ASK508: Which types of property do best? PLUS: Is Assisted Living a good investment?

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 Sunday Times column or our favourite option, send us a voicemail because then we can answer you right here on the show.

0:41Okay, let's hear our first question. Hi Rob and Rob. Thanks for the hard work you boys put on for these podcasts and content. It's really helped me over the couple months that I've been listening to it. I've been a landlord for, well, since I was 19 in my own personal name. I've got a grade two listed building in the Isle of Wight that I'm now looking to get rid of because it's a bit of a pain, to be honest. My question to you boys is when I sell the property, would you put it in two really nice properties or three average properties. I'm looking to put it into a limited company and my current contract runs out in February with the current tenant.

1:27Look forward to your answer and cheers for all the top work you've always done. Thank you for the question. It's something that comes up a lot and there is of course no universal answer. My biased answer from how I like to invest and for what I see makes other people's lives easier when they do this is go for nicer if you can. So if you get better properties, then you'll tend to get more capital growth. You'll tend to get a better pool of applicants who want to rent there, which means you'll tend to have an easier life. Obviously, it doesn't always work out like that. You could have lovely properties that are an absolute pain, but generally you'll put the odds in your favour if you go for something better.

2:08Obviously, that is all subjective as well. So what you're saying is average to someone else might be really nice. But that's my general rule of thumb. It also, of course, depends on what you're investing for. So are you mainly looking for the cash flow, the income, or are you more interested in total return over time by the time you factored in capital growth? The fact that you're going into a limited company suggests that you're probably not going to be looking to generate rent for you to take out and spend on yourself because you'd have the dividend tax hit from doing that, which makes me think you probably are investing more for total return over the long term in which case again that leads you back to more premium properties but of course up to a point there are benefits to having more as well because it means you're spreading your risk if you've got non-payment on one it doesn't affect the others and if you make one bad pick then well at least you've still got the others the only thing you can do for sure is to weigh up what difference it would make to you in terms of rental income so you can model out what you think you'd be making per month after all your costs by buying the three versus the two.

3:18And you can see how meaningful that appears to be. Again, you're probably not going to be taking that out, but maybe you want to be generating as much cash as possible to save up and put into your next deposit. I'm aware that I've not given you a cut and dried answer, but that's really because there isn't one. I can tell you what I would do, which I have, but that doesn't mean it's necessarily what you should do. So it all comes back to strategy. If you know what it is that you're trying to achieve, then that'll guide you towards what to optimise for and what decisions you should be making. So at this point where you are selling a property and you're going to have cash to invest, if you're not super clear on that strategy, now would be a really good time to go through that thought process to make sure you're making the right decisions.

4:02All right, let's listen to our next question that comes in from NS. That's what they've put down as their name. So I'm going to go with Nora Smith. Hi, I was wondering if you could shed some light on student accommodations and assisted living accommodations. There seem to be quite a few deals out in the market. I know these are mostly bought on cash, but they promise guaranteed returns for up to three years with yields up to 10%. What is your view on that? Is it good for just kind of passive income and not idly for capital growth in the future? or they're harder to sell. Be great to hear your views.

4:39Thank you. Thanks, Nora. So let's try and answer this. I think it's an easy one. I would avoid it. And I'll give you a few reasons why, and they are very good reasons. One, they're guaranteed returns for the first few years. And I've seen different lengths of time being offered with these types of investments. What you need to assess is what would the returns be when you're outside of that window? Because often what happens here is that those returns are priced in. You are paying for them yourselves because the developer, the seller, has worked out what they need to give you during that time and they've baked that into the price.

5:19The other thing around these investments is the resale market. There really isn't one. It's incredibly hard, incredibly hard to sell on these types of property because there just isn't a market for it. The market is based on the return. So you may be able to sell it on the return in the future. But that's a very niche buyer, something that an estate agent wouldn't be able to handle, for example. So your resale is going to be really difficult. You shouldn't really view this as a property investment. You should view this as something that will give you a return. And if this return will last for many, many years, and it may be tempting, if you are comfortable with the resale may be difficult, but you can probably guess that this isn't the type of investment that I've ever gone near or would recommend to others.

6:01Now, what's really interesting is we could have sold this type of investments through property of invest because the commissions paid on these types of investment are incredible far higher than any other normal property deal so if i was incentivized to make the most money possible then yeah i'd do these deals but i've been around like rob for a long time and our reputations are important we like to sleep at night i can't promote a project like this but others do because i'll be generous they don't understand it, or less generous, they're motivated by a very lumpy commission. So be careful, Nora, and be careful anyone else listening.

6:39When you see these types of investment, stay away. If you want something completely passive, stay away from property. Go passive outside of property if you want something 100 % passive. You can invest in normal property and be relatively hands-off, but it requires some work. If you're prepared to do that and put systems in place then property may be for you but if you want something that is a hundred percent hands-off that you never have to do anything with it stay away from property even if the headlines look good and the person selling you it sounds smooth do not venture down this path this is a strong recommend to go against this type of investment i wish you luck with whatever you do from this point on so there you go two more questions answered and like we said at the beginning we'd love to have yours too so do get over to propertyhub.net slash ask if you've got a question to send our way but that's it for today we will see you back here on thursday for the property podcast until then have a great week bye bye bye