70k to invest, buy to let?
Discussion
joyless lobotomised parrot said:
Not sure the term "value" can really be applied to annuities. After all, you can't sell or swop them or even return them back to the supplier. Harder to get rid of than a pregnant cat.
Actually there is REAL value in an annuity. To the supplier. They get your money. For nothing. You get a very small portion of it back for a while. Which, of course, is paid from the profit they make by using the money you handed to them in the first place.
However, if you were told when you were being sold the pension plan that after 12 years of contributing the plan would be worth more or less the sum total of your contributions would you buy it?
And if you were told that the annuity you were being forced to buy with the accumulated fund of 12 years contributions would provide enough to buy 2 or 3 bottles of wine a month (which is not really anyone's dream of an income in retirement) would you bother getting involved in the first place?
The op's question was should he invest his hard earned £70k in btl? There is a horrendous amount of nonsense spouted about btl on Dadsnet but assuming he's interested in alternatives, "investing" in an annuity with his £70k would, imo (and based on the experience of owning 2 for 16 years) provide very little in the way of satisfactory financial returns with a certainty of losing 100% of the original "investment" (or 'purchase price' if buying an annuity isn't considered to be "investment" at all).
(People who sell these awful things will, of course, vehemently disagree. But have they actually bought one themselves? Hmmmm.)
The usual ignorance from the usual suspect.Actually there is REAL value in an annuity. To the supplier. They get your money. For nothing. You get a very small portion of it back for a while. Which, of course, is paid from the profit they make by using the money you handed to them in the first place.
However, if you were told when you were being sold the pension plan that after 12 years of contributing the plan would be worth more or less the sum total of your contributions would you buy it?
And if you were told that the annuity you were being forced to buy with the accumulated fund of 12 years contributions would provide enough to buy 2 or 3 bottles of wine a month (which is not really anyone's dream of an income in retirement) would you bother getting involved in the first place?
The op's question was should he invest his hard earned £70k in btl? There is a horrendous amount of nonsense spouted about btl on Dadsnet but assuming he's interested in alternatives, "investing" in an annuity with his £70k would, imo (and based on the experience of owning 2 for 16 years) provide very little in the way of satisfactory financial returns with a certainty of losing 100% of the original "investment" (or 'purchase price' if buying an annuity isn't considered to be "investment" at all).
(People who sell these awful things will, of course, vehemently disagree. But have they actually bought one themselves? Hmmmm.)
Edited by joyless lobotomised parrot on Saturday 23 June 11:45
Post reported - it’s demonstrably wrong in numerous areas, areas that have been covered and explained time and time again.
The only conclusion is that you are deliberately trying to troll or you really are entirely ignorant on this topic.
As per one of your previous posts, if you don’t know or understand about a topic, don’t post on it.
Edited by sidicks on Sunday 24th June 19:04
Phooey said:
Property is cheap in Doncaster. Where you buy doesn't have to be local but maybe have a look at commercial. Something like this (previously let at 13k pa) - http://www.rightmove.co.uk/commercial-property-for...
eta ^^^ bit out of date that advert but you get the drift
Terrible idea(OP said hes not a risk taker in his first post) for someone who has never invested money to buy a shop without a tenant in an area that has quite a few vacant shops OP would be responsible for rates etc till he found a tennant - surely a project/investment for an experienced commercial property landlord who would know how to turn this around/offer free rent etc and if not can write the loss off against his portfolio.eta ^^^ bit out of date that advert but you get the drift
To answer the OP depends on your circumstances if you have a 95%LTV mortgage on your house then would make sense to reduce it & if you have a low mortgage & pay 40% tax then perhaps pay into a SIPP for a 40% uplift otherwise a Stocks & shares ISA.
jonny70 said:
Terrible idea(OP said hes not a risk taker in his first post) for someone who has never invested money to buy a shop without a tenant in an area that has quite a few vacant shops OP would be responsible for rates etc till he found a tennant - surely a project/investment for an experienced commercial property landlord who would know how to turn this around/offer free rent etc and if not can write the loss off against his portfolio.
To answer the OP depends on your circumstances if you have a 95%LTV mortgage on your house then would make sense to reduce it & if you have a low mortgage & pay 40% tax then perhaps pay into a SIPP for a 40% uplift otherwise a Stocks & shares ISA.
And yet, Jonny, the shop was sold and subsequently turned into a decent looking bar. Street doesnt look to bad to me. Certainly saw a few household names trading in it and not too many vacant.To answer the OP depends on your circumstances if you have a 95%LTV mortgage on your house then would make sense to reduce it & if you have a low mortgage & pay 40% tax then perhaps pay into a SIPP for a 40% uplift otherwise a Stocks & shares ISA.
joyless lobotomised parrot said:
And yet, Jonny, the shop was sold and subsequently turned into a decent looking bar. Street doesnt look to bad to me. Certainly saw a few household names trading in it and not too many vacant.
