ASK501: What do I do with an inheritance? PLUS: Should I sell or rent out my flat?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Hey everyone, welcome to Ask Rob and Rob. This show where you get your wonderful questions in, we give you some heartfelt answers, some answers with effort and care returned to you for this wonderful format. And this wonderful format has been going for a long time now. So let's keep this show on the road. Let's get your questions in. Rob, can we get a quick reminder how our dear listeners can get their lovely questions onto the show we sure can all you've got to do is go to propertyhub.net slash ask that's propertyhub.net slash ask you can send us a written question for our signing times column or our favorite option send us a voicemail because then we can answer you right here on this show like we're about to for felix hi so i'm looking to get into the property game and i do watch a lot of your guys's videos on youtube find them very interesting so i say i'm in quite a unique position because i'm 20 and i inherited a sizable amount of money not millions but enough let's say six figures those six figures but i want to get started in the property game now and build up over time but one thing is that i don't have like an income i'm a student so i don't have like much money to cover losses and i'm trying to be quite risk adverse but i don't know where like how to get started if i just am better just buying a one bed in manchester and cash all straight up or i don't know what do you guys think in my position because i just feel like i don't know if i'd be better off just putting it in the stock market but i do want a property portfolio and i want to get started on that while i'm young and then in the future will make my life a lot easier but um yeah big fan love your guys's work love the podcast yeah keep going and hopefully we'll get in touch soon.

1:48Felix, thank you for your question. It's a great question. It's a really simple one, but it's really hard to answer because there's so many different ways you could go with this. You've said that you're not a big risk taker and I think that's a really good thing to be when you're in this situation, a young person with a considerable amount of funds. So I'm really pleased that you've put your question into the show so we can try and help you through it. Now you have lots of options. So if we take the first option, which is action, which is moving at a reasonable pace into a deal. You don't have an income, but the mortgage market has opened up now.

2:21So there will be options there available to you. Of course, you could try and buy a property outright in cash, but the mortgage market is more advanced than it was a few years ago. Your options will be really limited and the rates won't be attractive, but leverage is a possibility. It's a possibility. So I wouldn't rule it out completely. I would at least make that inquiry. I'm not saying you should do it. I would weigh it up. Maybe the rates and the fees are going to be so expensive that it's not worth it, but it's worth considering. Another option is going in for a good solid property, one that's in really good condition and a really good area and a really good city or town and buying it for cash and remortgaging it in a year or two.

3:03That way, the expenses that can come your way, like property maintenance and voids, hopefully will be reduced because if you go for a good area, the rental period, the voids can always be mitigated by just lowering the rent and you haven't got a mortgage to clear. So you can make sure you've got a cashflow coming in. Don't be greedy with what you're trying to achieve. If you're not finding that it's getting let quickly, you want it let quickly. So that way your risk is reduced. You can get insurance as well. So if the tenant stops paying, there's some coverage there for you as well. And by going for a property in good condition, a newer property possibly, then your maintenance risk is reduced.

3:40So that's one way of approaching this. So that's your taking action in a sensible way. Another way of doing this is pausing for a little while longer, going through university, but building your knowledge up during this time. So listen to all the podcasts, but doing your research into the type of areas that you want to invest in, finding out more, taking your time. I don't know how long left you've got of uni, but you could go through that process so that when you have income, when you've left uni, you're then in a stronger place from a mortgage point of view to get the property. And hopefully your confidence levels have increased as well because of all the research and time you spent learning during that period as well.

4:19There is no right or wrong answer here. I don't think either of the options I've suggested are particularly aggressive. Even the action one, I've framed it in a more low risk approach. But if that still makes your palms a bit sweaty and you think you might lose sleep over that, maybe consider option two. I think they're both great options and I love the fact that you're taking your time to make this decision. You're not going to rush into a mistake. So I'm really confident that whatever path you choose, you'll do really well. Yeah, I think that's great advice, Felix. We've talked recently about how the market is particularly strong right now, which is true, but irrespective of the market, you need to be ready and you need to be confident.

