ASK519: Is a company worth it for just one more? PLUS: Serviced accommodation... yes or no?

0:01Rob B:Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Hey everyone, welcome to Ask Rob and Rob, the show where you give us your wonderful questions and we give you what we hope are some wonderful answers in return. It is super simple for you to submit your question, whether it be for this show or the Sunday Times. Rob, would you like to explain once again what that easy process is?

0:22Rob D:Surely everyone knows by now, but just in case, it's propertyhub.net slash ask. If you can find your way to that webpage, then you can leave us a written question for our Sunday Times column, see yourself in the paper, your mum would be very proud. Or you can leave us a voicemail, which is actually our preferred option, because then we get to play your lovely voice on the show. Let's listen to our first question from Andy. Hi, guys. Andy here, long-time admirer of what you do. I've got a question that I've been thinking about for a little while now, and I never quite know what to do with it. So I finally made the effort to reach out to you guys for your advice.

0:55Rob D:So my wife and I own four properties in total now. when we set out we didn't necessarily know we had a plan to get to that number we just started with one and you know kept adding we're up to four now and i'm kind of at this point where from a tax position it pushes us both into the higher bracket of a 50 grand tax bracket the 40 percent bracket and so i'd love to buy more but from a tax perspective it's really disadvantageous thing to do so obviously a lot of people these days are buying property in a limited company but then i I wonder, is it worth setting up a limited company if I were to acquire one more property?

1:33Rob D:It doesn't seem really worth it. It's a barrier to me moving further in property. So I guess my question is, what would you do if you were me? Is it worth setting up a company and moving the four current ones into it, which I don't think is that easy? I don't know. I'm at a dead end. I'm not quite sure which way to move. And therefore, I haven't done anything for two or three years now. Yeah, really grateful for your thoughts. Andy, thank you for the question. and you are in a really tricky spot. This is a hard position to be in, but don't worry, you are not alone. So many people are in the same position.

2:06Rob D:We know because we hear from them all the time. But there's really no template's answer, and it's going to very much depend on your future plans, how much you want to expand, and lots of other specifics in your situation. So to give you the bottom line now, you're probably going to want to go and speak to a tax advisor and get them to help you run some numbers. But on the face of it, if you really are just going to be buying one more property then setting up a company for that purpose is probably not going to be worth it because if you work out the difference in what you would keep between company and personal scenarios that difference is probably going to be wiped out by the extra running costs of the company so we normally say to people if you're buying your first property but it's going to be the first of at least several then it is worth having the expense of a company because it's worth getting that property in there it'll be worth it in the long run then as you add more properties into it those running costs are obviously going to be spread across more properties so it'll make more sense yours is a bit different though if you've got four on your own then you are going to get just one more and that's going to be the only one in your company that's probably not going to make a lot of sense however you're keeping yourself in the lower tax bracket at the moment but over time of course rents are going to go up and chances are the tax bands are not going to go up in line with rental inflation or even general inflation because this is such an easy way for the government to raise more taxes without it seeming like they're putting up taxes.

3:26Rob D:They just leave the bands where they are and let inflation pull more people in. So even with the properties you've already got, this is going to increasingly become an issue for you. Now, you mentioned moving those properties into a company, which would solve a couple of problems for you. It would mean that you wouldn't have that effect that we've just been talking about of more and more of your income getting dragged into a higher band. And it would solve the issue of having the company for just one property because you now have it for five which is a lot more sensible however as you've identified there is a cost of moving those properties in and that cost is likely pretty significant so the calculation to make is is it going to be worth it so you can work out how much will it save you each year and compare that to the cost you know well how many years of savings will it take me to earn back this one-off cost of moving the properties if it's three years then it's probably an easy yes if it's 15 years it's probably an easy no if it's something in the middle then it becomes a bit more tricky and you're never going to know for sure you're always going to be making assumptions because you never know what's going to happen to rents or property values or tax policy or anything but your point i'd say it really is worth speaking to a tax advisor because they can help you to work through some of these numbers and they won't be able to tell you what to do because they don't have a crystal ball either but at least they can help you explore some of these options so and i hope that helps is really annoying that you're in this position because you are really a victim of the changes that have been made to tax policy but like i say a lot of people are right there with you So good luck.

