ASK531: Why is this valuation so low? PLUS: How do I save faster?

0:02Rob D:Hi, I'm Rob.

0:03Rob B:And I'm Rob.

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

0:06Rob B:Hey everyone, welcome to Ask Rob and Rob, the show where you give us your questions, most of the time property related, and we do our very best to answer them well. Let's do that again this week. But before we do, let's give you a very, very quick reminder of how you can get your question onto the show.

0:23Rob D:Yes, you just have to go to propertyhub.net slash ask. It really is that simple but one link will let you submit a written question for our sunday times column or you can get your beautiful voice on the podcast by leaving us a voicemail we love it when people do that and the first person who's done that today is jack hi everyone rob my name is jack from sheffield i just want to say thank you so much for all of the content that you've put out and i'll keep on putting out through youtube and the podcast of course it's been a game changer for myself and my wife so we recently got into the property game and we bought our first buy to let last year through a limited company and we're obviously very keen to get our second as soon as we can.

1:00Rob D:So my question was around saving for the next property and maximizing the yield from the rental property. So at the moment we have a business savings account that we are putting our money into to try and save as quick as we can. Obviously the interest rate itself isn't as good as a personal account. So we've obviously got our personal license that we are saving up into with a view to using for the property to purchase the next one. So I was wondering, are we doing the best we could? Is there any way we can be doing it a little bit quicker or maximizing the rental yield that we are getting to get our second one as soon as we can?

1:38Rob D:Thanks as always. Appreciate your thoughts. Jack, thank you for your question. Really glad you're finding everything that we do useful. And congratulations on that first buy to let. Now you are at the very start of building up that snowball. So we often talk about the snowball effect. So you start off just saving. Then for your next property, you've got your savings plus the rental profit from your first property. Then for the next one, you've got your savings plus the rental income from two properties. And so it goes on. You get to a point where either you don't need your own savings anymore, the portfolio is sustaining its own growth, or by still contributing your own savings, you're able to go faster and faster.

2:13Rob D:That's a great place to be. But at the moment, your snowball is small, but you've got a snowball and that's something you didn't have a year ago. So what I would say is there's no big savings trick that you're missing. It just is going to be relatively slow going. So the best thing that you can do is not ease up on the discipline. Keep doing what you were doing to get the first one and you'll get the second one a little bit faster because you will have that rental profit. Make sure, of course, that your expenses are under control, that you're claiming all the allowances that you're able to so you're not paying more tax than you have to.

2:44Rob D:So you're keeping more of that money to put into the next one. But other than that, there's not a great amount. And even if there was a bank account that would pay you even 1 % more, which is quite big in the realm of savings, it's still not going to make a giant difference to how quickly you get there. So maybe it's disappointing that I can't give you anything tactical and go, oh yeah, this is the thing. But what I'm hoping this is, is reassuring. You're not missing anything. You're not doing anything wrong. You've actually made more progress than you think. And as time goes on, you'll see the benefit more and more.

3:15Rob D:Hope that helps.

3:15Rob B:Okay, next up, we've got a question in from Liam. Hello, Rob. And it's Rob. Thank you for everything you do on the podcast. I've been listening for a long time now, and it's always a bit of surprises. Yeah, I'm in the middle of a gym session right now, and I had a very long question. I had to stop when I was going to set, because, yeah, I've been thinking about this a little while. So, I'm really buying a property at the moment, and it's had its valuation come through, where they come out for the mortgage, and do their valuation. It was valued at 250, but comparing to other prices, for that type of property.

3:46Rob B:It should be on the market, your market comparisons around a 290k. And I was so confident it's going to be up to 290k up. But when it came in a 290k up, I was really shocked. So I was just wondering why multi-valorations can come in so low. I kind of get for insurance reasons, they wouldn't buy things higher than they need to. At the same time, if the property is worth generally 290k, and you could just be getting a discount on that property, why is this the mortgage valuation match a discount and not all the actual poster property is working liam thank you for your question i know what you're up to you do the same as me you're just looking for any excuse to have an extra rest between sets but hey let's give you that rest let's answer your question i completely get it and understand it you've gone for a property the market's telling you it's 290 your research is telling you you're 290 and you're disappointed it's come back at 250 but i would have expected anything else because the lender and the surveyor for that lender has zero incentive and i mean zero to go above what the purchase price is and you have to assess what's being asked here the lender is saying to the valuer is this property worth 250 000 because if it is we're happy to lend on it and the valuer is going to say yes or no.

5:13Rob B:And the valuer has agreed with that. For the valuer to then go and stick their neck out and say, actually, you know what, they're buying it for$2.50, but this looks like a great deal. I think it's$2.90. Like I've said, it's never going to happen. There's no benefit to the valuer doing that. They've not been asked to do that. They've been asked to assess the value you're buying it at. And for some reason, if they got it wrong, they could be sued so you often see down valuations from properties crazy sometimes but they're doing it to de-risk themselves and like you've touched on for insurance reasons because they have been burnt in the past valuers when we had the 08 crash a lot of valuers found that they couldn't get insurance anymore because they were sued by the lenders because they've been too aggressive in their valuing they would often overvalue it was boom time it was a crazy world and some valuers lost their heads and went down that path as well and massively overvalued properties and that is still remembered so because of that and because those values basically had to leave the industry because they couldn't get insured anymore this is what still plays out today it's that legacy that we're dealing with coming up to nearly 20 years later so now you understand why it's happened you can be rest assured that it's okay that it's happened and when you get it refinanced in a few years time they'll look at the local comps then and if you let's say the market's not moved then it's 290 and there's local comps comparables at 290 you should be able to refinance at that level so maybe a little frustrating on the initial purchase but if you believe in those numbers you'll get to benefit in the not too distant future all right well that is two more questions

6:52Rob D:answered which means our duty is done and we can leave you to get on with your day we will be back again with a property podcast on thursday so hopefully we'll see you there bye-bye bye-bye