Discussion
DoubleSix said:
Panamax said:
On the other hand the amateur BTL game died several years ago. Just check out how much tax you'll end up paying through your proposed project and have a glance at all the regulations you'll need to comply with.
Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Is the correct answer.Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
BoRED S2upid said:
DoubleSix said:
Panamax said:
On the other hand the amateur BTL game died several years ago. Just check out how much tax you'll end up paying through your proposed project and have a glance at all the regulations you'll need to comply with.
Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Is the correct answer.Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
DoubleSix said:
BoRED S2upid said:
DoubleSix said:
Panamax said:
On the other hand the amateur BTL game died several years ago. Just check out how much tax you'll end up paying through your proposed project and have a glance at all the regulations you'll need to comply with.
Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Is the correct answer.Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Yes I know about REIT’s and again I have no control in what they are investing my money in or how risky those property investments are.
BoRED S2upid said:
DoubleSix said:
BoRED S2upid said:
DoubleSix said:
Panamax said:
On the other hand the amateur BTL game died several years ago. Just check out how much tax you'll end up paying through your proposed project and have a glance at all the regulations you'll need to comply with.
Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Is the correct answer.Then compare hugely tax-advantaged investment in SIPP and/or ISA. Cumulated net returns from those should absolutely obliterate net returns from BTL and, better still, you won't find yourself locked into one large and illiquid investment.
Yes I know about REIT’s and again I have no control in what they are investing my money in or how risky those property investments are.
You’re saying you don’t have the knowledge or confidence to take control, and that’s fair enough, but the option is very much there.
Like many, you perhaps feels you understand property and are comforted by it’s tangible qualities.
But it doesn’t make it the best option.
Edited by DoubleSix on Tuesday 6th February 19:21
While pension plans and ISAs are a better product in some ways the trump card for BTL Is the ability to borrow money. If you buy £25k of shares you'll get dividends and captial appreciation on £25k. If you use that £25k as a deposit on a £100k flat you'll get the "dividends" (rent) and capital appreciation on £100k for a relatively low interest rate.
There is more work involved in BTL and theoretically more risk, though in reality for most of us picking stocks, or even the right funds, and timing when to buy are pretty much a shot in the dark. Most people have some idea of the property market around where they live.
There is more work involved in BTL and theoretically more risk, though in reality for most of us picking stocks, or even the right funds, and timing when to buy are pretty much a shot in the dark. Most people have some idea of the property market around where they live.
Usually (or often, at least) s&s are bought with already-taxed earnings. Some of them then get taxed again on liquidation.
Whereas property may be bought with 100% debt which may, along with its costs, then be paid off by its rental income, after which all its gains are "free money" by PH logic.
Time passes, rent rises, values rise. Not 'guaranteed' but not far off.
For an asset that cost no "hurt" money?
That'll do me.
Whereas property may be bought with 100% debt which may, along with its costs, then be paid off by its rental income, after which all its gains are "free money" by PH logic.
Time passes, rent rises, values rise. Not 'guaranteed' but not far off.
For an asset that cost no "hurt" money?
That'll do me.
JuanCarlosFandango said:
While pension plans and ISAs are a better product in some ways the trump card for BTL Is the ability to borrow money. If you buy £25k of shares you'll get dividends and captial appreciation on £25k. If you use that £25k as a deposit on a £100k flat you'll get the "dividends" (rent) and capital appreciation on £100k for a relatively low interest rate.
There is more work involved in BTL and theoretically more risk, though in reality for most of us picking stocks, or even the right funds, and timing when to buy are pretty much a shot in the dark. Most people have some idea of the property market around where they live.
Very much this. Although the costs to borrow at the moment are pretty steep. That should correct itself. There is more work involved in BTL and theoretically more risk, though in reality for most of us picking stocks, or even the right funds, and timing when to buy are pretty much a shot in the dark. Most people have some idea of the property market around where they live.
BoRED S2upid said:
Although the costs to borrow at the moment are pretty steep.
Currently rents are almost embarrassingly high and climbing faster than a good month in s&s. Big difference is they don't go back down.Bless the naysayers. The more people they persuade to exit the higher and higher and higher rents do go.
Thing is, to slow rent rise, govt need to increase attractiveness to potential btl investors. They've been told this, but won't listen. But eventually they will.
Edited by Portia5 on Tuesday 6th February 19:54
rufmeister said:
We aren't looking to gain short term, more of a long game, aiming for capital growth.
