ASK510: Should I flip this property? PLUS: Can I make my savings work harder?

0:02Rob Bence:Hi, I'm Rob. And I'm Rob.

0:03Rob Dix:And this is Ask Rob and Rob.

0:06Rob Bence: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.

0:28Rob Dix: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.

0:41Rob Bence:Okay, let's listen to our first question in from Ryan. Hi, Rob and Rob. It's Ryan here from South Wales.

0:47Rob Dix:I've listened to the podcast for a couple of years, trying to educate myself on property investing. And earlier this year, me and my partner purchased our first investment property and we managed to secure a deal of£35 ,000 off the£120 ,000 asking price. Now the property was in need of some works and the plan was initially to refurbish and refinance the property. However, as we close on the refurbishments, it seems that property in the local area does seem to be selling well, particularly on the street that we've purchased the property. And we were wondering, do we now sell the property instead and use that money to reinvest it in a maybe better quality investment property and do this in a limited company as this seems to be the way forward now, given that the government seems to be penalizing private rental owners?

1:41Rob Dix:Or do we stick to our initial plan and just refurbish and refinance the property, keep that property in our name and still purchase another buy-to-let property. But as a limited company, the only problem is we may not be able to get a higher quality property with the amount of money that is released after refinancing.

1:59Rob Bence:I look forward to hearing your response and keep up the good work. Ryan, thank you for your question. It sounds like you've got yourself a great deal there. You've used the word asking price, so you've got money off the asking price, But based on the rest of your question and what you've said, it sounds like it was at least very close to or may actually be the real value of that property. Hence why you're now considering selling it without even doing the refurb. So that's, first of all, brilliant. Well done. We've talked about on the podcast how you must, must be getting yourself great deals in this market.

2:32Rob Bence:The market is absolutely set up for getting a great deal done at the moment. And it sounds like you've done that. So now you have a decision to make. Do you want to do a refurb and potentially add even more value to the property? Or do you take the cash and run and reinvest? I mean, this comes down to a few questions you need to ask yourself. One, are you used to doing refurbs? So that's the first thing. A lot of people go into refurbs and they do their learning on their first property, their first time they do it. And it's very different to painting a few walls in your own house. A refurb is a big project.

3:04Rob Bence:If you've not done it before, the learning comes with experience. but you will pay for that and it's not by going on a course but through mistakes and that's the way to learn that's why we often recommend for people doing refurbs to have some trade skills to have experience already but if you do have those skills then amazing what you then need to do is price up your time something that people really really fail to do with a lot of property strategies but how long do you think this is going to take? How many hours and be real you know real hours even if it's just checking in on trades how many hours are you going to put into that property and what's it going to return if you do that compared to just selling it now?

3:49Rob Bence:So let's say you could get an extra£10 ,000 profit. Now that may sound great wow an extra£10 ,000 compared to just selling it you then need to work out how many hours you're going to put into that how much stress you're willing to tolerate everyone's stress levels are different some can absorb it really well others can't and then just make a critical decision a way to do this is possibly go back and forth with AI explain the numbers to it explain the time explain the level of the refurb get it to estimate the amount of time for you that will take and then you realize pounds per hour what your time's worth you want it to be much much more than you normally earn pounds per hour because all you're doing is creating a second job.

4:30Rob Bence:It's not to match the income you earn elsewhere. It should be vastly superior because if people want more income, you know, you get a second job or do overtime. That's what people sometimes mistake with refurbs is it's just a second job. You need to make sure if you do do that second job, it's a very well-paid second job and better than your primary source of income. So once you've done those calculations, it should give you a steer. I wouldn't be surprised if it ends up that you decide to sell and reinvest into a better quality property that's the strategy that rob and i follow is that the quality properties i doesn't necessarily mean it's a strategy you should follow but hopefully you've listened to enough podcasts now where we talked about strategy and ways of moving forward that is something that either resonates with you and would work for you or not but i think higher quality properties generally no matter your long-term horizon will just make life easier through the ownership so what i've done here ryan is thrown it back on you and giving you a process to go through to make that decision i can't say yes go ahead or no don't but hopefully the framework i've given you and the questions to go through now will help you and other people listening come to a great decision good luck great answer for ryan there let's see if we can help matt

