0:02

Hi, I'm Rob. And I'm Rob. And this is

0:04

Ask Robin Rob. Hey

0:06

everyone, welcome to Ask Robin Rob, the

0:08

show where you give us your wonderful questions

0:11

and we give you some half -decent answers in

0:13

return. This week we've got two absolutely fantastic

0:15

questions coming up, but before we do, Let's

0:17

give you a quick reminder of how you

0:19

can get on the show. Yep, there's one

0:21

place to go, which is propertyhub .net. When

0:23

you get there, you'll find a way of

0:25

leaving us a voice message for the show

0:27

or a written message for the Sunday Times.

0:29

But we love your voice messages, most of

0:32

all, because we love to hear you on

0:34

the show. OK, let's have our first question

0:36

from Scott. during

0:46

a tenancy, do you also ask for

0:48

more deposit to then be put into the

0:50

deposit protection schemes? Something I've been thinking

0:52

about for a little while. Thank you very

0:54

much for everything that you do. Look

0:56

forward to hearing from you. Thanks, mate. Scott,

0:58

this is amazing. We're nearly 500 episodes

1:00

into this show, and you have come up

1:02

with a question that has never been

1:04

asked before, which is absolutely brilliant. That's why

1:06

I love doing this. The answer is

1:08

you can, but most people don't. I never

1:10

have, at least anyway. But I've

1:12

had it done to me when I've been

1:14

renting, so rent went up, and then insult

1:16

to injury. I've got a demand to pay

1:18

more into the deposit protection service to take

1:21

it up to the equivalent of five weeks of the

1:23

new rent. Now, I believe if you want to do

1:25

this with the way the deposit schemes work, it has

1:27

to be an actual new tenancy agreement, which means I

1:29

don't know how this is going to work when the

1:31

rental reform bill comes in, but that's a whole other

1:33

matter. And you need to look into the mechanics of

1:35

it because I believe you may need to return the

1:37

deposit and then immediately take the new one again. But

1:39

you do need to look into that because, like I

1:42

say, it is done. but I've never done it. The

1:44

reason for doing it, of course, is that as the

1:46

tendency goes on for longer, as the rent goes up,

1:48

you're going to be less protected. And so if the

1:50

tenant decides to just not pay the final month's rent

1:52

and go, oh, you can just keep that and take

1:54

it off the deposit, then the deposit might not

1:56

even cover that final month's rent. So that would be

1:58

the reason for doing it. The reason against

2:00

doing it, apart from the hassle, is that

2:02

if you assume that the tenant does pay

2:05

the rent and you're keeping the deposit purely

2:07

against damage, then over time, the

2:09

amount you can claim probably goes down anyway

2:11

because more is going to be attributed

2:13

to wear and tear than damage. So if

2:15

someone's been in a property for 10

2:17

years, then you're not going to be expecting

2:19

to get the property back, spick and

2:21

span. A lot of it is going to

2:23

end up being chalked up to wear

2:25

and tear. Whereas if you've rented a property

2:27

out for a year, you probably

2:29

expect or at least hope to get it

2:31

back pretty much in the condition you left

2:33

it in terms of walls and carpets being

2:35

unmarked and so forth. So Scott. There's your

2:37

answer. If it's something you're going to do,

2:39

do get in touch with whichever scheme you

2:41

use to find out how the mechanics of

2:43

it work from their side. But thank you

2:45

for asking an entirely original question. Rob,

2:47

you're going to love this because we've got

2:50

another question in that I did not think that's

2:52

been asked before. And to top it off, the

2:54

person asking the question is called Rob. Amazing.

2:58

Hello, Rob B. Hello, Rob D. This

3:00

is Rob P. I have been investing

3:02

for about five years now, throughout that

3:04

time, been listening to your content, which

3:06

is amazing. So long may it continue

3:08

and many thanks for what you do.

