The Rent-to-Own Revolution with Sheila Smith

Transcript

speaker-0 (00:00.046)
Typically, the mortgage is less than the rent would be. It's just that lenders, they have a lot of rules. And if you don't tick all those boxes on that certain day, it's a computer says, no, what people need is a roadmap. It's a journey, not a you tick the box on that certain day, yes or no, black and white. So if they follow that roadmap, they will get to their deposit number that they need in order to get a mortgage at the end of the term.

speaker-1 (00:29.678)
Hello and welcome to this week's or this every fortnight now episode of Wealth Talk, the place where we try and show you new and interesting and sometimes fascinating ways to build, protect and transfer your wealth. And we've got a brilliant new idea. Well, I suppose it's not new, but it's a take on something that I think is just brilliant from a wealth builder member, Sheila Smith, who

Well, we've known each other for a little while, so why don't you say hello, Sheila?

speaker-0 (01:02.658)
Hello, I'm so thrilled to be invited on, Kevin. just to say you're right, it's not a new idea, but it's definitely an idea worth spreading to borrow from TEDx there. It's a little known idea, but I'll let you expand a bit further and we can get into the nitty gritty of it. So thanks for having me.

speaker-1 (01:24.426)
And I suppose going back to that TEDx, you're getting sort of out and about quite a bit now, aren't you? I've seen you radio, you've done, this is your second podcast now in relatively short order. So I saw a magazine talk about this entrepreneurial woman from Sussex, which I take to be you. So why don't you tell us the subject matter and the problem we're trying to solve today.

And then let's put it in context with the world where I suppose those people in property, whichever side of the road you stand, whether you're an owner of property or potentially an owner of property, there are challenges ahead, not least hot off the press. So, you know, where are we?

speaker-0 (02:13.644)
What we're talking about today is that we help renters become homeowners. So they can move into a home today and rent it while working towards owning it. And we facilitate that by matching them up with landlords who want to exit the market. And with the recent renters' rights having just come in and the increase in mortgages, increase in costs.

It's becoming quite an unfriendly place to be a landlord right now. So we're seeing a mass exodus from the market. So for us, that's perfect because it means that we've got more properties to match with our tenants who desperately want to become the homeowners. So it's full steam ahead for us.

speaker-1 (02:57.806)
So shine a light for me on the problem for the, maybe the aging, the tired. I think I'm seeing the same figures, you know, people who are, have been a landlord for donkey's years and have just seen the regulation, the tax, which has really been all pervasive from 10 years ago when section 24 came in. Plus new regulations and the renter's rights and all of that.

albeit renters need to be protected. Nonetheless though, we're definitely seeing an exodus. So what's the problem being faced by those who are trying to exit and what does your service and maybe you should tell us what you've called it as well so that people can look you up and check out what I think is just an outstanding approach to solving two problems. So let's highlight the problem of the

The aging tired landlord. People like me maybe.

speaker-0 (04:00.138)
I wouldn't say that you're aging. You're a chicken, Kevin. Thank you. I am speaking to more and more landlords, you're right, who are coming to me and saying, it's just not worth it anymore. I'm having to jump through all these compliance hoops. There's more expenses. There's a huge risk of getting it wrong. As we saw with Rachel, even Rachel Reeves got it wrong. given that it's one of their policies.

If she can get it wrong, the average person on the street can easily get it wrong and being faced with huge fines. And it's just not as easy as it used to be with Section 24 as well. And then the renter's rights, as we briefly touched on. So there are lots of landlords that are saying, do you know what? I've made my money and it's not worth the hassle anymore. The margins on buy-to-let are very slim anyway. As a landlord myself, I know that I...

dread the phone call ringing from the letting agent thing, no, what's it going to be this time? Let's hope it's not too expensive. And that reality is real. If something like the boiler goes out, that could have stripped away your whole profit on a buy to let in one fell swoop. So there are lots of landlords thinking, okay, I want to exit, but the reality is in the market right now for selling a house is tough.

I'm seeing houses that sticking on for six months, a year, more than a year, and being reduced and reduced and reduced. And if you're a landlord, especially if that property is empty, you've got costs stacking up. You're firstly not having the rent come in, but you've got all the council tax and the utilities stacking up, and that is a very stressful position to be in.