'Not too many vacant' matters a lot if you only own one and it's the one that is vacant. It matters much less so if you own a number of them.It's this risk thing that you keep pretending doesn't exist.
b
hstewie said:
hstewie said:BarryGibb said:
Agreed. I'll bookmark the post and come back in 10 years when Groak is on his 30th name!
Guess I'm due a whoosh on that one 
Thanks for the"endorsement" BG 
Unfortunately the Real World is beckoning and so Dadsnet time may be getting discontinued for a while. Since this enforced 'retirement' a thousand things have come up including some rather enticing stunts so the end of the long lies and lazy days may be in sight. Possibly time to get the clown costume out the wardrobe and return to what laughably passes for "work" in my world. This will be vehemently opposed by the missus with whom Ive had a good laugh over the last 2.5 years, but roundly applauded by my Uncle Sam who has just sent me a bill of head exploding proportions which will need paying (albeit slowly - Uncle Sam's always good in that respect) - otherwise it'll be the bailiffs!
Bottom line is that it's time to stop wasting hours talking crap in chatrooms and get focussed on herding cats, dodging bullets and avoiding meetings!
As Governor Arnie, or Charles Bronson (or was it Gen. MacArthur?) once said : "Maybe you feel lucky, punks, but just remember, I'll be back"
https://www.youtube.com/watch?v=ELcTJZLxhFU
Unfortunately the Real World is beckoning and so Dadsnet time may be getting discontinued for a while. Since this enforced 'retirement' a thousand things have come up including some rather enticing stunts so the end of the long lies and lazy days may be in sight. Possibly time to get the clown costume out the wardrobe and return to what laughably passes for "work" in my world. This will be vehemently opposed by the missus with whom Ive had a good laugh over the last 2.5 years, but roundly applauded by my Uncle Sam who has just sent me a bill of head exploding proportions which will need paying (albeit slowly - Uncle Sam's always good in that respect) - otherwise it'll be the bailiffs! Bottom line is that it's time to stop wasting hours talking crap in chatrooms and get focussed on herding cats, dodging bullets and avoiding meetings!
As Governor Arnie, or Charles Bronson (or was it Gen. MacArthur?) once said : "Maybe you feel lucky, punks, but just remember, I'll be back"
https://www.youtube.com/watch?v=ELcTJZLxhFU
bhstewie said:
hstewie said:BarryGibb said:
A good track record when large cap equities aren't doing spectacularly well?
I can only say look over his career pre-Fundsmith.Time will tell over the long term.
ToysRUs are the big signal of things to come for many businesses that have been surging on selling off assets and increasing borrowing. Lots of funds are going to get mullered and lots of fund managers found out. At the same time, property is also going to be reacting to rising financing costs, not just on their own debt but the debt of their tenants.
I think the next decade could prove to be as hard to make money as this decade has been so easy.
dingg said:
With me coming up to retirement this year I really hope you're wrong on that DA
Time will tell , I think the bull run will continue btw ,with the odd wobble on the way (fingers crossed)
I think it has to or a very large number of people are screwed through no fault of their own. But corporate debt has only gone up a little and quite a few companies have gone tits up so there is more to shake out however smooth the transition is. And on the BTL side making sure you’ve the resources to fund any deposit increases from lenders (note how the market has incentivised so heavily to get as many as people rolling their debt over every 2 years and thus change terms very easily) and also to fund any shortfall from a tenent deciding that the money they thought was going to be used on rent will be spent better with Vanquis or Sunny. Time will tell , I think the bull run will continue btw ,with the odd wobble on the way (fingers crossed)
In short, those without foundations are at huge risk. As always but this was on hold for the last decade. But if cash is going to be becoming more valuable then I’ll be buggered if I know what the best assets to be holding going forward are.
DonkeyApple said:
bhstewie said:
hstewie said:BarryGibb said:
A good track record when large cap equities aren't doing spectacularly well?
I can only say look over his career pre-Fundsmith.Time will tell over the long term.
ToysRUs are the big signal of things to come for many businesses that have been surging on selling off assets and increasing borrowing. Lots of funds are going to get mullered and lots of fund managers found out. At the same time, property is also going to be reacting to rising financing costs, not just on their own debt but the debt of their tenants.
I think the next decade could prove to be as hard to make money as this decade has been so easy.
I'm a total amateur but it's been interesting and eye opening when you look at how many companies seem built on a pile of debt.
Even more eye opening how many still pay a very healthy dividend whilst taking on more debt.
bhstewie said:
hstewie said: it's been interesting and eye opening when you look at how many companies seem built on a pile of debt.
Even more eye opening how many still pay a very healthy dividend whilst taking on more debt.
Nothing wrong with that provided the company is making a good margin. Imagine a one man business operated from your shed at home. You've only got £1,000 of spare cash. You could,Even more eye opening how many still pay a very healthy dividend whilst taking on more debt.