3:10

I'm calling about the interesting podcast that

3:12

you put out about the monopoly strategy. Now

3:14

I've been investing in the

3:17

north of England buying some of

3:19

those lower cost properties and

3:21

can see the benefit of moving

3:23

up the property food chain,

3:25

as it were, into some more

3:27

expensive properties. However, we're capital

3:29

appreciation has historically not been such

3:31

a big consideration in some

3:33

of these areas and cash flow

3:35

and yield has. How does

3:37

that work within monopoly strategy? For

3:39

example, if I've got three

3:41

100 ,000 pound properties that are

3:43

each generating 300 pounds per month

3:45

cash flow, it seems

3:47

unlikely that a single 300 ,000

3:50

value property is going to generate

3:52

900 pounds and equal the

3:54

cash flow, even if there are

3:56

less potential tenant issues, maintenance

3:58

issues, and so on, to consider

4:00

how does that equate within

4:02

the monopoly strategy and how do

4:05

you work around it, essentially? Thanks

4:07

very much. Appreciate your answer. Rob,

4:09

thank you for your question. It's a

4:11

really good question. Now, what I

4:13

do not have is your numbers. I

4:16

do not know what mortgage rate you're borrowing

4:18

at. I do not know what loan to

4:20

value you're operating at. When I look at

4:22

the cash flow that you're generating, I

4:25

can only assume that either you've got

4:27

a low load to value or a very

4:29

low mortgage rate. But let's just say

4:31

that none of that matters and let's just

4:33

go like for like. Is it a

4:35

fair assumption that the properties you are looking

4:37

at will generate a slightly better cash

4:39

flow than buying just one property for 300k?

4:42

Possibly yes. I'd say

4:44

that's a reasonable thing to

4:46

expect. I don't think there'll be

4:49

much in it. I think you'd be surprised. I

4:51

don't think there'll be a huge difference. So

4:53

let's say on the more expensive

4:55

property you might be getting a 6

4:57

% grow shield, and maybe on

4:59

those cheaper properties you may be getting

5:01

7? 7 .5? I'm talking in general

5:03

terms, of course, for both properties you can

5:05

do better and worse, but I don't think

5:07

there's going to be a huge difference. Even

5:10

with that said, it doesn't bother me. And I

5:12

can think of a lot of reasons why, but

5:14

I'll give you the three main ones. The first

5:16

is, you've got more properties to manage. So

5:18

you are spending more time on

5:21

each of those properties. So

5:23

let's just say that

5:25

instead of £900 a month,

5:27

you're earning £750 a

5:30

month off the one property.

5:32

That £150 difference, how

5:34

much more time are you putting in

5:36

to those properties for that £150? You certainly

5:38

will be putting more, but at some

5:41

point you've got to value your own time

5:43

as well. It's not a like for

5:45

like, you are doing more work, that's one

5:47

of the big reasons of doing the

5:49

monopoly strategy. The second is

5:51

the cheaper properties I found in

5:53

my portfolio tend to have more

5:55

problems going wrong with them. So

5:57

I actually spend more on those

5:59

smaller properties than I do my

6:01

more expensive properties, which sounds crazy,

6:04

but it's true. And also

6:06

the profits can be wiped out

6:08

quite quickly for those cheaper

6:10

properties. So you might be earning

6:12

that 300 quid a month per property.

6:14

But if you are having to spend

6:16

more on it, because more damage is

6:18

taking place, or a boiler goes,

6:20

or a new bathroom needs installing, or whatever it may

6:22

be, there's a leak, there's lots of things, and

6:24

yes, you can get insurance. But my

6:26

point being is, I've found, personally,

6:28

that it's required not only more of

6:30

my time, those type of properties,

6:32

but also more money's needed to be

6:34

put into them. And third, and

6:36

I think actually possibly the most important

6:38

of all, is that you're looking

6:40

at it the wrong way in terms

6:43

of return. So let's say

6:45

you get £150 more overall

6:47

from your properties. So over a

6:49

year, it's £1800 more. Not

6:51

per property, just overall. So if

6:53

you went to the trouble

6:55

of having those three different properties

6:57

and you didn't have the

6:59

problems that I talked about, and

7:01

you were earning £1800 more

7:03

per year from rent, you're not

7:05

including capital growth. And the

7:07

chances are, the STRONG chances are,

7:09

that that property, the more

7:11

expensive property, will outperform the other

7:13

in capital growth. And let's

7:15

say that Your properties that

7:17

are 100T each grow by 2

7:19

% a year, but your property

7:21

that's worth £300 ,000 grows by

7:23

3 % a year. Well,

7:25

your 100T properties, so if

7:28

we go 2 % each, that's

7:30

£6 ,000. But your 300T at

7:32

3 % is £9 ,000. You're actually

7:34

earning more through capital growth, or

7:36

your total return then is more

7:38

when you add the two together

7:40

from the more expensive property. So

7:42

when you put it all together,

7:44

You probably have less problems, less

7:46

time committed, and overall, when you

7:48

look at total return, including capital

7:50

growth, you're making more money as

7:52

well. So for me, looking at a

7:54

slight reduction of the rent you earn overall is

7:56

the wrong way to go about it. When you look

7:58

at the whole bigger picture, me, the

8:01

monopoly strategy becomes even more compelling. Well, two

8:03

more questions answered and we'll be back to

8:05

do it all again next Tuesday. But before

8:07

then, we will see you on Thursday for

8:09

the Property Podcast. Have a great week till

8:11

then. Bye -bye.