ASK509: Should I rent to the council? PLUS: Does personal ownership make sense for me?

0:02Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob. Hello everyone, welcome to Ask Rob and Rob, the show where you give us your questions and we give you answers in return. It's a simple format, but it's been running for many years now because it's simple and hopefully we're offering some good value as well. Now we make it very easy for you to get onto the show. Rob, should we give everyone a quick reminder of how they can get their question featured here or in a prestigious publication? Ah, surely everyone knows by now, but just in case, it's propertyhub.net slash ask. If you can find your way to that webpage, then you can leave us a written question for our Sunday Times column, see yourself in the paper, your mum would be very proud, or you can leave us a voicemail, which is actually our preferred option, because then we get to play your lovely voice on the show, just like we're about to now for Dan.

0:46Hi Rob and Rob, my name's Dan. I'm from Saffron Maldon in Essex and thanks for all your great content over the years. I've been listening for a long time. I've recently been offered an opportunity on one of my properties to rent to a rent-to-rent company and from what I can gather the way it works is I would rent to them and they have a contract with the local authority and they then occupy the property with tenants who are in between local authority or council accommodation for this I get market rent and aside from the boiler and the buildings, they maintain the property for me. And they say that, and it's a set contract a year or two years of which you get inflationary rental increases on an annual basis.

1:35And they say they return the property to you in the state that you gave it to them, aside from a bit of wear and tear. I must be honest, when I was listening to the guy, it sounded a bit too good to be true, but it did also sound legitimate. They seem to be an established company. So I know nothing about this area of the sector. And I wondered whether you guys are aware of it and whether you have any advice. Thanks. Dan, thank you for the question. And thanks for being a listener for such a long time. When I heard your question, I heard those dreaded words rent to rent and did a little involuntary shiver, but actually I think it's okay.

2:10And I'll explain why. So rent to rent in general is of course, when you rent your property to somebody else and they go and rent it out to an end tenant. And what's wrong with that arrangement a lot of the time is that the person who you rent your property to is someone who was looking for a way to get into property without any money. They don't have experience. If they don't do a good job, all the problems end up falling back on you. But in this situation, it sounds like they are actually an intermediary to the local authority. Local authorities, as we all know, are very short of housing, especially for short-term emergency accommodation, asylum seekers, things like that.

2:44And so what they often do is go to a big contracting firm and say to them can you go and get a load of properties for us from the private sector and arrange it all for us please so we've got somewhere to put these people. It sounds like that's what's going on here and because they are pretty desperate they make it pretty attractive. So the rents are normally below what you'd get at the market but maybe not that far below and the promise is that you hand over and you don't have to think about it for years. So on the face of it it all sounds pretty good. There are just a few things to look out for.

3:12The first is make sure that my assumption is correct, that this is a big company who've got an actual contract with the council. If this is some individual operator or a small company with no track record, I wouldn't get involved. I'd say that's too risky. The second thing to keep in mind is your mortgage. So you'll be signing an agreement that isn't a normal tenancy agreement, and that'll probably tie you in for multiple years. Some lenders are okay with that. Some are not, because it can make it more difficult for them to get the property back if you stop paying. And some can be okay with it, but they need it to be drafted in a particular way.

3:42so definitely check with your lender and the third thing to think about is the condition that you get the property back in so they'll say you'll get it back in the same state minus a bit of wear and tear from what i've heard the definition of wear and tear can be generous a lot can be put down to oh you know this is just like normal usage of the property and it turns out a wall's missing or something i'm being extreme but the point is if you're willing to get the property back in a not so great state you're prepared for that you're not going to be disappointed because you know that you're just going to hand over for a few years and having that stress taken off your plate is worth it, then go ahead.

