Why Service Accommodation Should Be Regulated - FULL INTERVIEW WITH PAUL SMITH

The next question is, you're now obviously teaching people service accommodation. Touchstone is teaching people service accommodation. We've had Gaudy. We've got Abby coming up on the podcast from Touchdown. What is the one big mistake that you see when you send your delegates out into the wide world? What is the one big mistake that you see that they're most commonly making when they're getting into service accommodation?

And all of this jazz single thing that holds them back the most is they try and do everything themselves. And what I'll always tell people is, look, I'm trying to help you to set up a business here. So a big part of what I try and get across to people is it needs to be done, but doesn't mean you need to do it. And so many people are very, very resistive to employing VAs, you know, virtual assistant. And in my head, anytime you're doing anything that could be done by virtual assistant, you're working for £1 50 an hour. Now, I don't know about you, but I didn't get into service accommodation to work for £1 50 an hour. Now, that's not to denigrate to people in the Philippines or wherever else that do work, because, you know, over there, that's really good money. So I feel like we're doing, we're doing good in the world by allowing people that wouldn't normally get access to that kind of money to earn, by their standards, pretty good money. But then from our end of the telescope, all the bits and pieces that need to be done get done and they get done well, but you don't need to do it.

Today we're going to be talking about serviced accommodation. We are now in season six, episode 11 and today I am joined by Paul Smith of Touchstone Education. So without further ado, Paul, welcome. If you could just take a couple of minutes, just explain a little bit more about yourself, your background and how you got into property. If you could, please.

Hello, Mar. Thank you for having me on. Real pleasure. So I got into property, you're not going to believe this, at the age of about 4, because both my grandad were into property, different way, so. So I could see my Irish granddad doing commercial stuff, could see my English granddad building houses and selling off fields to the council. And then what my dad did, very bright guy, Ed Master. He made more money from property than he made from teaching. So at the age of four or five, there was me under the floorboards and I used. Because he couldn't get down there and I used to get my money. So you, I don't know, you're from this neck of the woods. So the first house I can actually remember is in a place called Wombwell, which is like Barnsley, more or less. And we bought this big old Victorian monster thing, like three stories high. And what we then did over the next few years, I say we, me and my dad, we kind of modernized it. So when I started, I was four or five. By the time I finished, I was like, 15. We'd done three or four houses. So we were putting in central heating, we were putting in double glazing, we were putting in, like, all the mod cons for us at that time, because any house that we bought, it wouldn't have an indoor bathroom. It'd have, you know, tin bath in front of the fire and the toilets at the bottom of the garden. So I got into property almost before I can remember, and it was always very good to me because he would chuck me under the floorboards and I would rip out all the lead wiring and the plumbing, and he didn't give me pocket money, but we would take all the metal down the scrapyard and that was my money.

So why is it that you've sort of come full circle? Why did you come back into this and why are you now sat in Doncaster in your offices now, sort of teaching people what was the sort of progression from where you were. Sorry. To where you are now?

Like, what do I want to do the rest of my life? And we made a fairly fundamental decision. We don't want to work for anybody else ever. So we then got into property and it was probably six, seven years after that that I first got into service accommodation and I was actually property networking event. I sat next to a guy called Justin and we were talking about Formula One, because I'm a mechanical engineer, he's an electrical engineer and he was William's chief telemetry engineer, which was really fascinating for me. I spoke to him for hours about that and towards the end of it, I sort of said to him, what do you do then? And he said, service conversation. I said, what? And he said, you know Airbnb and all that. Oh, yeah, yeah, yeah, yeah. I said, what are you doing that for? Then he said, well, it's good money, innit, really? And I said, where are you doing it? And he said, middlesbrough. And I was like, I laughed out loud. I said, what? And he and I no harm to anyone from Middlesbrough. And this wasn't me being nasty, this was just like an instant reaction. I said, who the Hell wants to go to Middlesbrough. And he said, come up next week and I'll show you. So I did. And what he's got there, fabulous, he's got like a church with, you know, all like the vicarage and everything and a big car park and he's converted it to, I can't remember exactly, it's like 16 or 18 apartment. And he's making all kinds of money and I was just like, wow. Wow. By that time I already had, oh, I don't know, 15, 16 buy to lets flats and houses and stuff. So all I did literally is I converted one, one flat, one bedroom flat, place called Dumbarton. And anytime I tell anybody that story, they say the same to me that I said to Justin. Why would anyone want to come to Dumbarton? And so it really doesn't matter where you are. I think with the right service accommodation offering, if you provide the right service, the money will come.

