Discussion
drainbrain said:
Ho hum. Ok. Why shouldn't the income from a portfolio of properties form 100% of retirement funding?
If you had, say, 100% income from 10 properties of different types, with differently profiled tenants etc, I would be easier with the idea. Only a bit. But easier. If you had one tenant from one property that you had a bulletproof (say, ten year contract with) that'd make me sleep a bit easier too. But one small property offers lots of the risks as mentioned above with not much upside. I'm not being sniffy at the idea but without knowing full details, it's difficult to say with certainty, although the accepted wisdom is that you shouldn't do it. I'd go along with those far wiser than me. Ginge R said:
If you had, say, income from 10 properties of different types, with differently profiled tenants etc, I would be easier with the idea. Only a bit. But easier. If you had one tenant from one property that you had a bulletproof (say, ten year contract with) that'd make me sleep a bit easier too. But, one small property offers lots of the risks as mentioned above, with not much upside. I'm not being sniffy at the idea, but without knowing full details, it's difficult to say with certainty, but the accepted wisdom is that you shouldn't do it. I'd go along with those far wiser than me.
Ok. I was wondering what problem you saw with a pf of props providing retirement income. Especially given that so many people actually do it. I'm one. And I know quite a few others. I tried pension saving but it really didn't work out for me. The bit that bugged me the most was that I could do FAR better myself with the money, which led me to question the expertise of the - well - the 'experts' if you like. I mean how can an average Joe do so much better than an 'investment expert'?
If you look around, you'll see that many people seem to have come to the same conclusion. Property isn't seen as complementary to paper investment, it's seen as an option. Seems to work, too.
drainbrain said:
I mean how can an average Joe do so much better than an 'investment expert'?
Usually, as in this case, blind luck.You have run a massively concentrated portfolio in an asset that has risen dramatically.
Good for you but it doesn't change the basic fundamentals of risk.
walm said:
drainbrain said:
I mean how can an average Joe do so much better than an 'investment expert'?
Usually, as in this case, blind luck.You have run a massively concentrated portfolio in an asset that has risen dramatically.
Good for you but it doesn't change the basic fundamentals of risk.
Buy-to-let investors have benefited from being able to leverage (10x) which is great when asse prices are going up, but implicitly there is a lot of risk which can bite if / when values start to go the other way!
walm said:
Well that's better than the just one single property originally suggested.
But you are (obviously) HUGELY exposed to a single asset class (maybe two if you separate commercial/resi).
This means that when the government changes the stamp duty rules you can take a massive hit.
In 2008 you would be crushed (on capital).
Perhaps the most important thing is that with any sizeable portfolio you need to WORK to keep it generating all that lovely yield.
Lots of people genuinely want to retire, not keep on top of their portfolio.
Lastly, the vast majority of people are already massively exposed to property since they tend to live in a property that they own.
(Obviously not the OP's mum.)
So adding a further exposure to the same asset class adds to the risk by definition.
Here's the UK rental yield... safe as houses.
You aren't looking at the risk as a btl businessman does. But you are (obviously) HUGELY exposed to a single asset class (maybe two if you separate commercial/resi).
This means that when the government changes the stamp duty rules you can take a massive hit.
In 2008 you would be crushed (on capital).
Perhaps the most important thing is that with any sizeable portfolio you need to WORK to keep it generating all that lovely yield.
Lots of people genuinely want to retire, not keep on top of their portfolio.
Lastly, the vast majority of people are already massively exposed to property since they tend to live in a property that they own.
(Obviously not the OP's mum.)
So adding a further exposure to the same asset class adds to the risk by definition.
Here's the UK rental yield... safe as houses.
Edited by walm on Friday 26th August 10:38
Stamp duty isn't relevant to btl. btl's an income business. Specialisms within it allow it to be a multi-asset class. You've specified two types (comm&res) but there are 50 sub-types within them.
In 2008 it felt rather more like a buying opportunity than being crushed. Hugged would be better than crushed given how little time it's taken to un-crush. (O and for those with very long memories, it's only a couple of hundred years since the Great Crash of 1825 when a Mayfair townhouse crashed from 35 guineas to 15!!!)
No-one with a sizeable portfolio does anything they don't want to do. They have a manager/agent to do it. O and when it's sizeable enough they pay directors and managers to run the agency they sharehold - effectively another offshoot of btl.
drainbrain said:
You aren't looking at the risk as a btl businessman does.
Stamp duty isn't relevant to btl. btl's an income business. Specialisms within it allow it to be a multi-asset class. You've specified two types (comm&res) but there are 50 sub-types within them.
In 2008 it felt rather more like a buying opportunity than being crushed. Hugged would be better than crushed given how little time it's taken to un-crush. (O and for those with very long memories, it's only a couple of hundred years since the Great Crash of 1825 when a Mayfair townhouse crashed from 35 guineas to 15!!!)
No-one with a sizeable portfolio does anything they don't want to do. They have a manager/agent to do it. O and when it's sizeable enough they pay directors and managers to run the agency they sharehold - effectively another offshoot of btl.
None of which is relevant for the circumstances of the OP, hence why it was dismissed...Stamp duty isn't relevant to btl. btl's an income business. Specialisms within it allow it to be a multi-asset class. You've specified two types (comm&res) but there are 50 sub-types within them.
In 2008 it felt rather more like a buying opportunity than being crushed. Hugged would be better than crushed given how little time it's taken to un-crush. (O and for those with very long memories, it's only a couple of hundred years since the Great Crash of 1825 when a Mayfair townhouse crashed from 35 guineas to 15!!!)
