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Dentists Who Invest

Podcast Episode

Full Transcript

Dr James: 

What’s up everyone? Welcome back to Denysio Invest podcast, and we are here today to talk about property, which is something we actually neglect massively from the Denysio Invest podcast, given that so many dentists are into it. So it’s about time we did another property podcast and I’ve got my good friend Rob Bridgewater sat with me here today. We’re going to talk all things property, all things, mindset, all things how we can elevate ourselves and create financial freedom. Rob, how are you today?

Rob: 

I’m really good, thank you. Thank you for having me on.

Dr James: 

It’s a pleasure to be here, an absolute pleasure. Have you done a podcast before, rob? I’m curious.

Rob: 

No, it’s my first one.

Dr James: 

I see we didn’t even get on you’re talking about that before we hit the record button.

Rob: 

We’ve just learned that Anyway they’re very easy, Rob.

Dr James: 

tell us a little bit about you for the people in the audience who have yet to meet you.

Rob: 

Yeah, so coincidentally, obviously, with the dentistry background and the audience that you have is that I started selling the dentist. So I’m not a dentist, but I started selling dental products to dentists when I was 18. I’m 18. At first I actually started in the industry and then right up until 2020, when I then just ended up doing property full time as it became to the point where it wasn’t feasible to juggle both anymore and also there wasn’t any need financially to carry on doing both and I had to make a decision and property had grown to take over.

Dr James: 

Well, that’s what property is for right. Financial freedom isn’t it.

Rob: 

What got you into property?

Dr James: 

in the first place.

Rob: 

I think really, because when I just looked at investments, even from a young age, I always thought that when you look at property over the hundreds of years generally speaking, every 10 to 15 years, property price has doubled you didn’t really have to do too much. That was just the way that the market worked. Obviously, investing in the UK it’s a small country and so there was always going to be a limited amount of supply and there’s always going to be demand, and I wanted the simplest sort of approach rather than having to study and learn too much in other areas of investment whilst I was also working full time.

Dr James: 

Cool and I might have missed this, but perhaps you did say this. What age was it that you reached the point where you could say actually forget the flipping? Nine to five. I’ve got enough cash flow coming in from the property assets that I can stand on my own two feet.

Rob: 

Because of the lifestyle I led. It was a little later, it was about 2020. And also the main reason behind that was because I went for a longer term approach and with the type of property investment I do, is that building for the long term. So I buy, refurb and refinance and then for that reason obviously I’m not getting lump sums of capital. So it was steady growth through the rental income.

Dr James: 

Got you. Okay, wonderful, because here’s the cool thing about property it is something that I call a cash flow asset, and what I mean by cash flow asset is that it gives you great cash flow. It’s primarily designed to do that. So the number of times that people come to me and they say, james, how do I invest in my asset or how do I invest in my pension for passive income, ie cash flow and I’m like, hmm well, first of all, you wouldn’t put it in your pension, passive income, at least in the here and now, unless you’re close to retirement age, because you literally can’t get the money out until you’re whatever age. So that’s already. There’s already a big X through that one and the ISO one is something that trips people up. You can take a percentage of your investments in your eyes out every single year, but you’re ultimately going to inhibit the compounding process. The compounding process is the whole vehicle that’s going to allow you to get to financial freedom as soon as possible, so it’s really not for cash flow. So, really, a pension and an ISO are similar in that respect, in that you’re locking the money away for the long term. It’s just that sometimes people are deceived a little bit, because they know that, technically speaking, I some money is money that you can access at any point. Therefore, they think that that’s how it’s utilized, but not necessarily. Whereas property, oh wow. You can have pretty good cash flow pretty fast, but of course, you have to get some money for the deposits down. Also, it’s taxed a lot, as we know, or at least it can be, unless you’re savvy. But let’s talk more on that in just a minute. Rob, tell us you got into property. You got yourself to a position in 2020 where you did not necessarily have to exchange your time for money anymore because there was enough cash flow coming in through that. Tell us from a high level how that journey looked. How did it start, how did it evolve and then how did it transpire? Whenever you reached that point, we were like whoa, I’m free.