4:17If it's a really nice property or if you're very attached to how it looks or if you really don't want the hassle of having to do a complete refurb in a few years, if it happens, doesn't mean it will, but if it happens, then maybe don't. On the whole, I would say for most people, this isn't going to be an attractive option because even after taking out all the hassle, the difference between the rent you'd get on the open market versus the rent you'd get doing it this way it's going to be too great but if you've got a property let's say mid-market or lower the rent isn't one of the highest in the area anyway then of course the numbers might work out but do just check those few things that i mentioned dan hope that helps and good luck with it good luck dan value bombs galore from rob d there let's see if we can continue that value by listening to a question in from tim hi rob and rob tim here long time listener, first time caller.

5:08I'm a UK citizen living abroad and I'm about to buy my third UK buy-to-let in the next few months. My first two are owned in my personal name and I'll be keeping them that way. I have no other UK income, my rental profit sits within the personal tax-free allowance, my strategy is a long-term hold and I don't intend to move back to the UK in the future. For this third property, I'm trying to decide whether to buy personally again to continue benefiting from the allowance or whether I should start a limited company SPV to future-proof things, even though I know that would mean paying 19 % corporation tax straight away.

5:46I know an SPV makes sense for the vast majority of investors, but I'm wondering if I'm in that small minority where buying personally is actually more tax efficient for now. And linked to that, with talks of being near the later stages of the 18-year property cycle, would assure one-year fixed buy to let mortgage be a smart way to keep flexibility in case prices dip into 2026. I'll be getting proper tax advice shortly, but I'd really appreciate your strategic view on structure and timing for this next purchase. Many thanks. Tim, thank you for your question. There's two parts to this. There's the tax bit and there's the timing bit with the market.

6:27Now, the bit I won't go into as much detail with is the tax bit. One, because it sounds like you're taking advice very soon, which is great. Pleased to hear that. But two, I don't have all your information. And this is just general advice. When someone tries to give you strategic advice, when they have limited information about you, just be cautious. They are probably based more on their experiences rather than your own, and that they may not marry up. But to give you an indication, for the majority of people, a limited company seems to be the way forward. but there are circumstances where going in your own name is more efficient.

7:02I just want to touch on one of the points that you've mentioned there. The 19 % corporation tax may be something that isn't ideal to you but investing in your own name can often be a higher number but like I've said, get that advice. Give all your details over to someone who really understands what they're doing and they'll be able to guide you through the process but as a general guide, limited company seems to work for the majority of the people. That's how I invest and a lot of other people do too. Okay, so the 18-year property cycle. I feel like we've talked about this a lot and I've shared my opinion on the 18-year property cycle.

7:35But I just want to share it again so it just keeps landing. I believe the 18-year property cycle is broken. It does not exist and the reason why is COVID. So the last time the 18-year property cycle broke was because of the Second World War. COVID was a worldwide changing event just like the Second World War was. the world dramatically adjusted and changed because of that and therefore the 18-year property cycle, in my humble opinion, broke. We've also had a crash that just people don't see and it's a silent property crash. We've talked about it a few times in the past and maybe we need to resurface it and update the data and look at it again in a few months time but the silent property crash is a real thing.

8:18It's just that people haven't noticed. If you've not listened that episode I strongly recommend you do but the headline is the crash happened because it was hidden by inflation we've had high inflation for a number of years now and low property growth so in real terms property's been falling and then when you look at any charts that are adjusted for real terms so that means when you remove inflation you see the property in real terms has been falling year after year so and in a dramatic way as well you're going back to prices over a decade ago. That's where we're at now. Prices are at 2013 levels and with inflation still high, that's still adjusting.

8:59So we've had a crash. It's just that it's not a typical crash. So I wouldn't be worried about a crash. And in fact, I'd actually be really optimistic about the market. But that's why you need to listen to this Thursday's episode. This Thursday, please, please, please bookmark the episode. Make sure you save it, listen to it a few times and share it because it's going to completely change your view of the property market. And I don't think you're going to be nervous. I think you're going to be excited, but it's all backed by data. So make sure you join us on Thursday for that episode. All right.

9:30That is us done for this week. Two more questions answered, a bit more knowledge shared. And of course, we'll be back to do it all again next week, as well as bringing you the property podcast on Thursday. So until then, have a great week. Bye-bye. Bye-bye.