No-one with a sizeable portfolio does anything they don't want to do. They have a manager/agent to do it. O and when it's sizeable enough they pay directors and managers to run the agency they sharehold - effectively another offshoot of btl.
sidicks said:
walm said:
drainbrain said:
I mean how can an average Joe do so much better than an 'investment expert'?
Usually, as in this case, blind luck.You have run a massively concentrated portfolio in an asset that has risen dramatically.
Good for you but it doesn't change the basic fundamentals of risk.
Buy-to-let investors have benefited from being able to leverage (10x) which is great when asse prices are going up, but implicitly there is a lot of risk which can bite if / when values start to go the other way!
drainbrain said:
Using borrowing to expand a portfolio can carry (virtually) zero risk to either lender or borrower. In my case the 'experts' risk assessment, and decisions based on it, meant that both of us made considerably less than we could and should have done and did when we used a far far FAR more businesslike risk-assessment based and rooted in reality rather than theory.
Yes, leverage has 'virtually' zero risk...
drainbrain said:
Using borrowing to expand a portfolio can carry (virtually) zero risk to either lender or borrower. In my case the 'experts' risk assessment, and decisions based on it, meant that both of us made considerably less than we could and should have done and did when we used a far far FAR more businesslike risk-assessment based and rooted in reality rather than theory.
Seriously.You have absolutely no idea what you are talking about.
I would stop posting if I were you.
walm said:
Seriously.
You have absolutely no idea what you are talking about.
I would stop posting if I were you.
No, he's funny!You have absolutely no idea what you are talking about.
I would stop posting if I were you.
Anyone that (apparently) suggests that something wasn't very risky purely on the basis that the eventual outcome was favourable, clearly doesn't understand risk!
It's like going into a Casino, putting all of your money on a single spin on black, walking away having doubled your money and suggested it wasn't 'risky'!
walm said:
drainbrain said:
I mean how can an average Joe do so much better than an 'investment expert'?
Usually, as in this case, blind luck.You have run a massively concentrated portfolio in an asset that has risen dramatically.
Good for you but it doesn't change the basic fundamentals of risk.
The sad thing is, it doesn't dawn, and if it did it wouldn't change anything anyway.
'Risk' isn't scientific. It's an opinion.
drainbrain said:
It doesn't change the fundamentals of a certain perspective of risk, but surely with so many people doing ok through 'blind luck' it dawns on the risk assessors that there's a bit more than 'blind luck' to it!
The sad thing is, it doesn't dawn, and if it did it wouldn't change anything anyway.
'Risk' isn't scientific. It's an opinion.
Risk can be measured in a variety of different ways.The sad thing is, it doesn't dawn, and if it did it wouldn't change anything anyway.
'Risk' isn't scientific. It's an opinion.
drainbrain said:
I tried pension saving but it really didn't work out for me. The bit that bugged me the most was that I could do FAR better myself with the money, which led me to question the expertise of the - well - the 'experts' if you like. I mean how can an average Joe do so much better than an 'investment expert'?
The Pension is the wrapper, so it must have been the underlying assets that didn't work out for you.I have commercial property INSIDE a pension wrapper. Seems ok.
Jockman said:
I have commercial property INSIDE a pension wrapper. Seems ok.
Well you're an idiot.You should have levered up to the nines and bought a portfolio of ten flats to manage in your spare time.
Or just stick £1,000 in AAPL US in 2004.
I mean it worked for me in the past, what can possibly go wrong?
sidicks said:
walm said:
Seriously.
You have absolutely no idea what you are talking about.
I would stop posting if I were you.
No, he's funny!You have absolutely no idea what you are talking about.
I would stop posting if I were you.
Anyone that (apparently) suggests that something wasn't very risky purely on the basis that the eventual outcome was favourable, clearly doesn't understand risk!
It's like going into a Casino, putting all of your money on a single spin on black, walking away having doubled your money and suggested it wasn't 'risky'!
Everything in business is risk. In fact to a certain extent everything in life carries risk (except the certainty of death).
So something apparently very risky may or may not have a favourable outcome, just as something very non-risky may do.
drainbrain said:
Well when you spend all day every day in that casino,
The scenario being discussed was entirely different to the analogy presented.drainbrain said:
and time after time after time after time black comes up then whilst to a certain perspective it is extremely unlikely it'll come up next time, to another perspective it's extremely likely.
Except it is still 50% from a rationale perspective.drainbrain said:
Everything in business is risk. In fact to a certain extent everything in life carries risk (except the certainty of death).
So something apparently very risky may or may not have a favourable outcome, just as something very non-risky may do.
Of course. But denying that the risk exists in the first place is stupidity exemplified.So something apparently very risky may or may not have a favourable outcome, just as something very non-risky may do.
The funny thing with property is that at first it's the 'investment dump'. And during boom times it's a bit annoying because it only 'makes what it makes' whereas businesses can be rapidly grown and expanded. Then during bad times when businesses are slumping it's great, because that steady old income just plods on. Then one day the dump's grown to the point where it's actually becoming the business producing the profits which need invested. Oh dear!
By then it's agency time. Owning one, I mean. And that horizontal diversification leads to all the new contacts which starts the next one into sales. Then into building….
Just seems a bit more fun than putting money into a pension plan (and far more profitable )
By then it's agency time. Owning one, I mean. And that horizontal diversification leads to all the new contacts which starts the next one into sales. Then into building….
Just seems a bit more fun than putting money into a pension plan (and far more profitable
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