Rob: 

Yeah, so it actually started well. I tried to purchase my first property when I was 17,. I need to be told that by mortgage broker that I can’t actually get a mortgage until I’m 18. So I’d spent a lot of time saving and saving to get a deposit and then. So the first property I actually purchased was when I was 19, of which I spent a year convincing my parents to go 50-50 with me on the buying one. That first property we bought together. We did it and coincidentally, although I didn’t know it at the time, I had some friends that wanted to move out and they said can I rent a room off you, rob? So I was like, yeah, well, hang on, if I rent these rooms out, this actually means that I can live in the property for free, and so that’s what I did with the first one. But, as it stands, living with friends isn’t always the best thing to do, and as the owner of the property as well, and sharing it with my parents, I felt that sense of responsibility. So soon after I actually moved out myself, tried renting it out to them and another friend, and in the end it was just a lot to manage, and so we just rented it out as a single let. And then since then, we then started to look at if I could utilize surplus income that I was making that I wasn’t spending each year to save towards deposits, and that was also. I took out bank loans to use as deposits as well. And then, further on down the line, after I’d got about five or six properties, I think it was then I met my business partner and we started looking at where in the country could we buy cheaper properties so we could buy more of them, and we chose Liverpool that we’ve since sold those properties, because trying to juggle properties, being so far from where we lived, was quite hard. And so then we met one of our other business partners and start. He’d just done one HMO. He wrote out the model for me, how it worked, what the cash flow was like, and it looked great. And so we started to build a HMO portfolio from there. And then since that point I think after we’ve got a few there, we looked at semi commercial properties where you’ve got a mix of commercial use downstairs, whether maybe an office or a shop, and then residential above, because there were, and still are, permitted development rights. So it was. You didn’t need to necessarily get full planning permission, and so we were able to buy slightly lower value and get the increase in value once the works were done. And then we went on to do a couple of new builds, some more semi commercial investments and then a per conversion. So we actually bought a pub and that was. We turned that into 15 apartments and a pub. And while I was then flying out for a course in Miami, we got offered another deal on a pub no money whatsoever and we decided to say, yeah, while we were up in the sky, we’ll take it. And we committed to another one to build four apartments. So that was in 2019. So that was still while working full time, converting 20 apartments a pub, a shop, and that really was then the turning point. After that took the year of saying like this is now too much. Trying to manage builders work full time and yeah, so that’s when we went on to bigger, bigger projects after that.

Dr James: 

It’s looking sweet. So would you say it’s about having a portfolio, a diverse portfolio of different types of property? Or would you say it’s about focusing on one specific area, like commercial property, or by the less?

Rob: 

Yeah, I think that initially you need to really try and test and go through the process of buying a single let. Even if it’s not exciting, as in from a cash flow perspective, I think it just allows you to lower entry to market. Learn the process. So learn how it works with getting the mortgage. If you’re buying it on, let’s say, a bridge or short term finance facility with the bank while you do the refurbishment work with the builder, see how long that process takes. And then work with your whether it be the bank directly or a mortgage broker on the way out to refinance it. Hopefully get some uplift in the property to release some of your equity out of it. So then utilize into the next deal and then, once you’ve done that, if you’ve got a particular area that draws you in, whether it be HMOs or semi commercials then maybe go on a course specific to that and the very tunnel vision with it to learn about that. Because the problem with a lot of the courses are they’ll be somebody talking about semi commercial, some people talking about HMOs, some people talking about new builds, and they all sound great on the outset, but you’ve got to really ask yourself many questions such as what is it I’m doing this for? How involved do I want to get and learning that process, because all of them work at different times in the market. It’s just about learning the process of what you want to do and then following that, proving it to yourself and then repeating that.

Dr James: 

I see words of wisdom right there. So try to walk before you can run. In other words, correct, yes, yeah, okay, cool. So I Talk a lot about the concept of specific knowledge. So that is knowledge that can be learned, but it cannot necessarily be taught because you have to directly experience the thing. Are you with me? Like, for example, you can learn how to ride a bike, someone can show you how to ride a bike that they can’t put your wheels on the pedal, they can’t put the information from their head into your head. Are you with?

Rob: 

me. Yeah, and there’s also things.

Dr James: 

That’s. That’s a very powerful concept, and I love that, because what it shows you is that when you look for that knowledge, then you make yourself the reservoir of that information and people have to come to you. Therefore, you have an inherent value, and inherent power and inherent value. Are you with me? Yeah, and what that means is you can coach people. What that means is that you can be a consultant, all of that stuff. So here’s the thing through going through everything that you went through with property learning the ropes, so to speak, from the ground up and your experiences, what were the biggest learning points? What were the biggest things that you can say to people in the audience who are listening biggest piece of wisdom, the biggest Things that they can take on board to instantly get better or to at least not make the same mistakes that you might have done in your career?