I'm in two minds about this. I'm going to sound horribly socialist now, but I'm not sure about people buying homes to be an appreciating asset (as in over and above inflation). Either as their own residence or a BTL.It's absolutely not a buyers fault that government has failed to allow more homebuilding to alleviate some of the pressure, but the cost of an average home now relative to average earnings is becoming obscene.
I generally believe in free markets, however when young people are unable to get on the housing ladder due to overheating house prices, it seems morally questionable to use homes as an asset class, when there are so many others you could use instead.
It's ok, I'll come to my senses soon and return to my usual Alan B'stard!
Portia5 said:
If you pile it into pensions and start regretting it then too bad you're stuck with it. Whereas property you can simply dump back onto the market, or re-mortgage or second charge. It's not stuck or bound to the whims of, frankly, silly people.
Pensions can buy commercial property and other things, it’s often good to be stuck with a pension fund as it stops less self controlled people dipping in to the funds.
Portia5 said:
Caddyshack said:
Pensions can buy commercial property.....
.....and any rent it generates goes back into the pension not the pocket. 
Or
If the pension buys a % of property and the op buys another % they can take the % income for the personal part.
DoubleSix said:
It’s not so much a trump card as a lone “pro” in a thin column, stacked against many cons.
It has been a pretty big pro over the last few decades though! The FTSE 100 is 10% higher than it was at the start of the century. The average house price is up about 3.5 times. £25k in a FTSE 100 tracker would have paid c. £1,250 a year in dividends at 5% and grown to £27,500. Reinvesting dividends would change things significantly but nothing like enough to close the gap.
If you had bought a £100k house instead and used the rent to pay the mortgage and maintain the property, then without taking a penny out you'd have just about cleared the mortgage and have a £350k house.
The FTSE 250 and the S&P 500 have performed better. The 250 is up about 3 times, and the S&P 500 matches the 3.5 of houses. But you'd still only have that on the £25k. True they are zero work and reinvesting dividends could have boosted it further but unless you'd mortgaged your house and put a huge chunk into shares I doubt you'd have done better.
Even if you had bought the NASDAQ at it's post 2001 nadir of c.1200 points you'd only be up about 12 times now, which is better than the housing example above but would still only be worth about £300k.
True if you had bought shares in Microsoft, Amazon or Apple in 2000 you wouldn't regret missing out on the BTL opportunities, but if you'd bought shares in Yahoo or Cisco, as well you might have, then you wouldn't have fared so well.
Shares and trackers are great. I own some, they do their thing and spit a bit of money out every now and then, and if I just had loads of money and wanted to live on dividends then it's a lot less hassle and risk than a property empire. But for making money the ability to benefit from 3x your capital without exotic specialist instruments is a big plus.
Round numbers based on a few quick Google searches but this is the conclusion I've always come to. If someone can show me what I've missed then I'll be most grateful!
Respectfully, i’m not inclined to delve into the right wrongs of your post. Bit of a busman’s holiday for me.
Lets just say i own all the assets that are being discussed here, however I do so objectively and make it my business to understand both the detail and the high level arguments.
The issue is, and i see this a lot, the BTL zealots don’t properly understand the alternatives and default to property as a result. You could argue they don’t understand property very well either… but lets be kind
Lets just say i own all the assets that are being discussed here, however I do so objectively and make it my business to understand both the detail and the high level arguments.
The issue is, and i see this a lot, the BTL zealots don’t properly understand the alternatives and default to property as a result. You could argue they don’t understand property very well either… but lets be kind
Caddyshack said:
But the op wants to provide for retirement, once they get to over 55 they can consider turning on the income tap. Income rolled up in to the pension makes it grow quickly and can then be used to buy other things. The OP said, right at the start, that they don’t want income now.
Or
If the pension buys a % of property and the op buys another % they can take the % income for the personal part.
Or forget about the pension, the op buys the lot, lives better and some years later finds the rent’s even higher.Or
If the pension buys a % of property and the op buys another % they can take the % income for the personal part.
Edited by Portia5 on Tuesday 6th February 21:30
What you've missed is that past returns are not an indicator of future performance. I'd have loved to have invested into property 20-30 years ago but I was a kid/didn't have any money. The last 10 years have been pretty meh for BTLs in terms of capital appreciation which is really what you're after with the mortgage/leverage.
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