ASK497: Should I delay this until after the Budget? PLUS: Is this too much leverage?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Welcome to Ask Rob and Rob, a show we've been doing for a long, long time now where you ask us questions and we give you answers. It's simple, it works, and it works because you send in lovely questions. So we'll be hearing from Emma and James in a minute, but first here's a reminder of how you can follow in their footsteps. It's super simple. You head over to propertyhub.net forward slash ask. And there you can get your question in in a variety of ways. You can leave us a voicemail. You can leave a computer recording. You can even write in and maybe see your question in the Sunday Times.

0:38We do not mind at all as long as you keep doing it. Unfortunately, nearly 500 episodes in, you have. And this week, our first question comes in from James. Hi, Rob and Rob. It's James here in Kent. Thanks for all the great content over the years. My question is about remortgage product transfers. I have three buy-to-let properties all in the midst of a product transfer. The first one has already completed. The second one is due to transfer on the 1st of November, and the third one is due to transfer at the end of the year. The Chancellor has announced that her autumn statement will be towards the end of November.

1:14Do you think it would be worth me delaying the product transfer from the 1st of November to the 1st of December that way having time to consider the chancellor's tax changes and if it is truly unpalatable for me to keep the property then I would have the opportunity to cancel that transfer and sell the property. What do you think? James thank you for your question. I think this is fairly simple. It will depend on how you invest. If you are investing as a legacy landlord and that's basically landlords who invest in their own name or have invested in their own name, then you may want to wait because it's only been bad and it seems to be getting worse for those individuals.

1:58If you invest with a limited company, a lot of the things that have been rumored to be coming in don't really seem to impact people with limited companies. Now, I can't make you any promises, but I as an investor feel very confident in my strategy which now is to invest in limited companies previously because I've been in it for a long time I've got some legacies some properties in my own name but all the stuff I do now is in the limited company and I'm not that worried maybe I'm naive but I'm not that worried about this upcoming budget it seems to be it once again targeting those legacy landlords.

2:36So if you are really, really nervous, then yeah, absolutely hang on. A few months isn't going to make a difference. But for me, if you're an investor in a limited company and these are for a limited company, then I'll just crack on business as usual. But of course, the choice, as it should be, James, is very much down to you and just do what makes you comfortable. If you're losing sleep over this, just wait. But if it's not a big deal and you invest in a limited company, crack on. Okay, let's have our next question now from Emma. Hi, Rob and Rob. I know how much you love leverage, so I have a question about how much is too much.

3:10I bought my first buy-to-let in my own name with a standard 75 % buy-to-let mortgage, and I'm planning to buy at least two to three more properties through a limited company. I save what I can, and I plan to reinvest all profits from my property investments, but because I don't have much left over from my salary each month, I'd need to top up my funding for future purchases by taking equity from my home, which is currently mortgage-free. That means that future investment properties will essentially be double mortgaged. I'm wondering how to allow for this in my modelling, because as it is, the costs of the second mortgage tend to blow the business case for future investments out of the water.

3:47How can I find the right balance between smart leveraging and risky investing? Am I missing something? Or is it possible that I simply can't afford to play in this game? Emma, interesting question. Thank you for sending it in. There are a couple of different ways of looking at this. I don't know if there's necessarily a right or a wrong. By doing what you're talking about, by taking the deposit out of your home and then getting a mortgage for the rest, your property is 100 % mortgaged effectively. And that makes it hard to make it add up in cash flow terms, especially because the part of that comes from your home, highly likely to be on a repayment basis.

4:20So in pure cash flow terms, you're probably going to find that it just doesn't work. And that is an entirely reasonable way of looking at it. But there's also another entirely reasonable way of looking at it, which is that your home is currently mortgage-free. Many, many people are not in that situation. And so yes, you're borrowing some money against your home. But even after doing that, you still end up in a pretty good position. And if you think about it, you've actually got a giant opportunity cost, which is that you've got your home sitting there. But what it can do for you, the amount that it can produce for you is essentially capped at the amount that it would cost you to rent an equivalent home.

4:54So I think it's one of those where if you looked at it purely on the raw numbers and you tried to make it work at 100 % mortgage, it probably wouldn't. And maybe that makes you feel uncomfortable and you don't do it. But if you were to do it and you take the view that my portfolio is what it is and my home ownership costs have gone up, then it does create this opportunity for far more longer term growth than you would otherwise get because you're buying more properties, all of which will go up in value over time. So I think they're two different but perfectly reasonable ways of looking at it. The bit that makes me nervous is that you say you don't have much left over after your salary each month, which is why you need to be taking from your home.

5:28But of course, if you take out a mortgage against your home, then it means your costs will go up, which means there's a risk that will put you in a precarious position. So I think there's probably a middle ground here where because you are completely mortgage-free, where there's a possibility for you to take some money out of your home, but still end up at a very low conservative safe level of leverage and still have the ability to go and buy at least one property but the risk factor to look at is your cash flow position where would that leave you and are you taking on too much risk so i would say consider all that and also speak to a mortgage broker to find out if there is the option of borrowing interest only against your home it's far more rare to get interest only residential mortgages than it used to be but if you are going for a very low level of leverage it might be possible and if it is possible that means that monthly payments would be lower, which would give you a higher margin of safety.

6:16So I know that's not an answer, but hopefully it gives you a way of thinking about it and some ideas for what you want to research next. Good luck. Good luck indeed. Well, that's us done for another week. We'll be back soon with the podcast on Thursday. Property Pulse will be landing in your inboxes on Friday. There's loads going on our YouTube channel. You'll see us on Sunday in the Sunday Times. And then guess what? We'll be back same time, same place next week answering more of your questions. Until then, take care, have fun. Bye-bye. Bye-bye.

6:46Hi, it's Tracey here from Property Hub. We know there's a lot going on right now. Interest rates, regulation changes, negative sentiment. It's a lot to process. So we want to know, how are you feeling about it all? Are you buying? Are you selling? Are you hiding behind the sofa waiting for it all to pass? We've put together a short survey to find out. It takes two minutes and it'll genuinely shape what we cover on future episodes. You can find the link at propertyhub.net forward slash survey to have your say.