4:56So if you are, fantastic, but property is not something you can just easily dip in and out of. So if it is a case of sitting back, waiting, taking your time, you can put that cash in an account where the interest is going to mean it pretty much keeps up with inflation. So you don't have to rush if you're not ready. Okay, let's hear our next question now from Zara. Hi there. Thank you for your podcast. I listen to it a lot and find it really informative. I bought a leasehold flat in Zone 2 London, Tower Hamlets in 2019 at sort of elevated value. And since then, it's gone down in value, the service charges skyrocketing.

5:31And I'm wondering if it's a good idea. The other thing is I will need to upsize soon. Anyway, it's a two bedroom flat and I'll want to move into a bigger place. The good news is I've almost paid off my mortgage. So I'm wondering if the right thing to do is buy a larger property, a sort of forever home, you know, in the next year, a couple of years while prices are quite low and then use this leasehold flat as a rental because the rental yield would be quite high in Zone 2 London. And that might be a way to sort of recover my investment. Or I don't know if you think I should just get out now because there's no future for leasehold flats with service charges going up.

6:11I mean, the other question is, can service charges continue to go up? Because right now, it's more than 1 % of the value of the property, which makes it harder to get a mortgage on it. So I'm told. So I worry about being able to sell it as well. so thank you for your question it's a really tricky one i'll do my best to unpick this so the first thing i say is that london has had a tricky time london's not been at its best since you bought what five six years ago which hasn't helped it sounds like you didn't buy us at a great price which has put you on the back foot to start with and then service charges have gone up now there may be something with your building that means service charges have gone up in particular but they've gone up across the board because costs have gone up the cost of everything especially insurance and energy which are two of the major costs in there have gone up dramatically so you've not had a great run that doesn't mean that london or flats or anything like that is doomed forever not at all these things always go through phases but nevertheless if you're looking to upsize so you don't really want to be living there anymore and if you don't really want to own it as an investment anymore if you wouldn't buy it today knowing what you do now and believing what you believe about the future from now on then I can certainly see why it would be cleaner to sell it and release those funds for your next purchase.

7:27People generally get very emotionally attached to properties and there's nothing wrong with selling if that's the right thing to do. The challenge is given everything I've just said now is not a great time to sell now is not a great time to sell in the market in general it's a buyer's market so something that I would be trying to find out is if you did actually want to sell what price would you realistically get for it? So do some research, look at the land registry of transactions that have actually completed, see what price that deal was done at, speak to local estate agents, but really get beneath their general optimism.

7:59And if I needed to be sure of having this sold within six months, what price would it need to be? And then you'll have a quantifiable measure of what you'd be able to realise from this sale. I wouldn't worry too much about how much you'll have lost on it in air quotes, because that sunk cost, it doesn't really matter. But at least you'll then know what you'll be realising from that sale compared to your other option, which is assuming you don't have all the cash for your onward purchase, would be to increase the mortgage on that flat and use those funds for your next purchase. Which brings me to the other thing that I would look into is can you get a mortgage on it right now?

8:32And what would that cost you? So you mentioned the service charge being high, putting lenders off. Maybe that's right, maybe that's not. So go to an experienced broker, explain the situation and get them to see how much of the market is open to you. generally there are always options are they options you like what would it cost you and that'll then put you in a better position to start making decisions because you'll have a lot more information than you do now so i can see why it all feels a bit heavy right now and why it's probably frustrating that you can't make the move that you want to make but i always find that the best way to deal with things that feel a bit scary is to gather as much information as possible get the facts and then you can take a step back and look at it logically so zara i hope that helps So good luck, Zara.

9:14Good luck, Felix. Thank you for listening, everyone. We'll be back same time, same place next week. The main event, that property podcast, will be here on Thursday. So until those two wondrous events take place, take care. Have fun. Bye-bye. Bye-bye.