- Use that £1,000 to buy materials which you turn into finished goods in your spare time and then sell for £1,500
- Gross profit £500
- Net profit £470
- Increase your £1,000 by borrowing £9,000 at 5%, which costs you £450 a year
- Use the £10,000 to buy materials which you turn into finished goods in your spare time and then sell for £15,000
- Gross profit £5,000
- Net profit £4,550
It's called "gearing", because borrowing can "gear up" the ability of the business to make profit. In the case of big business a car factory running at 100% capacity should be very efficient indeed. But what do you do when you get more orders? You can't increase capacity to 101%, you have to build a whole new factory at massive cost and in the hope of winning even more orders.
However, things can go pear-shaped if the business can't sell its products or can't sell them at a high enough price (or if there's a substantial increase in interest rates). This is exactly what happened to Lotus. They built an expensive new factory in the hope of selling lots of cars, but the expected orders never materialised and the company is saddled with debt that it can't afford, hence losing money hand over fist.
rockin said:
Nothing wrong with that provided the company is making a good margin. Imagine a one man business operated from your shed at home. You've only got £1,000 of spare cash. You could,
It's called "gearing", because borrowing can "gear up" the ability of the business to make profit. In the case of big business a car factory running at 100% capacity should be very efficient indeed. But what do you do when you get more orders? You can't increase capacity to 101%, you have to build a whole new factory at massive cost and in the hope of winning even more orders.
However, things can go pear-shaped if the business can't sell its products or can't sell them at a high enough price (or if there's a substantial increase in interest rates). This is exactly what happened to Lotus. They built an expensive new factory in the hope of selling lots of cars, but the expected orders never materialised and the company is saddled with debt that it can't afford, hence losing money hand over fist.
Absolutely but that’s the sense blenand be eficial use of debt. What we are considering here is the companies that have been borrowing to simulate growth and where the revenues from the business are barely financing this debt, thus any cost rise is game over regardless as a business really can’t magnify sales overnight etc. - Use that £1,000 to buy materials which you turn into finished goods in your spare time and then sell for £1,500
- Gross profit £500
- Net profit £470
- Increase your £1,000 by borrowing £9,000 at 5%, which costs you £450 a year
- Use the £10,000 to buy materials which you turn into finished goods in your spare time and then sell for £15,000
- Gross profit £5,000
- Net profit £4,550
It's called "gearing", because borrowing can "gear up" the ability of the business to make profit. In the case of big business a car factory running at 100% capacity should be very efficient indeed. But what do you do when you get more orders? You can't increase capacity to 101%, you have to build a whole new factory at massive cost and in the hope of winning even more orders.
However, things can go pear-shaped if the business can't sell its products or can't sell them at a high enough price (or if there's a substantial increase in interest rates). This is exactly what happened to Lotus. They built an expensive new factory in the hope of selling lots of cars, but the expected orders never materialised and the company is saddled with debt that it can't afford, hence losing money hand over fist.
It seems quite plausible to see very many of the rapidly expanded chains disappear as their debt models all implode. I think very many of the furniture chains and the food chains are ticking time bombs as the slightest rise in their debt costs will halt them in their tracks.
DonkeyApple said:
I think it’s a fair arguement that how many assets perform over the next decade will depend on how they react to reducing money supply and increasing debt costs.
ToysRUs are the big signal of things to come for many businesses that have been surging on selling off assets and increasing borrowing. Lots of funds are going to get mullered and lots of fund managers found out. At the same time, property is also going to be reacting to rising financing costs, not just on their own debt but the debt of their tenants.
I think the next decade could prove to be as hard to make money as this decade has been so easy.
Do you think it will be the next decade, or will it be that things explode over a year or two, then it turns into a equivalent of ~2009 time to invest and get big gains over the following years?ToysRUs are the big signal of things to come for many businesses that have been surging on selling off assets and increasing borrowing. Lots of funds are going to get mullered and lots of fund managers found out. At the same time, property is also going to be reacting to rising financing costs, not just on their own debt but the debt of their tenants.
I think the next decade could prove to be as hard to make money as this decade has been so easy.
bhstewie said:
hstewie said: Yes absolutely there's good debt and bad debt.
What I struggle with is I buy shares in a company and they pay me a dividend whilst taking on more debt.
I get that there's an argument about keeping shareholders on board but that doesn't feel right.
Given the board probably have a lot of shares (so get dividends/ want to keep the share price increasing) then it doesn't matter long term about increasing company debt for dividends, as long as they get out in time! What I struggle with is I buy shares in a company and they pay me a dividend whilst taking on more debt.
I get that there's an argument about keeping shareholders on board but that doesn't feel right.
NRS said:
Given the board probably have a lot of shares (so get dividends/ want to keep the share price increasing) then it doesn't matter long term about increasing company debt for dividends, as long as they get out in time!
In the mid/late 90s you watched the old guard (often founders) board rooms being ousted by the young guns and almost overnight corporate debt began to rise, the market for specialist Board remuneration went through the roof and basic Board salaries leapt and none of it has really stopped. Gassing Station | Finance | Top of Page | What's New | My Stuff