Podcast Summary
Consider holding onto profitable investments: Transaction costs and hassle of selling outweigh potential gains, consider using rental income for next investment instead
It's generally more beneficial for property investors to hold onto profitable investments rather than selling and incurring transaction costs and the hassle of finding a new property. Andrew, a listener, asked for advice on whether to sell his profitable property and invest in the north of England. Rob and Rob, the hosts of Ask Rob and Rob, advised against it unless there was a compelling reason to do so. They explained that even if the new property performed slightly better, the transaction costs and time spent on selling and buying would likely outweigh any potential gains. They encouraged Andrew to consider using his rental income to save up for another investment in the same area instead.
Expand investment portfolio with refinancing: Refinancing a property can provide funds for another investment, bringing benefits like diversification and multiple properties. Long-term tenants also contribute to a successful investment strategy.
If you have equity in a property and are looking to expand your investment portfolio, consider refinancing and using the proceeds as a deposit for another property. This approach is more efficient and can bring additional benefits, such as having multiple properties and diversifying risk. However, it's essential to understand that the process may involve speaking with a mortgage broker and potentially dealing with some complexities. Another important takeaway is the value of having long-term, reliable tenants. If you're in a position where tenants want to renew their lease for an extended period, it's an excellent sign for an investor. Unfortunately, the current laws make it challenging to offer a five-year lease directly. Instead, you may need to offer a shorter term with an option to renew for an additional period. This approach allows both parties to secure a long-term arrangement while complying with the legal requirements.
Long-term tenancy agreements vs flexibility: Landlords and tenants may prefer flexibility over long-term agreements. Break clauses and deeds of assurance can provide security and flexibility.
While a landlord might prefer a long-term tenancy agreement of five years or more, it may not be feasible or desirable for both parties. If a mortgage is involved, the lender may not allow such a long lease due to their need to repossess the property if necessary. Even without a mortgage, both the landlord and tenant might prefer more flexibility. Tenants may want the option to leave before five years if their circumstances change. Landlords may not want to be locked into a long-term agreement with an uncertain tenant. One solution is to use break clauses to terminate the tenancy early. Another option is a deed of assurance. This is an additional agreement where the landlord commits to allowing the tenant to stay for five years, in exchange for compensation if the landlord asks the tenant to leave early. This gives both parties some flexibility while also providing a level of security. It's not a requirement, but it can be a useful tool for managing long-term tenancy agreements.
Effective communication and trust can retain talent without a contract: Communicate openly, build trust, and maintain a positive work environment to retain talent, or consider a written agreement for added certainty.
Effective communication and trust are key to retaining talent. If you informally express your desire for employees to stay and maintain open communication, they may feel secure enough without an additional contract. However, providing a written agreement can offer extra certainty and benefits. Ultimately, the decision depends on your specific situation and desired level of assurance. Regardless of your choice, maintaining a positive work environment and clear communication will help keep your team engaged and committed. Stay tuned for more insights on the property podcast and feel free to submit your questions for Ask Robert Rob. Until then, take care and have a great week!
