ASK507: Is it worth paying this broker fee? PLUS: What types of BTL property should I invest in?

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 favourite option, send us a voicemail because then we can answer you right here on the show.

0:41First up, let's listen to our question in from Moosa. Hi Rob and Rob, it's Moosa here. Thanks for all the great content you put out on the podcast. It's really helped me on my property journey over the last few years. My question relates to broker fees. So I do have a broker at the moment who operates as a sole trader and they don't charge me a fee directly. They get their commission from the lender. But I have been looking at potentially getting a new broker and I've done research into several firms that offer mortgage broker services. And I found that they typically do charge the client a broker fee.

1:17And that fee is often in the upper hundreds, maybe in the 500 to 800 pound range. And I just wanted to get your guys thoughts on whether you feel that's worth it. In my head, I'm a bit hesitant. I'm a bit confused as to the need to charge me a fee or the value they can generate to justify that amount. For a broker deal, I'd like to see that they've been able to provide me with a product or access to a lender that potentially other brokers couldn't. That's provided me with a savings equivalent to that fee that they are charging. But I find that hard to believe that sole trader brokers or online brokers who don't charge a fee, I find it hard to believe they wouldn't have the same level of access to a market.

2:00So I'm just a bit confused here and I like your thoughts on whether I'm missing something, whether brokers who operate as professionals or professional firms are worth the money they charge and what value that might be that maybe I'm not seeing, or whether it is better there's enough value in going with a broker who doesn't charge me a fee directly and instead just gets their commission off their lender looking forward to your advice and keep up the good work thanks very much so thank you i can understand this question because it feels like there's a service for free and there's a paid service and you've got a choice between the two so you always pick the free option right but rob and i don't and there's a reason for that rob and i pay for a mortgage broker so we always say we use a mortgage broker but we pay and there's a reason why we pay and that reason is the advice that we get with the mortgage.

2:50So when you go for a buy select mortgage there are many options on the table and when you go and pick your property you can see that list of mortgages and you may believe that you can pick anything from that list. That is rarely the case. It's getting into the detail of those mortgages that's really key. An experienced broker is critical here. Paying doesn't get you experience. What I would be looking for, Moosa, is an experienced broker. Not an online platform, not someone who will quickly turn something around, but also not someone who's just charging for the sake of it. What I'm looking for is an expert, somebody who understands buy-to-let mortgages.

3:33Not has done a few, really understands it and can evidence that the majority of mortgages they do are buy-to-let mortgages, not something to do occasionally. That is worth paying for. So paying for a broker just for the sake of it isn't. Paying for an expert absolutely is, because they'll be able to navigate you through the nuances of the mortgage market to say, ah, well, that lender may appear the best rate, but actually when you go through this, they'll charge you a higher rate because of that, or they'll move you on to a different product and charge you a higher rate because of this situation, or they won't lend to you at all because of this situation.

4:08There are some major lenders out there that I've never borrowed with because I know they're a nightmare to work with and the brokers have guided me through that as well. I can think of one major lender in particular. Great rates, great headlines, absolute nightmare to work with. So it's the expert that you're looking for and then paying for that. That's where you need to be spending your time researching. And then if it's five, 600 pounds, it's worth it. It really is worth it. Remember, don't play small. You're investing in property that costs hundreds of thousands of pounds. These are major assets.

4:45If you can find yourself a proven expert, that is money well spent. It's not cost, it's an investment. But even if you see it as a cost, it's a 500 pound cost, something you could get back in a month with the profits that you'll make from your property. Don't hold yourself back. You could lose a deal if you picked the wrong broker because they don't fully understand the market and what you're going into. So my advice, Musa, is find an expert and pay for them. Don't pay for the sake of paying and think you'll get better because you might not. What you're looking for is an expert and when you find one, they truly are worth paying for.

5:17Good advice there. Okay, let's listen to our next question. Hi, Rob and Rob. My name's Gina. I live in London. I'm just starting to look into investing in property. So I'm hugely grateful for all of the information and tools and general wisdom you're providing, including this podcast. My question is, do you have any data or even personal perspectives in terms of the types of property to invest in as buy-to-lets? So period property versus new builds, flats versus houses. I've realised that so much depends on the specific circumstances, but I would really love to know if there are even any general rules of thumb that I should be taking into consideration as I build out my own strategy.

6:00I noticed a lot of investments in new builds, which sometimes makes me a little bit nervous because where I live, I see them popping up and they look lovely when they're first done. And then, you know, a few years down the line, not so much. And then something else, shinier and newer has popped up in the meantime. and I wonder what the impact is in terms of capital growth. My husband is an estate agent and he certainly has more trouble selling new-ish houses there or flats than he does period properties to the extent where they don't really take them on anymore. I understand that could very well be just a thing that's very specific to this area but I would absolutely love any thoughts or information you have that you think it might be useful to know in terms of all of this.

6:51Thanks again. Gina, thank you for your question. It's a really good question and it's hard to give a concise general answer to because you're right, it is very area-specific, context-specific. So maybe we'll do a full episode about this at some point. But for now, I can give you some general rules of thumb, thoughts on the matter that might be useful. So let's start at the basic flats versus houses. So people historically have had the view that houses have done better than flats in terms of capital growth. Actually, historically, that hasn't been true. If you go back and look at the land registry, you can compare them, but you can see a graph and they basically do exactly the same thing up until about 2021, at which point houses actually have done better than flats.

7:33That's for various reasons, including all the cladding stuff and everything that happened around COVID. So houses have done better than flats over recent years i don't think that means that they're going to continue to do so if anything i think there'll be reversion to the mean and flats will come back again but regardless that's the flats versus houses situation then if you take period versus new build this is very area specific you do get areas where period property does a lot better where it's really in demand so you'd expect that growth to be stronger because there is just structurally more demand for it.

8:06And there are areas where that's not the case so much, where it just doesn't matter. Even where period property is very much in demand, that's great. Keep that in mind. But also keep in mind the maintenance. That's not a reason not to invest in older properties, but it is something to think about because the amount of maintenance you need on a, not necessarily a new build, but just a newer property versus something that's 100 years old is of course going to be wildly different and you do need to factor that in. And then on new builds in general, you said that you see things popping up and they start looking a little bit tired after a while.

8:40And I think that is a very valid point. Something that we do when we're looking at new builds is we go for the best. If you'd buy something that looks average at the point at which it's being completed, then it is probably going to start looking poorer by comparison after a while, especially if it's from a developer who's unproven, who's cut corners and just hasn't really invested what they should in it. But if you get something from a developer who's got a track record for quality, and you get something that's got some kind of enduring advantage, then it's far more likely to hold up. So the classic example of this is Deansgate Square in Manchester.

9:14We helped our clients invest there around about 2020. And it was so much better than everything else in town that still nothing has caught up and it won't do for a long time because it was just unique. Not everything's going to be a Deansgate Square, but maybe it's got some other kind of enduring advantage such as location that nothing else is going to have the point is that not all new builds are equal and so what you've identified is a really valid concern in a lot of areas but there are things that you can do to get around that concern and remove that as a factor so gina like i say not a complete answer there's so much more that you could say on this topic but hopefully that's been helpful and thank you for the great question 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.

9:58So until those two wondrous events take place, take care, have fun. Bye-bye. Bye-bye.