So what we're aiming to solve with this is by giving landlords a smoother, more relaxed exit from the market. Everything is pre-agreed from the start. So we would pre-agree a future sale price. We would take on a landlord's property on a long lease, and that could be anywhere from two years to five years on average. And we are putting in a carefully vetted tenant buyer who wants to

speaker-0 (06:19.018)
own that home. So they will be renting that home as they are preparing to be mortgage ready by the end of the term. So the landlord's got no voids to worry about, their costs are covered, they've got their monthly payment coming in every month, and the tenant takes care of the maintenance as well. for a landlord weighing up their options, they've got the uncertainty of selling on the open market, or they've got

this much smoother, more certain exit where they can plan it, they can structure it. We can structure the timing so they don't have to worry about early redemption charges or the construction of their capital gains allowances in a way that it makes the most sense for them.

speaker-1 (07:06.924)
Or be it like section 24 affecting the income tax, the capital gains tax allowance has been eradicated.

speaker-0 (07:13.806)
3000 not much is it but

speaker-1 (07:16.802)
Petrinia couple is at 3000 each, but there you go. And I think the other point I'd mention as we think about the landlord is you mentioned that some of those landlords who have become more keen to, as opposed to exit the market altogether. And it's become a buyer's market completely. And as you said, the properties can stick for a while or the value.

could reduce. I suppose there's a benefit to the landlord if they agreed a price now and one assumes with some measure for the general increase in prices over, let's say, that lease period.

speaker-0 (08:03.168)
Yes, absolutely. mean, none of us have got a crystal ball as to exactly what that price is going to be, but we would calculate that as more than that they would get today if they were selling. And more importantly, we're agreeing a price that they're happy with. So they know exactly what terms they're going to be exiting on and exactly when they're going to be exiting.

It's not a small thing. They get to know that they've helped a first-time buyer onto the property ladder. And that feels really good. So from a giving back and social impact, that feels really nice.

speaker-1 (08:41.992)
see the value in that. was only a couple of weeks ago when I was interviewed by our good friend Bimbi Fernando talking about the benefit of kindness and thinking about others as part of being in business for good. I think this fits that as well, so I definitely suggest you reach out to Bimbi because he'd be keen to know more.

about this generally because I can see the added value to first time buyer markets, those people who probably, let's look at their problem, right? So I can see first time buyers, if properties generally increase in value over time, they can rapidly just lose track because the wages may not be keeping pace. So what's the problem being faced by the would-be homeowner who's currently stuck in rented?

speaker-0 (09:39.68)
Yeah, absolutely. there are several issues that are holding people back from a mortgage today and that most often is not being able to save up enough deposit, but it could also be having a blip on their credit or it could be being new to the country because you can't get a mortgage straight away. Or even with self-employed accounts, sometimes lenders can be a bit funny about that and need to see a number of years of stability.

So those are generally the issues that we're trying to solve through giving them a rental period before they then go on to buy the property. But especially in London and the Southeast, we just see that house prices are so astronomical compared to where people's wages are. I think that it's fair to say that house prices across the nation are accelerating faster than people's wages are.

So what we can offer is a structured route to home ownership. So people know exactly what they're budgeting towards. During the rental term, the rent is fixed, but they also know exactly what they're buying that property for. So we can either do a shorter number of years or a longer number of years depending on if they need to save a bit more, they might need a slightly longer term. So all of that is really

cleanly mapped out. So if they follow that road map, they will get to their deposit number that they need in order to get a mortgage at the end of the term.

speaker-1 (11:16.558)
So suppose all of this, Sheila, correct me if I'm wrong, I'm just thinking out loud here, that this is possibly predicated on the idea that people who are paying rent, the rental would probably be more than the cost of ownership. It's just that they can't reach it.

speaker-0 (11:35.788)
That's exactly right. Typically the mortgage is less than the rent would be. It's just that lenders, well, they have a lot of rules. And if you don't tick all those boxes on that certain day, it's a computer says no. And what people need is a roadmap. It's a journey, not a you tick the box on that certain day, yes or no, black and white.

speaker-1 (12:03.342)
So I can see there's, you know, where I think very good businesses, very elegant businesses, they solve both sides of the equation. It's perfect mathematics. It just works. So I can see instead of having an uncertain, unstructured bumpy journey, both sides having that, you can give them a clear pathway so both sides can see, understand and appreciate.

exactly what they can do so they both get an outcome. Let's try and get to the nitty gritty for you then. So I can see you're solving the problem, but you know, they called you an entrepreneur in the, in the magazine. So entrepreneurs need to ethically solve problems at a profit. So how do you make your profit? Where's the margin?