Rob: 

I think, to be honest, that one of the big ones would be Realizing that you can’t have it all when it comes to High cash flow, massive equity, so as an instant capital appreciation Off from the start, you know. So you’ve got to consider many things, like the area that you’re investing in, but also that, looking at it over a longer period of time, I think people, especially when they’re looking at their initial investment within property, sometimes, especially on a HMO as an example Cash flow can look great but they don’t necessarily always show you or you wouldn’t necessarily consider that. Of course you can have a high turnover of tenants there for you. There’s gonna be a lot more maintenance. There’s gonna be a lot more people or the chance of a lot more people, for example, just leaving one day and and not really hearing too much more about it, and that might not necessarily cover all the costs to the point of leaving their, their belongings in the room. So you’re gonna have to pay somebody to clear them out. You’re gonna have to redecorate the room, a lot more ongoing costs. You’ve also got, obviously, with HMO to consider Excuse me, which people didn’t necessarily plan or could plan for more recent times. With utility bills going up, you know they almost doubled overnight and at the end of the day, as a landlord You’re paying those fees and you can only increase the the rents to tenants by so much. So again, you’ve got to consider these things over the long term and calculate those ongoing costs into it along with. You know something like that it’s gonna require a lot more specialized management than what it does for a single let, you know. So that’s an example of a HMO, of things to consider, and then obviously, each area has something to Think about when. When it’s when it’s when you’re starting out. So a simple refurb of a single let is why I always advise to start with that you go in and say, well, I just want to start with doing ten apartments and never work with a builder before. There’s a lot of things that can easily go wrong if you’ve not had the experience there. So it’s very much about starting small, trying and testing the model, whichever market it’s in, whichever area, field it’s in, and then rinse and repeat in that and just growing slowly. So if you do, let’s say, for example, your first project of a commercial conversion in his two apartments, then do for, then do six and do it like that, so that you you’re just rinse and repeating the model, just on a slightly larger scale. But but the principle remains the same one through at that point.

Dr James: 

I’m being devil’s advocate here slightly Okay, because I know the answer to this, but I want to say For the benefit of people who are listening in the audience Rob, do you still think Property is something that people can make money in? Given the way interest rates are at the minute, given that the money that would borrow the premium on that so flipping high versus rental yields that the market is just so much more Difficult to be profitable within, do you think that going forwards, that Property will return to a point where it’s viable for lots of people, or do you think that for the short to medium term, for quite some time, it’s going to be difficult out there? Therefore, people should stay away here in newbies, potentially, and leave it to the pros, leave it to the people you have experience. What are your thoughts? Yeah, I think Short to medium term.

Rob: 

The property market as it stands today is extremely hard. Whichever way you look at it you’re really trying to which you should never really just trying to make the deal fit rather than actually finding a deal that does fit, and I think it with property it’s obviously it’s a larger investment and it’s also something that’s quite a slow return on investment compared to sort of other investment vehicles, and your route to market is a higher chance to go into it at, and I think the there is. I mean, it’s one of those, isn’t it not? Time in the market? It’s how long you’re in the market. So I think over time it will get better and I think there will be opportunities. But I do also think that a lot of the way that the taxation systems working now and the way that the government Sort of steering it, that they basically are giving the impression that they want more professional landlords. So so people that want, rather than these people that are using them for their pensions and maybe having won two properties, they’re really sort of marketing it more towards the professionals high 10, 15, 20 plus Property portfolio owners that are easier for them to sort of manage because it’s easier for them to apply systems and processes in place. And and then I’m into micro managers, much about you know, rogue landlords, etc.

Dr James: 

I see interesting and do you think that a time will come where it’ll be easier for people to get into the market?

Rob: 

potentially, yeah, I think already. I mean, look at the end of the day, properties always, especially investing in the UK. You know it’s limited. There’s always going to be that high demand there and lack of supply. That’s not going away at all. So I think that definitely over the long term, the properties are great investment and I will continue to invest throughout. I just think that the numbers that people used to talk about, even from way before I invested when the markets were better there’s always going to be problems, but at the end of the day, there’s areas and limitations to anything and you have to be creative and I think that’s the key to it now. You have to look at more creative avenues of going into a property where I think the single-let market is going to be tough in the short to medium term.

Dr James: 

For sure, yeah, so what’s a good rental yield for the moment. Yeah that’s obviously very broad is that a question.

Rob: 

Yeah, let’s say outside of London.

Dr James: 

Let’s say like the north, where you’re best.

