0 to 1 Property = Financially Free (The Secret)

[Music] hey everyone it's Stephen in this video I'm going to show you how you could be one property away from becoming financially free and that probably cost you the same amount of money as this one bedroom flat in Wimbledon above some shops that one property is a commercial property and I hope to bust on this that you may have about that commercial property investing in this video so she thought that you couldn't afford a commercial property or you just don't know how to get into commercial property or the deposits are too big or the finances too expensive or Out Of Reach stick around as I walk you through each of these perceived problems to help you better understand that you could potentially be one property away from becoming financially free Others May and probably do charge you a lot of money for this information but you can get access to it for the bargain price of a lot thank you for those of you who don't know me I bought my first commercial property back in 2013 in the US which reasons why we don't have enough time in this video to explain why I started in the US but I did and I bought that for 375 000 with only 75 000 down without a bank line and that generated me three thousand six hundred dollars a month two words sell a finance I've since gone on to buy a mixture of commercial property from retail office blocks Industrial and Commercial Flex based warehouses that allowed me to quit my I.T job a long time ago now a lot of property investors feel that commercial property is out of their reach and this could be because they simply just don't know enough or that they see the risk as too great and I felt the same because I bought my first investment property in North London and that was years before I bought my first commercial property and it's hard to push yourself outside of your comfort zone but I know that if I could push myself outside of my comfort zone that's where the magic happens I was lured into commercial property investing because of the attractive long leases the bail and the tenants pay all the outgoings and the rent is in advance all I have to do is write an email with an invoice attached to make sure the rent is paid on time being a bit of a tire task I started self-managing my own investment properties in London and this meant that I was dealing with calls all the time 24x7 had to be available I was looking after check-ins checkouts and reading the meters and organizing trades that never turned up I just felt it had to be a better life [Music] foreign [Music] rich list and I thought to myself these people that were on there that make their money through property I bet they're not mucking around with single let residential property that's right they make their money through commercial property Donald Trump Donald brenn John gandal they're not mucking around converting single let residential property into hmos and getting called out because the fridge freezer's broken down yeah okay yeah they made their money through hotels office blocks and shopping centers commercial properties are everywhere in our lives and without them the whole economy would grind to a halt just like we need a place to live businesses need a place to operate from there's three main reasons why I personally love commercial property as an investment vehicle the gross rent is the net rent you get to keep so where this comes from is that the actual lease associated with that commercial property to that tenant stipulates that everything to do with that outgoing all the expenses associated with that property is the responsibility of the tenant and this is called a full repairing and ensuring lease in the UK and a triple net lease in the US leases normally span for years not just for 12 months like they're doing a buy to let property and it's extremely passive what I mean by this is that all you have to do with a commercial property if you buy the right type of commercial property and have the right type of lease in place is send a quarterly invoice to make sure that the rent is paid on time there's no phone calls about maintenance of repairs there's no phone calls about leaky roofs there's no phone calls about blocked toilets there's no check-ins or checkouts there's no modal mold or damp problems all of these things are taken care of by the tenant and these things are the norm not the exception to the rule when it comes to commercial property investing but I hear you say they're so expensive and you need a large deposit when you're buying commercial property or so that's what you've heard so let me show you an example to kind of bust that myth a bit so I'm going to put in here that the price is 200 Grand and we're just going to look across the whole of England and I'm going to put the minimum price at just like 20 grand just by looking at all property types all commercial property between 20 and 200 Grand it comes back with 1 758 properties if we wanted to go and look at those properties we can just go into a map view and then just start to zoom down and have a look at those properties and we can see when we're looking at the map here is that those properties are all our Hoover England it's not that they're congregated in one specific area so you've got the opportunity to buy commercial property in any part of England based on any type of budget that you've got you can just zoom in to the area where you live or the area that you'd like to invest in and then just have a look around at those types of properties and see what they are and then if we wanted to change that amount let's say we want to make it 150 and find out what properties there are for 150 in England again we've got 1244 results that are commercial properties that are between 20 grand and 150 000 pounds again all over England again you can just kind of zoom in and see where you'd like to invest and Commercial properties are actually cheaper than Residential Properties when you compare the price per square effort so that means you can buy more commercial property for your same amount of money than you can when you're looking at residential property for buy to let properties you need at least a 25 deposit sometimes it's more than that but generally anyone can get started with a buy to let property and have a deposit of 25 value of the agreed purchase price or whatever the price of the property in value is up at with commercial property the purchase price is going to determine how again your deposit amount and the deposits that you need are 30 as a best case scenario worst case scenario it can go down to as much as 40 but it's somewhere in between 30 and 40 so for example in 2021 the commercial mortgage Market was a bit more tentative