The next question is, you're now obviously teaching people service accommodation. Touchstone is teaching people service accommodation. We've had Gaudy, we've got Abby coming up on the podcast from Touchdown. What is the one big mistake that you see when you send your delegates out into the wide world? What is the one big mistake that you see that they're most commonly making when they're getting into service accommodation and.

All of this jazz, the single thing that holds them back the most is they try and do everything themselves. And what I'll always tell people is, look, I'm trying to help you to set up a business here. So a big part of what I try and get across to people is it needs to be done, but doesn't mean you need to do it. And so many people are very, very resistive to employing VAs, you know, virtual assistants. And in my head, anytime you're doing anything that could be done by virtual assistant, you're working for £1,50 an hour. Now, I don't know about you, but I didn't get into service accommodation to work for £1.50 an hour. Now, that's not to denigrate to people in the Philippines or wherever else that do work, because, you know, over there, that's really good money. So I feel like we're doing, we're doing good in the world by allowing people that wouldn't normally get access to that kind of money to earn, by their standards, pretty good money. But then from our end of the telescope, all the bits and pieces that need to be done get done and they get done well. But you don't need to do it.

Just to go over from what you said there, episode three of this series was talking about outsource and about working with virtual assistants and how it so effective. And I think the main takeaway that I'm getting from doing this season is there are so many things that people in the service accommodation world can learn from people who run the guest houses, people who have the rental accommodation from the hospitality world. But there's on the flip side, there's so many things that I believe that people from my world right now, from the hospitality community group, from the boostly group could learn from essay and I truly believe that outsourcing, working with virtual assistants is one of the key ones. How do you envision it changing in the future? Do you think this will become regulated to fall in line with a lot of B&Bs and guest houses have to have to do to get opened? Or do you think that it is just going to keep as is? I'd love to get your opinion on this because this is like a pretty big topic at the present moment in time.

Any industry where there are super flights profits as profits normalize over time. And one of the ways they normalize is by regulation. So it's inconceivable to me that there won't be more regulation within the next 20 years. Will there be significant regulation in the next two or three? I don't think so because it's not where the government's attention is. They're trying to deal with Brexit, they're trying to deal with immigration, they're trying to deal with massive issues. But they will get round to it because housing and the housing crisis is a big part of the discussion in society at the moment. Now, I'm not saying for one minute that service accommodation is responsible for the housing crisis, but I think it's indisputable that there is a housing crisis and therefore housing as a sector will get looked at. But just to go back to what you said to begin with, Mark, I would teach people that it is actually a legal requirement. I do teach people. There's a legal requirement to register for various things and to do various things. So you're right. I hear all the time, why would you bother getting trained? You can just take your house and stick it on Airbnb. Well, you can, you physically can, but you're breaking all sorts of laws if you do. So, you know, for example, from my perspective, I would teach people that you shouldn't be operating a business without professional indemnity. And public liability insurance. Let me talk to you about July 2016, Brighton. You know about this Airbnb incident? No.

Enlighten me.

All right, so four people. So two couples having their 50th birthday party went out and hired this like two bed flat in Brighton just to chill, very relaxed and whatever. One evening they went out just to watch the sun go down. You know, very civilized. Gin and tonic, little olive or something. So they stood on the balcony watching the sun go down, balcony collapsed. Three of them fell two stories into the basement. One of them fell one story to street level and was impaled on the railings. Whose fault is that? The operator. Whoever's struck because the owner might not be the person that's operating it.

That's very true.

So if it's a rent to rent, that's your ass on the line. So something I pound, I just mercilessly hammer it into any of my students is you got to be a complete Class 1 nutcase to anything in your own name. If you're not operating it through a limited company, it's an open invitation for bankruptcy. Lose your house, go to jail, everything.