speaker-0 (12:55.298)
We run very similar to a letting agent where we are taking a management fee from the rent every month from the landlord. So that's our business model. And we take a bit of the difference in between what we're agreeing the price today and the price that we sell on to the tenant buyer. But it's mainly through a management model, very similar to a letting agent.

speaker-1 (13:22.168)
And letting agents are well established as a source of both cost and revenue. whichever side you're on, is a letting agent a profit, but it's an acceptable profit. So I can see that. So that seems to be a solution that I can see would work. And in order for you to market this then, to get more people to be aware of this as a solution, hitherto they might not be, what's your process to educate both sides?

speaker-0 (13:52.174)
Well, I think as you touched on earlier, for me, it's just been getting out there in the press, saying yes to lovely podcast invitations when they arrive in my inbox, speaking on live radio yesterday, being as visible as I can, because not everybody, in fact, I would say not many people know that rent to own exists, which is quite funny for me because I lived in America for 14 years and it is a really...

common route to home ownership over there. So when I moved back over here, I thought, why aren't we doing this here? Because I knew lots of people in America that had chosen that route because it's a well-defined, well-structured route for somebody that doesn't qualify for a mortgage today. So for me, it's just about publicity. It's about getting the word out there and letting people know that this is a...

solid and quite frankly better alternative than some of the government schemes.

speaker-1 (14:52.366)
Come on, tell us why.

speaker-0 (14:53.998)
I wondered whether you were going to ask me to name and shame the government schemes.

speaker-1 (15:01.474)
Blusted on long enough about what governments do and what they do often with good intention, but bad execution can be quite painful. you know, so I can, I remember way back when I started in the world of finance, which was 1989, the right to buy was, you know, the full on marketing opportunity of the day. And that's really where I started.

doing work, I just started doing mortgages for people to buy their council houses, frankly. Honestly, knocking on council house doors in Tooting and Mitcham in 1989, saying, would you like to buy your house? And they didn't know they could because they weren't paying attention. So I think there's always been the gap of knowledge and there's always been the government trying to intervene. But how have they intervened? What have they done?

And it's not just the government, the housing associations as well. What are they doing and what's the problem with what they're doing?

speaker-0 (16:06.988)
There's been quite a few government schemes over the years that have come and gone because they haven't been very, very successful. Like the help to buy scheme, which is dead as a door now, now. But I would say the one that has stuck is shared ownership. And I'm constantly reading in the press horror stories about how people are getting trapped in that. Because the problem with that is there's no fixed pricing. The rent.

keeps increasing on the share that you don't own of the house and the house price keeps going up. So you've got a moving target and quite frankly, the longer you wait, the harder it is to buy your additional share because it's very likely that your wages aren't increasing as fast as the rent is increasing or the house price. So lots of people are getting trapped in that, which is not a pretty place to be.

speaker-1 (17:02.958)
So, okay, so how does someone who is looking to use your idea here, how do they avoid being trapped?

speaker-0 (17:12.91)
So our scheme is the tenant at the end of the rental term always has the option but not the obligation to buy. So they are not locked in, unlike with a shared ownership scheme where you are locked in. And to sell, it's very difficult to sell your share of the property, but it's not the case with us.

speaker-1 (17:34.83)
I think I've said before on a podcast that often one of the benefits of being well connected and thinking about the culture of who, not how, is you borrow ideas and distinctions from other people. And we've all been on that journey looking at, that's interesting, that's interesting. And so your American experience has really been an interesting one that shaped that.

How long did it take you to come up with the idea and how did the germination of the name, you need to tell us what it's called here as well.

speaker-0 (18:11.564)
Have I

speaker-1 (18:14.254)
You're so used to telling people, maybe you haven't today. you know, we'll do a link in the show notes to who you are and what you're doing. So there's no problem there. But yeah, best tell us what it's called. Why don't you do that first?

speaker-0 (18:26.642)
It is called Behomed and the idea from that, as is probably quite obvious, is that we are helping people getting into a home. So Behomed felt like a nice, comforting name.

speaker-1 (18:41.666)
And how long did you wrestle with that? Because there's method in every madness.

speaker-0 (18:45.054)
I wrote down loads of brainstorming ideas and then as you do in a modern world, you Google them to see whether somebody else has got the domain and that acts as a few of them. And luckily nobody else had the domain for Bahome. So that's the one that's stuck.