5:46Rob Dix:just as much. Hi Rob, Rob. Matt here. My question's around deposits. I bought my first property this year and it's taken a few years to build up the deposit. I actually did it in a stocks and shares ISA. Obviously got good gains from the market as well, but I realized that possibly was more luck than anything that I kind of managed to then take it out at the right, well, not the right time, but take it out and be able to put it into a property. Whereas if anything would have happened, and kind of made big losses, and all of a sudden couldn't afford to buy the property. So now trying to save up for my next one, do I try to do the same again, and hope it works out, or would you split it?

6:27Rob Dix:How would you approach saving up that next deposit while still trying to maximize games? Thanks for all the help. Appreciate it. Matt, thank you for your question, and congratulations on your first property. A great milestone. And it must have gone all right, because you're pushing on to your second. But this does take you into a tricky area. We get variations on this question quite a lot, and for a good reason, because you're sitting there looking at your money in the bank going, well, I might be getting 3%, 4%, whatever it is, but in the stock market, I could get, well, could get anything, but what if I got 10 %?

6:57Rob Dix:Then I'd be able to get to that next property so much faster. And obviously, that approach of investing worked for you last time, but I'd be cautious about doing it again. And there are two reasons for that. The first, you've already alluded to yourself, you got a bit lucky with the timing. The thing about investments in the stock market, if you make a broad based investment, like an index fund or something like that, over the long term, it's highly likely that it will come good. It's very, very rare, you'd have to be extremely unlucky to invest and actually be behind like 10 years later. I think it's actually at 20 years where it becomes like statistically, like almost impossible that you end up behind based on historical performance.

7:34Rob Dix:But over a shorter timeframe, anything can happen. So if you're talking about the next, say, three years or so, just for the sake of argument, then within that time your investment could be up a bit up a lot down a bit down a lot and you really have no idea i'd say that certainly if you want to get your hands on the money within five years ideally 10 then you probably don't want to be exposing it to the stock market and the other reason i'm a bit iffy about doing this is that i don't think it necessarily going to make all that much difference so you're exposing yourself to quite a lot of risk but the upside that you're getting in return may not be as strong as it once was.

8:11Rob Dix:I'm not going to bore you with the details because I've literally written a book about this stuff. You can read that if you actually care. But basically, the interest rate you're getting in the bank is better than it was a few years ago. It is at least just about keeping up with inflation at the moment. And at the same time, the returns that you could expect to make from the equity market based on where we're starting from now, not making any predictions about the future, but just purely based on the starting point where we are today is probably going to be lower over the next few years than it has been over the past say 10 years.

8:41Rob Dix:So you look at the difference between those two numbers, what you could expect to make in the stock market versus what you know you're going to make in a bank, and those numbers are closer to give them they were. And they're at a point where the risk probably isn't worth it. I'm assuming though, but for you, property is the main thing. That's kind of how you've presented it. So I'm assuming that the most important thing for you is to buy the property as soon as you can. If that's not the case, if actually you're more relaxed about that and you'll just kind of wait a few years, see where you are, and then make a decision about whether you even want another property, then that changes things a little bit.

9:12Rob Dix:But if the priority is to be able to get that property as soon as you can, then the only way you can be sure that that's going to be possible is to put your money somewhere where you know that the capital sum isn't going to be reduced by whatever happens in the markets at any point. So Matt, that's my answer. I hope it helps and if the market does go on an absolute tear for the next few years please don't come back and leave us another voicemail well that's just done for another week we'll be back with

9:35Rob Bence:another ask rob and rob same time same place next week so until then take care have fun bye-bye bye-bye