How to turn a house into Serviced Accommodation | Money Matters | Touchstone Education


– Hello, and welcome to this
week’s edition of Money Matters because after all money does matter. (upbeat music) (bright bouncy music) I’m going to talk to you
now about Dunera, my home, that was a commercial conversion from a care home to a family home. We’ve lived here for 17 years and now we’re moving to Doncaster. I wanna talk to you about
serviced accomodation. But first, I wanna talk to you about why I’m selling the house. If I don’t sell the house, and
I do go and buy another home in Doncaster, that’s
gonna be a second home. I go and buy that second
home in Doncaster, the property I’m buying in
Doncaster is over a million quid, so that’s gonna be an extra 3% stamp duty over and above the stamp
duty I’ve gotta pay anyway. So just on a million pound
house, that’s £30,000. So there’s a £30,000
reason to sell this house. Second reason. If I sell this house
now, it’s my family home, I bought it for £450,000, years ago, and it’s now worth 1.3, 1.4 million. So I’m almost at a million
pounds in capital gains. So if I sell the house now
while it’s still my family home, then I don’t have to pay
any capital gains tax. So I’d get a million quid tax free. That’s a pretty strong reason to sell it. So two reasons that I can think of, maybe you can think of more, if you can think of any more then put in the chat box comments below the Money Matters
thing, here, video. So I’ve got £30,000 worth of stamp duty, well actually more, because I’m
paying over a million for it but let’s call it £30,000 pounds. I’ve got £30,000, the 3%
extra money stamp duty reason to sell the house. So I’m not buying my next
home as a second family home. And I can crystallize the capital gains so that I get a million pounds tax free cause I bought a house for
400K, sell it for 1.4 million, get a million pounds tax free, happy days. That’s two reasons to sell it. What about reasons not to sell it? And balance is everything. There’s always pros and cons
to almost every argument. Why don’t I want to sell it? Well, house prices double, on average, every seven to 10 years. So to get some temporary tax advantage, how does that weigh up against
the capital appreciation that I’ll receive if I keep this property? And also if I keep this property and run it as serviced accomodation, I can claim capital allowances. The capital allowances that
I’ll get on this property, given the price that I’m selling it at, when I use it as serviced accomodation, are gonna be roughly £600,000. Now I know you might not all know what capital allowances
are but let’s just say at a very simple level, they’re an amount of money
that you can earn tax free. So I’m a 45% tax payer so if
I can earn £600,000 tax free, that’s going to save me 45% in tax. Well 50% of 600,000 is £300,000 in tax, real hard cold pounds. So 45% is gonna be, what is that gonna be? 10% is 30k, so it’s 15. So it means I’m going
to save £285,000 in tax that I can then go and use
to spend on something else. So that’s a pretty strong
reason to not sell it. But the million pounds in
capital gains still outweighs it. So here’s the challenge. How can I get both? How can I get the tax
advantages of selling it and the ownership
advantages of keeping it? There’s a challenge for you. So what do you think I’m doing? What I’m doing is I’m selling
this property to an LLP, to a limited liability
partnership, that I own. So I’m actually selling the property, which means I’m crystallizing
the capital gains, and I’m avoiding the extra 3% stamp duty. But I’m selling it to an LLP that I own, a limited liability
partnership that I own, or I actually own with Aniko, we own. Which means I get the benefits
of the capital allowances and the benefits of the ownership and the income stream from
serviced accomodation. How about that for a win double? So let’s now look at specifically what is an eight bedroom luxury
million pound plus property worth as a serviced accommodation unit on the west coast of Scotland
five miles from Loch Lomond. At the bottom of my
garden, there’s the sea, as you’ve seen from the other shots. How much can I get for this? Is there a market for it? Well, I’ve done res– This house sleeps 16 people comfortably. Five bathrooms, you know, it’s fine. Snooker room, jacuzzi, this is a very good
house for entertaining. So what sorts of people would stay here? Well, number one, Loch Lomond
is an international center for weddings. People come from all over
the world to get married at Loch Lomond. But they don’t come for two days, they tend to come for a week or 10 days. So could the groom’s wedding party or the bride’s wedding party or a bunch of friends going the wedding come and stay here? Absolutely. Is this a good place to
hold training and retreats? Yeah, how do I know? Because I’ve done it for my own
training company Touchstone. Groups of cyclists,
groups of birdwatchers, groups of golfers. Can we provide them with caterers? Can we pick them up from the airport? Can we give them a live in chef? Absolutely. Do we need to do all those sorts of things at this level of quality
of serviced appartment? Yes, we do. We’ve done the research. If you look six months
ahead, nine months ahead, there’s nothing available in this area where you can
put that amount of people. Now it isn’t that there
aren’t that type of unit. There are, there isn’t
many, but there are some. When we did the research, the earliest that we could
get a property like this, anything like this, is 11 months ahead, everything else is fully booked. And even then, that property. We’re about 25 minutes
from Glasgow airport here. We’ve got two trains an hour
from the local train station go to the middle of Glasgow, the property that I could find that was kind of equivalent to this, that one could sleep 14 people, you’d have to drive
into the back of beyond for another hour further
than here to get there. That’s really not like for like, but even then here’s the punch line. How much are they charging per night for that one that I can’t
even get until next year? £1500 per night. So my estimate for this one when we move out as a family
and move down to Doncaster and put it on the market,
serviced accommodation. My estimate is that we’re going
to get bookings in the range of £1800, possibly as high as
£2000 per night or per day. How’s that going to stack
up in terms of income? Well, I’m gonna have to put
a mortgage on this place and I’m probably gonna
put a mortgage on it round about the 800,000 mark. What’s that going to cost me per month, I’m going to put a repayment mortgage on, it’s gonna cost me about
five grand a month. I put that and all the
booking fees, booking.com, cleaning, housekeeping,
all of the other things. A good rule of thumb normally
for smaller properties is that 40% of your turnover is profit. When you get to something like this, it’s going to be more like
60% but let’s keep it easy. Let’s say it’s only 50%. That means for every night it’s booked after paying all my
mortgages, all my costs, all my housekeepers, all my
linen, all my everything, I’m gonna make £1000 a night. Now even if I’m only
booked 70% of the time, which is ridiculous, because there’s nothing
around here that’s available for a year virtually, but let’s take 70%. That means this property
is going to make me £20,000 a month. One property. And I don’t have to pay
tax on the first 600,000. Now I know you’ve maybe seen me before running round one bedroom
flats and two bedroom flats. And I’m not saying they’re not good serviced apartment units. But what I wanted to show you is a big proper expensive
serviced apartment. Because price is what you
pay value is what you get. So I want you to think
about properties like this in two ways. If you’ve got the capital
and the firepower, buy it, but even if you haven’t,
could you do a rent to rent on a lease something this size? And if you did, would it pay you fantastic
handsome dividends? I’m gonna say yes. Cause you just need one of
these, one property like this, an eight bedroom monster, and you’ve got complete and
absolute financial freedom right there, nevermind £5000 a month. This can give you £5000 a week. So I want you to think on that. So I’d spent just over half a million to create something that’s
worth more than a million. Then years later, I’ve moved out of it, enjoyed further capital
appreciation, sold it to an LLP. Now that might be making your
head a little bit dizzy here but what I’m trying to do is prove to you that it’s worth getting the
basics of company structure, tax, capital allowances,
understanding how to use them, and then actually using them. Cause this property is
gonna make us, as a family, of the order of another £20,000 a month. Nice isn’t it. That’s like 10 times the
average salary in the UK. Having one house like this
is like having 10 people work for you full time and
then give you all their money. So how can you get properties
that are the equivalent of having full time
people working for you, and they give you all their money. And every time you open a
serviced apartment like this, this quality, you bring so much money
and investment and spend to your local areas it’s unbelievable. Unbelievable. This one property will
bring hundreds of thousands if not millions of pounds of benefit for the local restaurants, taxi companies, aircraft flights, quad bike
tours, fishing you know, all of the stuff that I mean, weddings for goodness sake. How much people spend on weddings? Incredible amounts of money. So I want to encourage you to think about big serviced accommodation
units that add lots of value to you as a family, to
you as an individual and for the local economy. I hope you’ve enjoyed this
edition of Money Matters cause after all, money does matter. Get your comments in the chat box below. Ask your questions, I’ll answer them. The team will pick out their
favorite comments and questions and they’ll give them to me in
my special Money Matters Q&A every month and you get to grill me with whatever questions you wanna know about commercial conversions, about serviced accommodation, about whatever property strategy you want, or whatever financial strategy you want, and I’ll do my level best
to answer it for you. If you’ve liked this edition,
please literally like it and share it with your friends. If you’re not already a subscriber, please subscribe to our
channel, our YouTube channel. You’ve been wonderful, I’ve been Paul, I’ll see you next time. Bye bye. (shimmering music)

