s say the market rent is 1200, we pay on for 1150, we’ve got flood of tenants going and we normally like to pick tenants. Obviously normally husband, wife and kids. Kids at the local schools, separate schools, both have got jobs. So we’ve got stable income coming in. We’ve got good bank references, credit checks, employer references from the netting agent. In my 20 years with over 30 properties I’ve only had to evict twice and there was genuine reason. They lost their job and they couldn’t afford the rent there. So as long as you’ve got that 6% yield, you use the netting agent. I’m not concerned about evictance at the moment or long term, because we have got very good money there.
Dr James:
Thank you so much for taking the time out to talk tonight, harry. I’m sure everybody listening learned a lot there. If anybody’s got any more questions related to property, harry is of course on the group. Harry Singh, feel free to drop them a message. Harry, can I just say a massive thanks for giving up your Sunday evening and coming talk to us. I hope you’ve enjoyed yourself.
Harry:
Yeah yeah, luckily Liverpool didn’t win. I would have been gutted if I missed that match.
Dr James:
That is completely my bad on the football thing, guys, so I’m going to take ownership of that one apologies. Anyway, as I say, we’re going to wrap up now. So it’s been a pleasure to see everybody on the show tonight. I hope everybody’s had a good evening and is having a good weekend. We’ll see each other very soon, in a bit. See you later, harry. Bye. Thanks, james Take care. I’m sure everybody’s interested in improving their finances, well-being and investing knowledge. I look forward to seeing you on there.