speaker-1 (19:04.95)
It always fascinates me how people name their businesses, you know, and yours is similar in style to wealth builders. You know, it's be home, it's do what it says, you know, on the tins. I really liked that. And I think it, speaks to the clarity of the solution that you're bringing to the market. So I think that's great. As far as the government is concerned, you know, is any, is there any, anything going on with renters rights, anything going on?

with any regulation that would somehow scupper anybody's plans because these, for the tenants and the landlords, they're typically five-year plans. So what could get in the way of that, do think?

speaker-0 (19:47.042)
Well, there's nothing on my radar right now that could get in the way, but as we know, the government and I would say not just this government, but governments in general like to move the goalposts as we've seen with inheritance tax and certainly with renters' rights and all sorts of things. So I don't know what the future holds, but right now I don't see any roadblocks. I just see a really strong demand.

For instance, after our recent article in the Standard, the London Standard, we had over 400 inquiries and 136 applications in a matter of sort of a week and a half, a couple of weeks. So the demand is definitely there.

speaker-1 (20:34.926)
So the demand is there, so how about the supply side?

speaker-0 (20:37.55)
The supply side, as you can imagine, the housing market does move slower. I would say there's more demand than there are houses coming online. But I think that's mainly because landlords don't know about it yet, which is exactly why I am doing my darndest to get as much exposure as I can to get the message out there and let landlords know that this is a really

great alternative to selling on the open market.

speaker-1 (21:09.634)
Well, I wish you well as far as that's concerned. And I think, you know, we kind of share frustrations with what governments do from time to time. And we often have a battle with getting messages that we think really solve big problems, but don't get the airing. I think we, we had that issue with SAS, you know, a while ago, people just weren't talking about it. In fact, that's how we came to be connected, is it not?

speaker-0 (21:37.396)
is, absolutely, because there aren't that many SaaS education providers. when I think I might have even seen one of your stands at a property investment show that I went out. anyway, came, wealth builders came into my world as one of the few and trustworthy providers or and information and education providers for SaaS. And it's brilliant how much information you have because SaaS, while it's very powerful,

There is a learning curve there, and I think that you need to do your homework and get educated on how to run a SaaS successfully and profitably.

speaker-1 (22:19.756)
Well, well said. And I know you're a SaaS owner yourself as am I wrestling as we are with the inheritance tax issue. And Paul and I, Paul Brooks and I, the podcast that's just recently been out, was talking specifically about the seven C's of SaaS and how you can use your SaaS to minimize your inheritance tax. Let's talk about the tenants then, just in terms of the protection piece.

So someone's got an obligation, sorry, correct myself, it's got a right but not an obligation. So we would call that an option. So they've got an option to do something. What if we've got a married couple and somebody dies in the intervening period? How do you help solve that problem so that the other person can meaningfully find a property?

and stay in the property rather than in the end they can't execute and they're back in the marketplace and maybe even struggling. How do you do that or do you do that at all?

speaker-0 (23:28.302)
Do you mean that they were already in the rent to own scheme when one of them died or that they're coming to us after?

speaker-1 (23:38.08)
Is there a way that, or is it part of your service to educate them is to make sure their wills are up to date, they've got live cover to pay for the cost of the property, you know? In other words, we know life goes wrong. Is there something educationally you're providing that helps to say if you, you know, you're on a good journey, you can see the journey, but if just like having a holiday, sometimes things go wrong and things cancel.

Are you providing that or is that just an idea that we're talking now that you might want to use?

speaker-0 (24:12.622)
So that's a very good question, now I understand what you're asking. That's exactly why I'm loving the partnership with wealth builders, because I know that I can't provide everything, but I also know that homeownership is just one piece of a giant puzzle of becoming financially free and becoming financially empowered and educated. So I can't do everything, and why would I when I can introduce

people to get educated to wealth builders.

speaker-1 (24:47.074)
What I always have a passion for is people set themselves a journey and they reach it. Even if something goes wrong, they've got the opportunity to take care of that. So if, for example, someone sees the opportunity, which is life-changing to be an owner or supposed to a tenant, and they can protect themselves for the duration of that, I think that would be worthwhile perhaps adding.

to the string of things you do just to educate them on what that looks like. anyway, that's just me chirping up with ideas that I think, yeah, I would want that happen the same way as when we help people build wealth. We're always taking care to say, well, you're on the journey to build wealth together, often families. But if something goes wrong, what's going to take care of the family so they become wealthy? It's just an extension of the same thing.