25 thoughts on “How to turn a house into Serviced Accommodation | Money Matters | Touchstone Education”

  1. Hi Paul can’t wait to come to the training on 25th/26th in Doncaster. What would be your advice to me if I wanted to get into property but only have £700 per month income and no savings and a credit rating of 146?

  2. Excellent video. I need some advice. If someone sells their home for about £400,000 then they buy a house to live in for £200,000, do they have to pay any capital gains tax on the difference if they have no mortgage and end up with approx £200,000 left over?

  3. Great strategy Paul! Thank you for sharing your knowledge within this area, enjoyed watching, very interesting, good content. Commercial/residential with SA definitely worth considering.
    Just one query, how tax efficient would it be, in future years, to transfer ownership of assets within an LLP, if not the whole LLP, to say a family member, i.e son or daughter? Could they still run the property as SA? & take advantage of similar capital allowances? Useful to know when transfering similar assets to next of kin…

  4. How do you get around the SA 90day rule that some councils are applying. What do you have to consider before proceeding with a rent to SA

  5. Hi Paul, the LLP benefits you suggested of operating your property as a SA look very appealing, what are the negatives of an LLP in this situation?

  6. I take it you are converting it back to a commercial property before selling it to your LLP to avoid paying the extra 3% stamp duty, and have you not already claimed capital allowances on that property?

  7. Hi Paul, another great video,Thank you, you really get me thinking. If you sell your main residence to your LLP company then won't the company be liable to pay the higher rate stamp duty anyway? also would it still work on the capital allowance aspect if you sold to the company but let it as a standard residential let. A third thought is could you still rent it back off the LLP and live in it yourself.

  8. God this guy is frustrating to watch… he just comes across so boring and the long pauses jesus… get on with it.

  9. Great tips Paul. I have a big HMO. I really want to test some rooms for SA . The challenge is may be I need to inform the lender , insurance company and council …… I would be grateful if you suggest me.

  10. Hi Paul. What's your thoughts on say buying land and building something valuable that would benefit nicely from service accomodation? Would you think the time and ROI would be worthwhile your would it be pretty complicated? Thank you.

  11. Great information Paul. Thanks for the inspiration. How are you so confident that the bank would allow you to change use from residential – your beautiful mansion to Serviced Accommodation?

  12. Stroke of genius Paul. Did you come up with that idea yourself? I love it ! Even before you mention £20K per week income !!

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