because we were just coming out of the pandemic so the market sentiment was that they didn't really want to lend too much on commercial property because there was a lot of unknowns with stuff being closed down and people not people were working from home and so buying offices buying retail they were seen as more riskier by the financial market and so it was quite common then to only get a 60 loan to value commercial mortgage for those properties so you'd have to find a 40 deposit but now the market sentiment has changed and I'm seeing lots of places now off offering seventy percent loans of values commercial mortgages and you just having to find a 30 deposit so when it comes to commercial property all you really need is an extra five percent deposit to buy a commercial property and that commercial property is a bigger property square foot compared to an equivalent residential property on the same amount of money per square foot so with commercial property amazingly you actually save money on stamp Duty compared to buy to let property investors so since April 2016 buy to let property investors have had an additional Levy of three percent on top of the usual stamp Duty charges for them to buy a second home like a second property that was going to become an investment property and so with commercial properties you don't have to pay this additional three percent the rates are even cheaper than normal residential stamp Duty rates as well and so yes we're having to pay an extra five percent deposit down but we're actually saving three percent on the stamp Duty base if we buy commercial property so let me show you an example if we were to buy a 300 000 property comparing a residential stamp Duty cost and Commercial stamp Duty charges so if you were to buy a commercial property and it cost you 300 000 pounds to buy you'd only pay 4 500 pounds in stamp Duty fees if you were to buy the same valued property but you're buying it as a buy to let property you'd actually pay eleven thousand five hundred pounds in stamp Duty fees so that's a saving of seven thousand Pounds just there on the stamp Duty differences so if we then look at our deposit again and we're saying five percent of three hundred thousand which is an extra 15 grand we've got to put down we can deduct Seven Grand from there and already we've only then got to find an additional eight thousand pounds to buy a three hundred thousand pound commercial property and don't forget with commercial property the gross rate that you get is a net rent that you get to keep but then you may say about legal costs so yes with legal costs they do cost more when you're buying commercial property because commercial solicitors price gouge when it comes to that type of thing for whatever reason no it's because commercial property there is a bit more involved compared to uh buy to let properties so you know for example a buy Select Property might cost you anywhere from 500 pounds to a thousand pounds depending on the location and the cost of it with commercial property again it comes down to the price of that commercial property but for 300 000 pound property you might look to pay between fifteen hundred and two thousand pounds in legal fees for a commercial solicitor so yeah there's an additional additional maybe a thousand pounds that you might have to pay for buying a commercial property as part of the legal fees but what about this one property to become financially free so I'm going to run through an example to demonstrate how this one property could potentially make you financially free so we start by looking at the average UK full-time salary which at the moment is around thirty five thousand pounds so let's look at an example I found this place in Bournemouth lectertonian guy you may have had your haircut there this place is up for 350 000 pounds with a 35 000 per year rental income on a 10-year lease from 2021 there's a rent review and a break clause in the lease which is normal and that's at the halfway point in 2026 so three years from the time of this recording and if you compare that to the one bed flat that we saw in Wynwood and above the shops that one rents for a 1500 per month but then you have to pay ground rent service charge maintenance and repairs pay for insurance be available 24 by 7 365 days a year with the Tony and Guy place you earn 2916 pounds per month before taxes and that property you don't have any maintenance or repairs you don't have to pay any buildings Insurance you don't have to worry about any of the bills the business rates or anything like that it's all paid for by the tenant and that's what stipulated in the niece is full repairing and ensuring they have to make sure that the property is to the same condition it was when they went in all you have to do is send them an invoice every quarter to make sure that rents paint in advance you can even then automate this so you only have to do it once and schedule it to be done every quarter so I hope you can see with commercial property the gross rate that you get is the net rent that you actually get to keep can you see how owning commercial investment property will get you to achieve your Financial Freedom goals a lot quicker than it would residential granted there's going to be a commercial mortgage in their summer which we're going to get to in a moment let me know in the comments below why you don't want to buy commercial property and you want to buy residential property if at some day you want to be able to be financially free and quit your job I'd love to know so a common question that a lot of people will ask is what commercial properties are the best ones to go for so when it comes to what types of commercial properties are best there's two things that I specifically look for and I ask myself these two things the first question is how much cash down for how much cash back and for over how long a period of time until I realize that and the second point is can I manufacture some type of profit by buying that property that enables me to refinance it down the track so I can pull some money out and then go again the development angle on a commercial property could be that you want to extend it so you've got additional commercial lettable space or it could be that you want to convert some of it from commercial to residential or all of it from commercial to residential property or it could be that you want to add additional residential component to that commercial property such as adding another floor to it and that's all going to be residential this principle is the same as when you buy a house and see it's got changes to be extended out the back or extended into the loft or any of those types of things where you're adding