Yeah, I thought that was going to be your answer because, you know, it is a big, is a big topic, regulations and making sure that you are covered when people. Because I mean, the thing about this, if you compare it to all the other industries, whether it's E commerce or whatever, when you're doing hospitality, you are literally having people coming into, you know, your homes. You're in charge of these people. So I think that, I mean, this is a real big sort of takeaway to have from this and from this interview and from your answer is, you know, just make sure that it doesn't matter what you're doing, what type of property that you're doing, make sure that you are covered. You have got all the steps in process and this is obviously something that you teach and this is something that I wanted to move on to onto next. So just give us a little bit of a background about Touchstone, about when it was started, about the reasoning behind starting it and what you're currently doing right now to help people sort of avoid those pitfalls and how they can have a successful property career.

Well, the forerunner of Touchstone, we had a really imaginative name before. We called it Touchstone, it was called Smith LLP about that for an imaginative mate. So I was going to call it the Smiths, but that's already been taken. Apparently.

Some nomarch, right.

Some singer, someone. So Touchstone has been. So it morphed into, but that's just a name change. So we've been doing this for. About doing this, as in teaching other people, for about five years now. And Touchstone's ethos, Touchstone's vision is to be the UK's premier wealth creation company. So everything about wealth, I believe, is either not taught or mistaught in our schools. Now, let me just dismantle that a little bit for you. Warren Buffett says poor people invest in things, wealthy people invest in time. And my interpretation of that is the true cost of anything is not measured in money. The true cost of anything is measured in the amount of your life you're prepared to exchange to achieve it or to do it. And a huge part of what Touchstone is about is 100% compliance. We're not about getting away with it, we're not about winging it, we're not about getting around, we're about learning how to do it properly. For me, there's a right way and a wrong way to structure most businesses. There's a tax friendly way and there's a tax unfriendly way. Many, many people that come on my courses are just amazed at how you can use the tax legislation to benefit you. So to give you an example, there's a guy called Guy called Nigel and his wife Wendy from Kent. This is a couple of years ago now, they had four holiday cottages around their house and they had a lovely house in Italy, a place called Lake Garda. And they'd said to their accountants, can we get any tax breaks? And the Councillor said, no, absolutely not. You can't. What you're doing, you can't get any tax breaks. They'd heard about capital allowances. I don't want to drill deep into this because this is a bit technical for this time of night especially, but here's the bottom line. I reinforced their knowledge that they could go and claim capital ounces, which bear in mind, Mark, their accountant has specifically told them they couldn't. And with a little bit of simple paperwork, they reclaimed £650,000 in tax. Now, how the hell can you afford to ignore that if you're a business person? You know, for me, I'm a business person first, I'm a property person second. And when you've run companies and big companies, you know how to structure things. You know that tax is important. I mean, for Christ's sake, the amount of money you can make in service departments means that you very quickly can put yourself into the high rate tax bracket. The highest rate tax bracket, which is 45%, you lose all your allowances. If you don't know what you're doing, you'll be paying, 53% of your income will be taxed. So you're not actually an entrepreneur at that point, you're a government employee because you're giving more of your money to the government than you keeping yourself. So the whole tax structure, for some people, it's going to be boring, but I think it's essential and I don't think you can assume that your accountant can keep you straight, because in my experience, most accountants can't. They don't know it well enough. And then the third aspect specifically to do with service accommodation that I'd want to pick up here, so we've got compliance, we've got tax. The third aspect is vat. So many people out there are committing VAT fraud and they're not even aware because they don't know that they're supposed to be paying VAT on their service accommodation income. So they just don't. They just take the money and don't pay any vat. We can't do that. That's not legal. So, I mean, that's like, you know, bed and breakfast owners taking pound notes and stuffing it under the mattress or something, you know, at least they know they're cheating so they're likely to get caught. Service accommodation people don't even know that they're liable for VAT on service accommodation. I just see horror story after horror story and people generally that come to me, they've had some other experience of service accommodation training somewhere else and they will routinely tell me that what you do, Paul, and I don't want to classify everybody in the same boat, because they're not. But there are some people that will teach people just like the practical operational side, you know, this is how you should look after a guest and this is how many towels you should have. And you know, this is. I'm not saying it's not important to have towels, of course you need bloody towels. But for me, if you're behaving illegally, you're not compliant, you're not paying vat, you're paying far too much tax. Those things are a bit more important than should you have one towel or two tails? For me, because that bit is kind of common sense. I don't know if I'm answering your question, but our whole ethos, our whole mentality is about professional, compliant, tax efficient wealth.

