Minimum Standard of Living

[Cyril Haearn]

Surely buy to let is a stressfree goldmine

You set a juicy rent and get the tenants to sign watertight contracts and pay big deposits

Ever read about tenants scarpering or messing up the property or leaving the taps on?

[kwackers]

Well invested funds usually beat buy to let property as an investment. Once you factor in the odd month the property is empty and repairs then the returns aren't so good for most. Although, with buy to let the return may be leveredged as money is borrowed to invest.

I've been tempered by buy to let a few times but have little desire to be a landlord.

I'm not too convinced.

When my partners parents died she couldn't bear to sell her 'family' home. So we renovated it and rented it out.
Renting it was a pita to be sure. But the return was 'ok' if nothing remarkable, had we invested the money elsewhere we'd have done better no doubt.
After 8 or 9 years of renting she was ready to 'let go' so we sold it. Over the period its value had increased by over £100k, that was were the real 'investment' came from. The rental simply paid the bills and kept it in reasonable condition whilst providing a modest 'income'.

Not only that but the rental is effectively index linked without the need to reinvest so could go up annually. (We only raised it when changing tenants).

[al_yrpal]

But...you cant put a house in an ISA... Capital Gains Tax? Had to pay that on our Cornish home when the value quadrupled and you have to own a place through a period of rising prices which is hard to predict.

Al

[Vorpal]

I currently own a house with two apartments. We live in one and rent out the other. I have done similar things in the past. I think it's okay if you live in the building. It's only a little more work than a single family home. I've only once had any difficulty with a tenant. And the extra income is nice.

[kwackers]

But...you cant put a house in an ISA... Capital Gains Tax? Had to pay that on our Cornish home when the value quadrupled and you have to own a place through a period of rising prices which is hard to predict.

Al

You just need the right accountant and to jump through the correct hoops.

Everything's a game, know the rules or employ someone who does and stretch the truth a little...
It's called "taking back control"

[pete75]

Judging by friends, quite a number of landlords have become so directly as a result not getting a decent return on savings. Two people have told me that as soon as interest rates on savings reach a realistic level they plan to sell their properties and put the money back into savings. Neither had to have a buy to let mortgage by the way.
I think low interest rates have encouraged the rising house price market as it's never been so cheap to borrow.

Well invested funds usually beat buy to let property as an investment. Once you factor in the odd month the property is empty and repairs then the returns aren't so good for most. Although, with buy to let the return may be leveredged as money is borrowed to invest.

In the last 20 odd years house prices in some parts of the UK have risen by over 400%. So 20 years ago 100,000 to invest. Buy 10 properties with a mortgage and 10,000 deposit on each. Let them and the rent pays the mortgage and running costs. During the same period rents rose substantially but you're only repaying a mortgage based on the original purchase price. For your £100,000 you've got a million quid investment which grows by 400% to 5 million quid. Even if you had interest only mortgages you'd have made 4 million quid. Then there's the profit on rent which would be substantial in the second 10 years of ownership. If you invested your 100,000 in a fund which magically grew by 2000% in that time - 20 fold you'd still only have made 2 million.

[pwa]

Judging by friends, quite a number of landlords have become so directly as a result not getting a decent return on savings. Two people have told me that as soon as interest rates on savings reach a realistic level they plan to sell their properties and put the money back into savings. Neither had to have a buy to let mortgage by the way.
I think low interest rates have encouraged the rising house price market as it's never been so cheap to borrow.

Well invested funds usually beat buy to let property as an investment. Once you factor in the odd month the property is empty and repairs then the returns aren't so good for most. Although, with buy to let the return may be leveredged as money is borrowed to invest.

In the last 20 odd years house prices in some parts of the UK have risen by over 400%. So 20 years ago 100,000 to invest. Buy 10 properties with a mortgage and 10,000 deposit on each. Let them and the rent pays the mortgage and running costs. During the same period rents rose substantially but you're only repaying a mortgage based on the original purchase price. For your £100,000 you've got a million quid investment which grows by 400% to 5 million quid. Even if you had interest only mortgages you'd have made 4 million quid. Then there's the profit on rent which would be substantial in the second 10 years of ownership. If you invested your 100,000 in a fund which magically grew by 2000% in that time - 20 fold you'd still only have made 2 million.