4:48Rob B:Right. Next up, we have a question in from Dan.

4:51Rob D:Hi, Rob and Rob. My name's Dan. I'm almost certain it won't have escaped your attention that the internet at the moment is full of people extolling the virtues of the serviced accommodation market and how ordinary buy-to-let landlords are all missing out on this amazing yields generating opportunity. you might also have noticed there's some famous people peddling this as well. I might sound a bit cynical or facetious about it, but I am genuinely open-minded about it because I don't know enough about the market to not be. So I am genuinely coming at it with an open mind. I did, however, look into it briefly a few years ago, and it all sounded good on paper until they told me what the cleaning charges were going to be, which were astonishing.

5:43Rob D:and seem to wipe out a significant chunk of the profits. So I'm unsure. But as I said, I am open-minded and would be really interested in hearing your take on it. Thanks for all the great content. Cheers.

5:56Rob B:Dan, I'm so, so pleased that you've asked this question because I still hear of cases where people are paying money to these gurus. And I could use a different word to gurus, but I'll stick with something professional. who are selling these courses on different schemes all the time. And it depends on the year, like what they're peddling. At the moment, it sounds like it's serviced accommodation. And is there a market out there for serviced accommodation? Yes, yes, you can do it. Is it miles better than everything else in property? Absolutely not. We have to be careful here as well, because one of the things that they try and sell is that you don't even invest.

6:42Rob B:you debt property from someone else and then let out service the accommodation whichever of these paths you take they're all hard or harder than normal property investment the reason why they don't sell courses on other strategies is because property investment can be straightforward i'm not saying it's easy but it could be straightforward you listen to podcasts you read books you do some research, you're making an investment, and then the real lessons will happen. And you'll learn way more when you do it for real than of any course or any podcast, including our own. But what they will do here is make massive claims and promises of what's achievable.

7:24Rob B:It can sound like there's loads of secrets that you don't know to stop, which is holding you back. But the thing that is never shared is these strategies are just a job. You're creating a job for yourself within property. We believe that property investment is an incredible tool, but you should try and set it up so it takes as little of your time as possible, unless you don't have a job and you want to create a job. But most people are busy. Most people have full-on lives with jobs, businesses, families, lots of things going on in their life that means that they don't want extra work. And this is never, ever highlighted.

8:00Rob B:The other thing which no one ever really seems to pick up on is the gurus claim that it's incredible but spend all their time marketing courses they don't spend time making the investments all they do is just market the courses but if if that's all they're doing all day every day and then they're posting pictures of them in private jets and lamborghinis did they get there through serviced accommodation or did they get there through this core selling business that they have? I'm going to give you the answer. It's the business. It's the selling business. It's that business that gave them the money because property investment does not make you rich in the short term.

8:41Rob B:It does not. It cannot. It will not. You can be incredibly wealthy through property if you give it time, but there are no shortcuts, no matter what is told to you. And the Lamborghinis, the private jets, if they're real, in fact many times i wonder if they are let's just assume for a moment they are real that was not funded by the latest wild scheme that they have go back through history you'll see plenty of press reports on these people none of them are complimentary and you'll find that they used to sell different types of courses it's just the latest harebrained scheme that they have at the time the one that they think can make the most money for them so please this is not just for you Dan, this is for everyone listening.

9:23Rob B:Be careful. Tread very carefully. You do not need to pay for education. That's the great thing, especially in the world that we live in now. AI can tell you how to do service accommodation if you want. You can get a whole course built out by AI. Do not give these people money. Put it into your investments instead and you will have far better results. And by actually investing, you'll learn far more than any course you'll ever go on. so a word of warning for you dan and everyone else listening well that is us done for this week and

9:53Rob D:we'll be back to do it all again next tuesday but before then you can join us for the property podcast on thursday so we'll see you then bye-bye bye-bye