Rob: 

Yeah. So I mean where I am, I mean, 8% is sort of a normal sort of yield, and then obviously the HMOs that are going to require a bit more time and effort involved and a bit more experience you can be at sort of 10% plus. I mean, yeah, I personally don’t really touch anything less than that now, but that’s come through experience, you know. But I think that also, which is a good idea, is that you’ve got to really look at what it is you’re doing it for. So, for example, for me, I was doing it to build cash flow, to build to replace income, to get myself to a point where then I had that sort of financial freedom as such. But then that’s. The problem is that people keep going and going on and they get used to living their lifestyle to the cash flow that’s coming in, whereas I think at some point, once you’ve hit a number which I think you should predetermine in advance of doing it all is that you need to stop and then accept that at that point you need to slow down a bit and utilize some of the assets that you may have to put them into lower yielding but better security investments. So, for example, for me, in the future. I will take some of my HMOs, I will sell some of those HMOs, I’ll take the capital from that and just drop it on very simple single-let properties that are very predictable. They’re not susceptible to the market conditions so much with things like utilities etc. But it’s not going to be. It wouldn’t get me out of my job, for example, very quickly. So you’ve got to build the cash flow in order to do that. But I think from a sensible perspective and that lower risk in the future, I think you need that and plus, I don’t want for my wife or if I have children in the future, to have the responsibility of what I would call messy investments like HMOs there’s a lot more that comes with them or in an apartment block where we’ve got different alarm systems and different certificates that you need to get for fire etc. Each year. I just want them to be in very simple, very easy to manage and also, if you ever need to upload them, they’re very quick to sell things like that as well if you ever need to. So that’s my personal approach. But even if it’s not yours, then it’s still something you should consider between having a mixed portfolio at that point if you’re just in one asset class.

Dr James: 

Love that. Thank you so much for sharing your wisdom. You know, there’s one thing that I know about Dennis and it’s also applies to myself as well and Dennis love to be tax savvy. So we can’t do a property podcast unless we talk about tax at least a little bit and how we can be efficient on that front, because ultimately that contributes towards your margin. So any tips on that front?

Rob: 

So obviously a lot of the listeners are probably going to be in a different position to me and as much as they’ve, obviously the dentist, obviously a high earners already. So any any profitable income coming in from the property they might be looking to use for future income. Rather, or if it is a case of similar to me, where it’s looking at getting out of dentistry and it’s replacing that part of that income or increasing that monthly income, then that’s something different. But for me, because it’s very much been a case of replacing my income in a cash flow, I will I will be very strict with myself on my monthly amounts that I sort of spend like an income, the same as you would in an employment, and then I will reinvest into, back into the properties to buy more. So from my perspective, rather than taking the money out of the business, I’ll pay court tax and then I’ll, so it’s just a lower amount, and then I’ll reinvest that back into property and just keep growing and growing and growing. Because it’s more important to me is the is the ongoing cash flow growth.

Dr James: 

Yeah, right, so what you’re saying is because there’s there’s a bit of a two schools of thought on this Some people like it in the personal and some people like it in their limited company is kind of two schools of thought on that one. So yeah, very much the second one get it in the limited.

Rob: 

Oh yeah, I would, especially now with the tax changes. I would definitely definitely not advise anybody unless you literally do want one to have two properties to use as a part investment of your future pension, let’s say. In which case even then, to be honest, I know setting up a company’s harder and also obviously you’ve got accounting fees and et cetera, things like that then. But for somebody, if they’re already, let’s say, in the sort of like high 50, 60, 70s figure, going into the six-figure income, then obviously from a taxation point of view, as soon as you hit 40% now on a property that’s owned in your personal name, you’ll end up losing money. You’ll probably overtax my money because all it does is keep going on to your income bracket. So the problem there is that limited companies just offer you a lot more choice of how you then take that money out of the company, or if you just park it in your 20% cortex and decide in the future how you want to do it, or whatever that might be. But I would always advise people to set it up in a company 100% now, just because it’s a no-brainer and it just gives you much more freedom of control and plus anyone that’s getting into property. I would advise, if you’re going to look at it seriously, to be going at four or more anyway. And once you go past the four or more properties, your class is a professional landlord anyway, and so banks look at you differently anyway. So any areas where you would be concerned that you’re not going to get the same interest rates that you would in your personal name, they kind of go out the window once you have four anyway. Because once you’ve passed a professional landlord it sort of goes into that You’re seeing a bit more as a company, that’s it.