That's looking back, but I'm not sure house prices will rise 400% over the next 20 years. Who will be able to afford the rent for such homes? People are struggling with today's prices, so I think we may be reaching a plateau.

[francovendee]

That's looking back, but I'm not sure house prices will rise 400% over the next 20 years. Who will be able to afford the rent for such homes? People are struggling with today's prices, so I think we may be reaching a plateau.

I think that's right, there has to be a maximum that house prices can reach at the speed they have. One thing that might happen is that after Brexit there is a period of increased interest rates due to our poorer trading position in the world. This will increase the cost of mortgages, bring prices down and push savers rates up. Sounds good to me

[pete75]

Well invested funds usually beat buy to let property as an investment. Once you factor in the odd month the property is empty and repairs then the returns aren't so good for most. Although, with buy to let the return may be leveredged as money is borrowed to invest.

In the last 20 odd years house prices in some parts of the UK have risen by over 400%. So 20 years ago 100,000 to invest. Buy 10 properties with a mortgage and 10,000 deposit on each. Let them and the rent pays the mortgage and running costs. During the same period rents rose substantially but you're only repaying a mortgage based on the original purchase price. For your £100,000 you've got a million quid investment which grows by 400% to 5 million quid. Even if you had interest only mortgages you'd have made 4 million quid. Then there's the profit on rent which would be substantial in the second 10 years of ownership. If you invested your 100,000 in a fund which magically grew by 2000% in that time - 20 fold you'd still only have made 2 million.

That's looking back, but I'm not sure house prices will rise 400% over the next 20 years. Who will be able to afford the rent for such homes? People are struggling with today's prices, so I think we may be reaching a plateau.

I know someone who's done just what I describe. I doubt he's bothered if rents etc reach a plateau his money has been made. Congrats for realising that past investment performance is no guarantee of future performance.
If I was able to predict future performance I'd be richer than Warren Buffet assuming I could be buttocked to use the knowledge.

[al_yrpal]

The thing many people overlook about investment is dividends. If you choose investments in companies which have long track records in paying increasing reliable dividends over 20 years 4% + per annum tax free and slowly increasing payouts adds up to a tidy sum with a reliable income stream if you choose your shares carefully. http://www.damiancannon.com/blog/how-to ... portfolio/ The magic of compound interest plays a significant role too if you reinvest dividends over a long period instead of spending them.

Get rich quick share schemes as a member of Joe Public usually end in tears.The government has identified BTL landlords as cash cows and, is now taxing previously tax free dividends more severely therefore shares have to be held in ISAs avoiding income tax and Capital Gains Tax. But, thats easy to do if you are saving small sums regularly rather than investing a large lump sum like the proceeds of a property sale all at once

There is no need to indulge in nafarious illegal tax dodges recommended by dodgy accountants. Softly softly paying your taxes you can sleep soundly with a clear concience.

Al

[kwackers]

There is no need to indulge in nafarious illegal tax dodges recommended by dodgy accountants. Softly softly paying your taxes you can sleep soundly with a clear concience.

Al

You don't need dodgy accountants. Simply accountants that have a good grasp of the rules so they can give you good (but legal) advice.
If your accountant tells you to live in the house for 6 months before selling it then that's what you do.
That or pay 40 grand to help the OAP's pay for their brexit.

[thirdcrank]

Re the stock market. At the end of 1999, on what was wrongly called the eve of the millennium (which didn't really start till 1 January 2001) the Footsie 100 was hovering near 7,000 and as I type this it's below 7,400 having had a sub-7,000 low during the last year. ie An 18 year period with zilch growth. Obviously, anybody buying at the lowest point in between 1999 and now would be in front, so timing is important. That's the index of the leading shares - generally the dependable dividend payers - and there are others for smaller and/or riskier companies. Picking the right investment at the right time is the key to megabucks as the Sage of Omaha demonstrates, but even he can get it wrong: he's had so much success and so many investors believing in him that he can take a few hits. DIY isn't for the faint-hearted, unless it's only tiny sums involved.

In general, investment managers get their cut - based on the size of the investment, not their performance in terms of loss/gain - and they do quite well, no matter what.

[al_yrpal]

...but you still get the dividends and you can choose when to sell. So called financial advisors and fund managers can seriously damage your wealth with their seemingly insignificant fees. Over time fees are just like dividends they can really add up. Some shares tank, others fly, thats life.

Al