And I know there's a lot of people that are watching this that will get A lot of benefit from this. I think the big takeaway that I'm getting is, and not only from this episode but throughout, as all the guests that have been on, doesn't matter what they're talking about or what focus that we have had. I think you've just got to make sure that you do your due diligence. Don't take this as a get rich quick scheme. Don't take this as a passive income thing because it is not like Paul is saying time and time again, if you fuck up on this in one of the most core essential things, starting up a business, then you could damage everything that you've worked up to, to this point by not going limited, by not paying vat, which is again, insane. I can't believe people aren't doing that. By not having the health and safety certificates that you need for your properties, then I think that that is a core mental fund. Funny fact, Nigel, the Nigel you're talking about, he's part of the Boostly Academy and I know exactly who you're talking about. So yes, it's a small world, this Facebook and hospitality. So we've teased people enough, we've talked about your training, we know you're based in Doncaster. Now if somebody wants to find out more, they want to maybe come to one of your training weekends or two day things or they just want to get started, they want to find out more about Paul Smith. I want to find out more about Touchstone. Where is the best place for someone to start right now.

And just put Touchstone Education into like the YouTube search bar, not the Google search bar because that will take you somewhere else and just subscribe to the Touchstone channel. And we've got two regular programs that go out every week. Got one on a Sunday afternoon and one on a Wednesday and we cover all aspects of property. But so my second suggestion is if you want to get deep into service accommodation quick, then why not go get yourself a copy of my service accommodation success manual that I wrote about five years ago now. But what I'm going to do is I'm going to give everybody a digital copy of that for free at the end or whenever you want.

Yeah, we can give them the. We can give them the little bitly link now if you like, Paul.

Yeah, so it's just bit ly. It's all lowercase bit ly. And this is all one word. SA Success Manual. Just all one word. I'd make it as simple as I could. So it's kind of the name of the book really.

Easy, really straightforward. But if you're still struggling, don't worry. I will put everything in the show notes. I'll put a link in the post so wherever you go you'll be able to click on it and go to it. But yeah, YouTube, fantastic place to start. I am a subscriber, I'm enjoying the videos and I will definitely make sure that we get the essay success manual out as well. And if anybody wants to find out more about going on training weekends or really delving deep into Paul's wealth management courses that he's talking about, like I say, at any point, go onto YouTube, you know, reach out via via social medias. Touchstone is not just Paul. There's a full office of people and someone will be able to help you and answer any questions. So Paul, I just want to say thank you so much for that tonight and it's been an eye opener, it's been really effective and I think what I love about this series of the Boost Hospitality podcast is that we are delving into every aspect of not only just running a property business or a service accommodation business or a hospitality business, but just running a business. So really do appreciate that and I just want to say thank you to everybody that has tuned in. Doesn't matter whether you're watching the video or you're listening to this on a podcast, I really do appreciate it. This season by far has been the most successful in terms of downloads. I'm planning on doing three more episodes this season, so I'm going to end this on a high. We're going to be talking about marketing, we're going to be talking about running your business all through a phone and we've got something special lined up for the final one as well. So please make sure that if this is the first time that you've listened to this, go to booster.co.uk podcast. You've got 10 other episodes that you can download right now. You can even check out the blog post behind it and get access to all of the digital downloads from each of those. One final thing that I could ask if you could please head over to itunes and go and leave this podcast one of those lovely five star reviews. More and more people are finding it. It's breaking the records for how many people are downloading this podcast at the moment and I truly believe that it's because of people going on leaving reviews. It's climbing up the rankings and more people can see see it. So really do appreciate it. For everybody that is tuning, thank you so much and I'LL be back for episode number 12 very, very soon.