Dr James: 

Gotcha. Well, that actually might work for a lot of dentists anyway, because what tends to happen is they live on maybe like 50k-ish a year and there’s a lot of money that’s building up in their limited company that they basically don’t know what to do with. So actually, the fact that you said that is a good thing because, conveniently, there’s probably loads of dentists listening to this podcast who have a decent bit of wealth built up in there already and anybody who is listening who is a dentist and doesn’t have a limited company. Well, depending on your expenditure, it can be really worthwhile considering that. But of course it is a question for your accountants. But, as Rob has just highlighted, massively beneficial to have that structure set up already, because then you have all these other doors that are open to you, which is what I found whenever I had a limited company and you know what you know. It’s also really beneficial about just having a limited company. I always just forget to announce my things that were tax deductible whenever I was speaking to my accountant at the end of the year, whereas if you have a limited company, it’s just way more obvious as to what is and what isn’t. You know, I know that that’s not a reason in itself to exclusively go for one, but I find that even just having one in itself reminded me of what actually was a tax deductible expense or a limited company expense, versus something that wasn’t effectively. So yeah, just throwing that in there as well, a little bit of a personal anecdote to throw on top of what Rob has just said about property.

Rob: 

But anyway, that’s, really cool.

Dr James: 

Rob, Thank you so much for sharing all of that. I always wish them whenever it comes to the property market. Anything else we need to be savvy and aware of in order to either further our property journey or begin our property journey.

Rob: 

Yeah, I think the main thing, before anyone starts looking at investing in property, I would say just ask yourself the question of what is it? What’s the goal? What is it a cash flow goal, for whatever reason that might be? Is it a long term vision goal from an investment, from a retirement perspective? And that will help steer you in the direction and give you a better understanding of what might be the right path to follow, because, at the end of the day, without knowing that, you’re going off in any direction, and I think clarity on anything before you start is the most important.

Dr James: 

Cool. One more thing I want to ask what about on the obtaining finance front? I know that that is obviously something that’s extremely pertinent to anybody who’s wanting to start a property portfolio, and all banks are not one and the same when it comes to this stuff, right? What do we need to know to get the best deal on that front?

Rob: 

Yeah, I think that, depending on what what you’re going into is in single let’s, hmo, things like that that would determine the banks, but I mean commercial banks. Even though they look like they’re high rates, they’re much easier to deal with because there’s somebody at the end of a phone it’s not a computer says yes or no answer. I’d also really recommend going with a mortgage broker and they will be able to fit you from their experience and understanding and knowledge and relationships with the certain banks that they work with on who’s going to work for you on the properties that you’re going after as well. Be creative as well. At the end of the day, there’s not just one way. I sometimes won’t even use banks. I’ve got properties where I’ve raised money on through private finance. I’ve got properties that we’ve then put on a long-term low-interest loan with individuals that just want that passive income when they retire and things like that. There’s different ways that you can get creative. I think sometimes people will stop and just think there’s only one way. When they’re told no and I’m a bit of a find a way to make it work person I’ve raised finance. I’ve got dentists that I’ve invested with as well. I’ve got dentists I’ve raised finance through and I’ve got other private investors, business owners, people that have sold their businesses, family members. Once you’ve started, I think you build those relationships that people can see what you’re doing, and it does become a lot easier, depending on your risk analysis and to apply that and obviously to do due diligence both on yourself and, obviously, with them, then you can get really creative on different finance methods.

Dr James: 

That’s really cool.

Rob: 

Is there anywhere that a?

Dr James: 

dentist can go to find out more about what banks are offering different rates and what bank might be the most conducive to their specific property that they had in mind. Is that something that’s out there or is it very much an anecdotal thing, like an experience thing? Yeah, I think Is there something that I don’t know.

Rob: 

No, I’d say. A lot of the time the websites will give you certain information, but they don’t necessarily mean that, and obviously they’re there to market themselves as well. So it doesn’t necessarily mean that you’ll get those rates or you’ll be that they’ll do that sort of deal for you or you’ll be that fit, for example. So I would personally always recommend getting a mortgage broker. Look, if you’ve had somebody before, obviously approach them beforehand. If not, there’s plenty out there I can put you in touch with one. So, because I think that they’ve got, it’s a bit like anything I don’t try and be an expert in things that I’m not an expert in. I’ll find the best people for the right roles. So from me it’s like why would I try and spend all those hours trying to find that information out when I can go to the experts that have got those relationships with the people? I can give them a background on me, where I’m at, what it is I’m looking at doing, and they’ve already done that homework. They’ll be able to tell me straight away and it tends to work much quicker and much more efficiently.

Dr James: 

I like that philosophy. I like it a lot, rob. Listen, you’ve been really generous with your time today. Thanks so much for sharing your positive wisdom on the subject. We really enlighten you for everybody here who is listening. Guys, this has been the Dennis Humev best podcast. My name is Dr James Martin. It’s been a pleasure to host this podcast, as usual, rob, thank you so much and we will have you again once more very soon. See you later, cool.

Rob: 

Take care.