Welcome to this week’s edition of Money Matters.
This week we’ve got a couple of questions. This is the special, your questions answered Q and A. The first one is about serviced accommodation, and specifically it’s about rent-to-rent serviced accommodation, that’s from Rob. And then from Mohammed, we’ve got questions about lease options, it’s about being in a debt payment plan, and it’s about buying property when your credit isn’t good.
“Hi Paul, just come across your videos after searching serviced accommodation, is this your core strategy? And rent-to-SA? Just making sure I’ve got every base covered before signing my first two SA deals.”
Is serviced accommodation my core strategy? I’d say it’s one of my two core strategies. Serviced accommodation I’ve been doing myself and I think have been doing for about six years now. For years and years and years we’d been slowly building up a portfolio of buy-to-let, alongside our portfolio of commercial property. And, after we’d been doing this for about 10 years, we had an income of, just from our buy-to-let, forget the commercial for now, just from our buy-to-let, we had an income of about £3,500 a month. That was, you know, in a typical year, we would maybe buy a four bedroom flat, something like that. And we would cut it into two two-bedroom flats and suddenly we’d have two buy to lets. In addition to that, because the way we’d done the project we would release £30,000, £40,000, £50,000 cash, tax free, so each year, just as a part time thing, you know, doing property on the side, we’d be bringing in £30,000, £40,000, maybe even £50,000,
tax free. Buy refurbished, re mortgaged title split, that sort of thing. Left us with a few hundred pounds of property. So we had 12, 13 of these, £3,500 a month.
But all that, I’ve got to say this respectfully, £3,500 a month is a lot to most people because it’s one and a half times the average salary, probably. But it wasn’t what we wanted. Discovered serviced accommodation, worked with a lovely guy that we do in service accommodation and bang, suddenly, the same properties that were giving me £3,500 a month, as buy to let, suddenly, started giving me £15,000 pounds a month, as serviced accommodation.
So yes, it is one of my core strategies, Rob. And I continue to do it, to this day. What you’re talking about is specifically a sector of service accommodation called rent to rent service accommodation, so, do I do rent to rent service accommodation? Yes I do, but it’s fair to say, that most of the properties that I’ve got for service accommodation, I own them. I’ve got two core strategies that I love and I train on all the time. One is service accommodation, the other is commercial property and, very often, they go hand in hand, together. Very often I can take a shop or an office downstairs, rent out to a company and, the first, second and third floor, I can turn them into service departments. Your question is, you want to make sure you’ve got every base covered before signing your first two service department deals. Well, I’d need to know a lot more than that to be able to tell you whether you’ve got every base covered or not. In my book, the service accommodation success manual, I cover the seven key steps that you need to go through. Discover the areas where service departments will and won’t work, interrogate the systems, find out the night rate, the demand and your key costs before you even start. How do you acquire the units? I mean, for instance, Rob, your two service departments that you’re getting on a rent to rent basis, are you paying any deposits? Because I wouldn’t want to be paying any deposits, at all. No advanced rent, I wouldn’t want to be paying any set up costs.
So, that’s all part of the acquisition element. Marketing, how you going to market them, Rob? I mean, yeah, fine you’ve them, good. How do you know they’re going to be full all the time? Because that’s what you need to do. You typically want 60%, 70%, 75%, 80% occupancy, that’s good and that’ll make you money. But if you’re only 50 percent, because your marketing’s not right. How about operations, how you going to let people in and out? How you going to collect the money off them? Have you got a channel manager? Because there’s a one hell of a lot of bases that I think you need to cover before you start. Huge one that virtually nobody talks about. Compliance, are you registered for data protection? Have you got the right insurance? Are you insured, for short term lets? This is just the stuff, the basic stuff that you need to know before you set up. How are you operating the whole thing? Is it in a limited company? Is it in your personal name? If a guest has an accident, whose liable? Is it the limited company or is it you? So, I’m trying to give you as many tips as I can but what I really want you to make sure is that you got the proper education and the proper support.
“Hi Paul, I really like your videos. I am in debt management, it would be hard for me to buy a property with a mortgage. I’ll have a deposit but, you know, not going to be able to get mortgages because of the debt management situation. Very interested in lease option properties but I don’t have any knowledge.”
So you’ve got the idea but you haven’t got the skillset. “Would you touch on education, source me buy to lease options property in and around London?” I get it, we all have unfortunate situations where we end up in debt management or, you know, some form of personal credit issues, where we can’t get mortgages. That’s a big percentage of the UK is in that boat. Your solution to that, and there are others. Is your interested in lease options. Now, you say, you don’t have the knowledge for this. Okay, well, strong, strong advice, get the knowledge. Come along to a six figure summit, talk to people that have got those skills, that education, you know, come along to a six figure summit, its completely free.
So, just want to share a few thoughts with you before I close of this week’s Q and A. Very often, people say that the skillset, without the mindset, will leave you upset. Okay, but you don’t even have the skillset yet and that’s not me being critical, you’re saying you don’t have the skillset. So, my strongest advice, Mohammed, and anybody else in the same boat. If you’ve got any kind of personal finance issues, really get to grips, go and do your Experian credit check and understand, so, Experian, it’s an online credit checking agency, there are other but Experian’s the main one. And understand what it is that’s causing you issues, with your personal credit score. So, Experian, is just one of the credit checking agencies, if you want to get a whole heap more information, a lot more detail about how to manage your personal credit score, we’ve got a whole separate episode on that, so, just click on the link above and that’ll take you to a whole separate video on how to, not only, understand what any credit issues you’ve got are. And how to manage them as well, hope that’s a useful tip, get yourself the right education, read the right books, I’ve written a variety of books that could help on this, get yourself along to a six figure summit.
I hope you’ve enjoyed this special Q and A edition of Money Matters, if you want your questions to be answered, specifically, in next month’s edition, get the comments in on YouTube and I’m sure what you’ve heard this week, is a couple of really interesting examples, someone that’s interested in rent to rent SA but maybe is doing a bit more homework and someone that likes the idea of lease options because they got personal credit issues and they’re looking for a solution. So often we look for, you know, the grass is always greener, silver bullet, one trick to solve all your problems. Almost never in life, is it that easy. Always, it’s about these things. It’s about the knowledge that you gain, it’s about the network that you’re in and it’s about the action that you take. Click here to watch the full episode.