ASK487: Should I invest instead of buying a home? PLUS: Is this ground rent a dealbreaker?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. It is Ask Rob and Rob. Thank you for joining us. It's Tuesday. That means we've got two more of your lovely questions to answer. Those heading your way. But if you've got a question of your own, you need to recap how to send it our way. Yes, you do. But it is very, very easy. You just go to this one place and there's a selection of options once you arrive there. Go to propertyhub.net forward slash ask. There you can phone in if you so wish. You can leave a message directly there on that website. Or you can write in and maybe see your question in the Sunday Times.

0:37Whichever option you prefer, we do not mind. But for the purpose of this show, audio helps. And luckily, we've had some audio in. Okay, let's listen to our first question in from Sam. Hey, Rob and Rob, it's Sam. Huge fan of your podcast. Thank you for all the good stuff you guys do. I have a question. So I'm a first-time buyer and I think I found a property that seems to be really good value, but it's a little small still for me and my partner to live in. But, you know, I think the investment case is pretty strong. I understand as a first-time buyer, it's very hard to get a buy-to-let mortgage.

1:09So I wanted to ask your views on working with a broker and a lender to potentially get it on a regular residential mortgage and get a consent to lend, which I believe is sometimes an option. And thanks once again for all the good work you guys do. And we'd love to hear your thoughts on this. Sam, thank you for your question. So doing what you want to do, if I understand correctly, is buying a property but not living in it is not allowed. So you can't get a residential mortgage, pretend you're going to live in it, and then turn it to a buy to let. Now, that said, I know firsthand people who've done it.

1:45And I also know people who've got away with it. But it is a risk. and if the lenders find out, they could black mark you, which could affect your lending prospects in the future. At least that's what I'm told. I don't know actually happening to anyone, but that is what I'm told. So the sensible, safe advice for me to give you is don't do that unless you are prepared to take a reasonable risk around your future lending prospects. Now, if you are willing to live in that property and you just so happen after a few months decide to move out and rent out instead, that's okay. but you will have to live in the property for a short while before you do that.

2:25So it depends on how close it is to where you would want to live anyway, how much of a compromise it is for your needs. But if you did that, that would be a way of achieving what you want. But that said, I think you may have more options open to you than you think. Now absolutely, as a first-time landlord and first-time property owner, you have less options open to you. That is true, but you don't have no options and the mortgage market is getting better all the time, week by week it seems. So my advice to you would be to speak to an experienced mortgage broker. If you haven't got them we have experienced brokers come on our podcast, they don't pay us to come on the podcast, we get them on because they are good at what they do.

3:08Speak to one of them or speak to your own, it doesn't matter and find out all your options that are available to you and then make a better informed decision. The first mortgage you will get won't be the tastiest rate. It won't be. It won't be a good rate at all. But once you've owned that property for a couple of years, you are then considered an experienced landlord. The property will then have many more options in terms of refinance prospects when you come to get your remortgage in a couple of years' time. So it's a case of some short-term pain potentially, but longer term you'll be much better off.

3:42And remember, you don't own a property for two years. so the slight dent that you will take to your cash flow for two years is just a blip in the bigger picture so don't get too distracted about paying a slightly bigger rate for the short term as long as the cash flows well you'll be fine and in a couple of years time you'll get a much better rate so plenty to think about sam but speak to someone with experience to help guide you through this process good luck okay here's our next question from karen hi rob and rob this is karen a long-time listener and just starting out on my property investment journey i found a promising property in London within a block and both the seller and I are quite motivated.

4:19However, we have hit a roadblock regarding the ground rent. It is currently set at£250 and reviewed roughly every 20 years with increases linked proportionally to the land value. The concern is that there is no upper limit on these increases which is making my lender really hesitant. They're requesting a deed of variation to address this. The management company is willing to agree with the deed of appropriation but is asking the seller to pay a 10 ,000 pound fees which while this isn't unheard of but it does seem quite high. What I'm trying to understand is, is my lender being overly cautious or is this a serious issue that could restrict the number of lenders or buyers when I eventually decide to sell or is the management company being unreasonable with their fee?

5:01I have spent a fair bit of time on this property and would really like to move forward either ways. At the same time, I don't want to end up stuck with a problematic asset or feel pushed around by the management company as the current seller appears to be. What would be a foolproof and definite resolution in this situation? Thank you so much for your time and insight. Thank you for your question. And the first thing I would do here is see what your broker has to say. Because basically, is the lender being overly cautious? Well, if they're acting much as any other lender would, then maybe you consider it overly cautious, but it's the reality.

5:35If most lenders would take the same view on this ground rent then it's going to really struggle your ability to refinance and to sell in the future so it's something you need to take very seriously but your broker will know it might be the case that because of some peculiarity of the property and your circumstances you've only got the choice of one particular lender and they just happen to be being weird about it but the answer here is to have an experienced mortgage broker because they should be able to put this case past other lenders so they should have contacts with business development managers at different lenders and just say to them hypothetically if we were to put this case forward with this type of lease would it be an issue for you or not and that'll give you more information about the situation regardless though if you do want to proceed and you are tied to proceeding with this lender then the only solution is to get the deed of variation and that is ultimately the only thing that makes the situation go away forever so there's always the possibility that it will come up again at some point in the future when you're refinancing or selling but if you get the deed of variation, that very expensive piece of paper solves the problem for you.

6:36£10 ,000 is a lot. It's not uncommon. The management company doesn't particularly care if the transaction happens or not. So I don't know how much success you'd have negotiating that down. You could try. But you've said that they've asked the seller to pay it. So for you, that's great. If the seller is willing to pay, then there's your answer. You don't have an issue. But if the seller is not willing to pay, or if they ask to split it with you, then you have to ask yourself, by the time you pay that extra£5 ,000, is it worth it? Does the deal still work for you or not? Of course, it's possible in the future that all of this goes away, that the legislation we've been waiting for for years and years finally happens and this all gets totally sorted.

7:13So by the time you come to sell in the future, it's a non-issue anyway. But for the sake of your security and the sake of you getting this loan, you need to get it sorted. So for me, dream option, the seller pays, all sorted. Next best option, agree to split it with them, but only if it still makes the deal worth it. It's very common to get a long way into a deal, you've been through so much, and you're so committed mentally to making it happen, then you can lose sight of, is it something you even still want to be doing? Does it make sense after all the little compromises you've made along the way?

7:42Does it still work? I'm not saying it doesn't, but I am just saying, ask yourself that question. Don't fall into deal bias. Take a moment to just go, is there still a deal I want to be doing? Or have I just become committed to having it done so hopefully that helps karen and i hope you get the outcome you want that's just done for another week thanks for listening we'll be back on thursday for the property podcast and we'll be answering more of your questions sunday in the sunday times the home section don't check that one out and of course back here same time same place next week for another ask rob and rob until those wondrous events occur take care have fun bye-bye bye-bye