some additional value to that property in a short amount of time there's potential there for you to manufacture some growth and increase the value of that property and I look at commercially in the same way as a lot of people would do with residential that they want to manufacture some profit so when buying commercial property you don't just look at its current use and just think that's all it's got as a potential look at what the potential could be in the future if you look if you could do some kind of development to it what's the highest and best use of that property in that particular location for example retail High streets are changing and this isn't because of what just happened with kovid the writing was on the wall when Amazon started offering fast shipping with one and two day time frames for shipping and free 30-day returns secondary retail parades are less important now with online sales accounting for 21 of retail sales globally so right now there's less need for the number of shops that they were especially in those secondary retail parades and those places are becoming ripe for conversion to residential I've recently bought retail shops and offices but I've also bought industrial property like warehouses and flex spaces which are made up of office space as well as a warehouse all of them have pros and cons but my first priority is always to generate cash flow so I look at what the property's actually generating from an income so how much cash down do I make have to put down how much cash back am I going to get and then over what period of time and then as a second priority I'm looking at what's the opportunity to further develop that property a manufacture some quick profit in the future so to buy commercial property without buying all cash you're going to need to get yourself a commercial mortgage and so with a commercial mortgage there is enough lenders out there for it to be competitive still but yes commercial mortgages are going to be slightly more expensive than a buy to let mortgage from an interest rate perspective as there's not as much lenders as there are with the buy to let space with commercial property so what that equates to is that you'll generally pay at least an extra one percent on um the interest rate when it comes to commercial property but you're definitely making more than one percent uh profit your return is definitely over one percent more than when it comes to commercial property when you compare that to a buy to let property commercial lenders essentially looking at the type of property the location and the Tenant and the lease associated with it those are the key things that they'll be assessing to determine if that's something that they're willing to lend money on you can get interest only and repayment mortgages when you're looking at commercial mortgages and these typically run from 20 years to 25 years there's not many that go above 25 years I'm happy to share the details of my own commercial broker with you you can get the information from my website which is probably investing wealth.com and it's going to be in the resources tab with commercial lenders the one thing that they do require is that you have some kind of property investing experience so if you've never bought a buy to let property yet commercial property may not be for you because you're going to struggle to maybe get a commercial mortgage if you want to buy a commercial property debt free you don't need to worry about that you can buy it without having any investment experience at all there's got to be some negatives it can't all be gravy and so with commercial property the negatives are really business rates and vat but there's ways around both of these things so when it comes to commercial properties commercial properties have to pay business rates normally the business rates well they are always put in the lease that the business rates are paid for by the tenant but it comes a point when the tenant leaves and you've got a vacant commercial property at that point you're liable for business rates but only after a period of time and that is three months well so they give you three months grace period before you liable for business rates so then you've got to pay business rates on an empty property there's certain types of properties that you don't play business rates on which I'm not going to go into on this particular video with vat if the property is registered for vat this means that you have to pay VAT on top of that property but if the property is tenanted therefore it's an investment property you can then buy that property without paying any vat even if it's registered with vat and I've done a whole video on how to not pay vat which you can find in on my channel and I'm also going to link to at the end of this video so that'll explain to you exactly the steps that you take to go through to not pay bat on top of a property essentially what you're doing is you're transferring that property as a going concern and by doing that you the hmrc don't then charge you VAT on that transaction probably prices can be impacted by the rental income so this is less likely to occur in major cities but it's more in Regional area so if you've got a tentative property and that tenant moves then that will impact the value of that property on the flip side of that if you buy an empty property and you get a tent for it that can dramatically improve the value of that property and you could then sell that property onto another investor if I've piqued any interest in commercial property investing I'd like to invite you to join my wait list on my new training called up level commercial property investing this will show you how you can go up a level from residential property into the commercial investing world to get massive cash flow returns and achieve a truly passive income stream that has the potential with buying one or two commercial properties to replace your earned income if you're interested in learning how to buy commercial property without paying bat go and check this video out now if you want to know a property about the I bought a commercial property that I bought for 384 000 pounds that generates thirty seven and a half thousand pounds that also has a development angle on it go and check this video out now thanks very much for watching I really do appreciate it and I'll see you next time

Channel: Stephen Duncombe

Views: 9,981

Keywords: property investing, real estate investing, buy to let, stephen duncombe, how to invest in property, property investment, commercial property investing uk, commercial real estate, financial freedom, uk commercial property

Id: 8MXxY4yxRLU

Length: 20min 24sec (1224 seconds)

Published: Wed May 10 2023