speaker-0 (25:44.128)
It's interesting because that came up in my interview yesterday about income protection. And it's very typical for when you go to get a mortgage that a mortgage broker might point you down that route to say, would you look at income protection insurance because if the worst case happens and you're not able to work because of illness or an accident, it's a good idea to have that protection in place. And it's quite interesting because

Renters aren't typically offered that kind of insurance, but there's no reason why they shouldn't be. And quite frankly, that is a great opportunity as they enter into a rent-to-own agreement to be looking at income protection as a way to protect that journey and make it a bit more peace of mind.

speaker-1 (26:37.516)
Yeah, sure. And if it's part of your education and becomes part of your service, it could become part of your profit center as well. As well as doing good things. There's nothing wrong with insurance. It's not a process that persuades people to do things they shouldn't do. In fact, in some cases when we talk to people about say inheritance tax and we do our best to get their inheritance tax typically down by half. So if they got a million quid tax bill, we'll get it to half a million.

But sometimes you just can't do it, especially property owners, because you can't suddenly just get rid of all your property. You know, it's not really possible to do that anyway. So if there is a bill to pay, then we can often rearrange money to pay for the tax so that the kids, when they do have to pay it, don't have to sell the very assets that they own in order to, that's built the wealth. So it's an interesting one.

We're not trying to persuade people to buy insurance. saying he's just one of the options. And if you decide it's important to you, can, if you don't, you don't. And that's always the way I try and explain things is do something, do nothing, but get the clarity so you can make a decision about what you want to do. anyway, that's good. Anything else that you're learning just about yourself as you're doing your podcasting and your TV next.

speaker-0 (28:01.464)
Well, I have been. I've had a TV interview last year, yeah, on GB News. I was interviewed, but yeah, maybe a primetime TV next. I'm opening up for those opportunities to arrive.

speaker-1 (28:15.606)
Okay, well good. Is there anything you'd want to say to the wealth builders listeners, who you're reaching out to, who you'd like to possibly get in contact with you and where would they find you if they wanted to do that?

speaker-0 (28:29.998)
Absolutely. The best way is through our website, is behomed, B-E-H-O-M-E-D, .co.uk. Or you can find me on socials as well on LinkedIn, Facebook or Instagram, Sheila Smith. And yeah, I'd love to hear from people who've got a property that they want to offload or equally if you're a tenant and you would like an easier way to, a structured way to become a homeowner.

speaker-1 (28:59.662)
Yeah, and I suppose this subject is probably talked about in homes and families across the nation. And therefore somebody might know someone where that solution would be a good fit and back to the kindness thing. Sometimes it's good if it's not relevant for you, you share something for somebody else. so where to next? What are you going to be doing next to promote your ideas? So what else are you doing?

speaker-0 (29:27.182)
I've got a couple of press things coming up, so stay tuned for that. We've just been working with a tenant buyer who is moving over from New Zealand. So that's quite exciting. we are purchasing, so this is a little bit different from the landlord journey. We're purchasing them a property with Investor Finance, and they will be moving in hopefully at the end of the month. So that's all going through conveyancing right now.

So the investors getting a nice return on their loan and the tenants are due to arrive in a couple of weeks over from New Zealand to start over here. So that's quite exciting.

speaker-1 (30:09.714)
So that's an interesting twist and one that might appeal to those people who perhaps have got sasses or perhaps have got cash and want to be an investor. are you able to describe that or do you want to describe that on another day?

speaker-0 (30:23.822)
It's purely on a loan note. So if we pay a healthy rate of interest for a loan, which we can then use against property, purchasing a property on a fixed term. So this one happens to be three years, but there are different term lengths. So that's all very flexible. That is on my website. Yes.

speaker-1 (30:43.32)
And is that on your website as well?

OK, very good. Well, I think it's been a fascinating share, Sheila. And good to know that things are going well for you. And I'm so glad that we've been some small part of your journey as a member of Wellbuilders and as a SaaS owner yourself. And I'll be telling as many people as I can, both landlords and tenants, to check you out. And if you're interested in that, if you're a listener, please go to the website. It'll be in the show notes.

Follow Sheila, she's doing some great stuff online on LinkedIn, on Facebook and all the socials and share this podcast with other people and be kind. Until then, see ya.

speaker-0 (31:32.494)
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the WealthBuilders membership site to help you create and develop your wealth. Head over to wealthbuilders.co.uk slash membership right now for free access. That's wealthbuilders.co.uk slash membership.

speaker-1 (31:39.566)
help you create, build and protect.