ASK541: What advice would you give a first-time landlord? PLUS: Can I rent to a family member?

0:01Rob B:Hi, I'm Rob. And I'm Rob. And this is Ask Rob and Rob.

0:07Rob D:Welcome to Ask Rob and Rob. It is Tuesday, which means we have two more listener questions. And we've got some good ones today. Good ones every week. What am I saying? You always send in interesting stuff that allows us to cover some ground we never otherwise would have covered. So make sure you keep that happening. If you've got a question of your own and you haven't sent in yet, then Rob, about time to put that right.

0:25Rob B:It certainly is, but the good news is it's very easy to get it done. You just need to go to propertyhub.net forward slash ask. That's propertyhub.net forward slash ask. There you can record a message, you can call in, you can write your message if you want, and then maybe it'll appear in the Sunday Times. Whatever you prefer, we do not mind as long as you do it. Right, let's listen to our first question in from Anya. Hi, Rob and Rob. My name's Anya. I've been listening for a while now. I'm yet to purchase my first buy-to-let but it's something I've wanted to do for quite a long time. I've recently purchased my residence which is a renovation property so I'm hoping to use the increased equity as a deposit towards my first buy-to-let.

1:06Rob B:However considering everything that's going on in the world and the renter's rights as a new landlord I am a little bit hesitant. So what would your advice be for a first-time landlord and how would you mitigate the risks as I've only got the one property so I've not really got anything else if something does go wrong. Thank you. You know what, Anja? I get it. The first property is the scariest, the hardest investment you will make. It gets easier after that. I absolutely promise. But does that mean that you're not going to invest because of giving you that reassurance? Almost certainly not, and understandably so.

1:36Rob B:But I just wanted to reassure you that that will be the case. So when you get in a position that you will have equity, one of the things I would do is set things up so it becomes a no-brainer for you it becomes easy how do you do that well I'd be buying in an area that just makes complete sense for property investment so a fundamentals hotspot we give our hotspots out on the property podcast each and every year but I would be picking an area that you truly understand and conceptually get it's a great area to invest. The fundamentals are there. The property is going to rent over and over again.

2:14Rob B:The second thing I'd do is buy at a discount. That makes it a no-brainer, right? If you get yourself a property that's got a genuine, the word is genuine, a genuine discount. So you need to do your research and make sure you put yourself in that position. But that's what I'd be doing also. Now, you might have a defined goal. Maybe you didn't want to record a full mini podcast on your side to tell us all the ins and outs of your situation but if you don't that's something to work on but once you've got that goal you very much understand your starting position the thing that will give you more confidence is a strategy a clear step-by-step plan that will then help you take action because once you understand the investment decision helps you towards your goal it becomes a lot easier you're not just buying on the hope it's going to work out to the future you're vesting because you know it takes you closer to that financial goal and that's what I'd be doing I'd be doing all of those things to put yourself in a great position now it might be a bit early for you right now because you haven't done the refurb and got the equity but absolutely speak to our team at Property Up Invest because that's something they can help you with it won't cost you at all that's the great thing they can help you they can guide you and they will put that strategy together with you and they can eventually if it's right show you properties that are at a discount and you research that for yourself you trust but then validate but that will make life a lot easier for you you don't have to you can do just the steps i've talked about already but i would at the very least based on the circumstances you've laid out have a chat with them because the worst thing that's going to happen is you're going to learn a lot and the best thing that's going to happen is you might make your first investment and both of those sound like good scenarios to me best of luck.

3:56Rob D:Okay, let's hear our second question now from Sarah.

3:58Rob B:Hi, Rob and Rob. I'm a buy-to-let investor. I have one buy-to-let property that's doing well. I'm in the process of buying my second. I love the BRRR method for now. I'm recycling about 100k, hopefully into multiple properties. The second property, the numbers look good. However, I've come up against an obstacle because I want to rent my sister. My sister is disabled. She'll be paying market rate through her own money as well as through government housing benefits. She'll probably be there for a couple of years at least until she recovers. So this investment looks good, but nobody will give me a mortgage apparently based on the fact that I'll be renting to a family member.

4:41Rob B:I suppose I have several questions. One, is that true? Do I buy my personal name instead if it is or do I just walk away? It's a really tough situation. This ticks a lot of boxes for us as a family for an investment. A bit of background about me, I earn about$37 ,000 a year. I'm a homeowner. I should be in the next tax bracket within about two years. And to further complicate matters, I'm a US citizen as well as a UK citizen. So I do have some double tax implications that I've just discovered when it comes to my limited company. If you could give me some advice, that would be wonderful. I really appreciate it.

5:20Rob B:Thanks ever so much. Lovely show.

5:22Rob D:Sarah, thank you for your question. This is a tricky one. One of the reasons it's tricky is because of your tax position. And that's something that is way beyond my pay grade. So I'd definitely take advice on that in both jurisdictions to see how UK and US tax interact. But the other issue, which I can tell you about, is the fact that you are renting to a family member. Because as you become aware, renting to a family member is really hard.

5:49Rob D:It's because most buy-to-let lenders will not be interested and one of the reasons for that is because it's regulated it means that it's much harder for them to get the property back if you end up defaulting on your loan so they have to underwrite it in a different way and they're taking on more risk that doesn't mean that there are no options it just means that there are far far fewer options and because it's going to be a regulated loan there are going to be far far fewer options it's probably going to be extremely difficult for you to find a loan that would do that in a company which means you would then be buying as an individual and you're either going to have a situation where the loan to value is going to be very low or possibly where they're going to underwrite it based on your income rather than the rental income that the property produces.

6:31Rob D:So put that all together and it's probably going to be very hard for you to make this work. That's not to say impossible. When it comes to mortgages there normally are options, there just sometimes are many of them and they're not the options you choose and the rates and the amount that they lend you won't be anywhere near what you'd get if you were in a completely normal straightforward situation where you are renting to an unconnected third party so if this is something that you want to do because it makes sense for your family which i completely understand then i think you have to start thinking about it in those terms you have to go well this is not going to perform as an investment in the same way as an investment would because my financing is not going to be the same it might be tying up more cash the terms won't be as i'd like and if that's something that you're okay with and you still want to proceed with then go find a specialist broker because it is a harder situation it's something that not all brokers are going to be able to handle you need to find someone who knows the market inside out and possibly has a relationship with lenders where they can speak to them pre-application and find out what their appetite would be for something like this because it is a bit of a specialist situation so sarah i'd say don't give up hope there will be a way of making this work if it's the right thing to do for your family but it is something that you're going to have to work at and it's not going to perform in the same way that any other investment would.

7:43Rob D:So I hope that helps and all the best.

7:45Rob B:So that's just done for another week. Thank you for listening. We'll be back with the main event, the Property Podcast on Thursday. Until then, take care, have fun. Bye-bye.

7:53Rob D:Bye-bye.