House or investment, whats my best bet?

[P101]

We have a House in a nice area of ChorleyWood, its value is approx £700k, there is no mortgage, and at present we get a rental income of about £2200 pcm.

We have been told loosely by a couple of financial people that we would be better off selling and investing the money elsewhere. I am not so sure about this. I feel that the money is relatively safe in bricks and mortar. Am I being blind here, would I be able to make more money investing? if so what kind of investments. I don't want anything high risk. Must be very low risk.

Opinions would be welcome.

Thanks.

[N Dentressangle]

P101 said:

I don't want anything high risk. Must be very low risk.

.

Then in the long term (15 - 20 years+) you're better off sticking with the house, I would think.

You're currently getting a yield of 3.77%, which is probably similar or better to many savings accounts (the least 'risky' form of investment), plus any capital appreciation on the house - OK, none currently but it will rise in the longer term.

Could you get a better return on your 700k? Yes, definitely, especially in the shorter term.

Would it be as 'safe'? Probably not.

That's how I would see it. It all depends how comfortable you are with risk, and over what period you want to invest.

[groak]

P101 said:

We have a House in a nice area of ChorleyWood, its value is approx £700k, there is no mortgage, and at present we get a rental income of about £2200 pcm.

We have been told loosely by a couple of financial people that we would be better off selling and investing the money elsewhere. I am not so sure about this. I feel that the money is relatively safe in bricks and mortar. Am I being blind here, would I be able to make more money investing? if so what kind of investments. I don't want anything high risk. Must be very low risk.

Opinions would be welcome.

Thanks.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

[P101]

groak said:

P101 said:

We have a House in a nice area of ChorleyWood, its value is approx £700k, there is no mortgage, and at present we get a rental income of about £2200 pcm.

We have been told loosely by a couple of financial people that we would be better off selling and investing the money elsewhere. I am not so sure about this. I feel that the money is relatively safe in bricks and mortar. Am I being blind here, would I be able to make more money investing? if so what kind of investments. I don't want anything high risk. Must be very low risk.

Opinions would be welcome.

Thanks.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

By units do you mean flats?

[P101]

N Dentressangle said:

P101 said:

I don't want anything high risk. Must be very low risk.

.

Then in the long term (15 - 20 years+) you're better off sticking with the house, I would think.

You're currently getting a yield of 3.77%, which is probably similar or better to many savings accounts (the least 'risky' form of investment), plus any capital appreciation on the house - OK, none currently but it will rise in the longer term.

Could you get a better return on your 700k? Yes, definitely, especially in the shorter term.

Would it be as 'safe'? Probably not.

That's how I would see it. It all depends how comfortable you are with risk, and over what period you want to invest.

Not comfortable with risk at all really, not with that sum of money anyway. The house represents part of our little nest egg for the future, can't afford to lose it! The house will be sold probably within the next 7 - 10 years, perhaps a little longer.

[Mike Random]

Please forgive my stupidity but how is yeild worked out when the house is mortgage free?

Thanks

Mike

[otherman]

Mike Random said:

Please forgive my stupidity but how is yeild worked out when the house is mortgage free?

Thanks

Mike

Its more like return on capital employed as stated there.

[Maxf]

Mike Random said:

Please forgive my stupidity but how is yeild worked out when the house is mortgage free?

Thanks

Mike

The yield has nothing to do with ownership/financing - its £2200*12 / £700,000 - it's just a factor of the rental income against the value.

[groak]

P101 said:

groak said:

P101 said:

We have a House .... we get a rental income of about £2200 pcm.

We have been told ... we would be better off selling and investing the money elsewhere. would I be able to make more money investing?
Opinions would be welcome.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

By units do you mean flats?

[Mike Random]

Maxf said:

The yield has nothing to do with ownership/financing - its £2200*12 / £700,000 - it's just a factor of the rental income against the value.

Thanks for that, l also looked online after reading this post and worked out l stand to make 8% on my rental place all being well.

Why would you also go Interest only over repayment? being that in my case the anticipated rent can pay the mortgage off in 12 years?

Thanks and sorry to the OP for taking the thread of track

[N Dentressangle]

Mike Random said:

Thanks for that, l also looked online after reading this post and worked out l stand to make 8% on my rental place all being well.

Why would you also go Interest only over repayment? being that in my case the anticipated rent can pay the mortgage off in 12 years?

Thanks and sorry to the OP for taking the thread of track

Because you can offset mortgage interest payments against the income tax payable on the rent, but not against the actual loan repayments.

[P101]

groak said:

P101 said:

groak said:

P101 said:

We have a House .... we get a rental income of about £2200 pcm.

We have been told ... we would be better off selling and investing the money elsewhere. would I be able to make more money investing?
Opinions would be welcome.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

By units do you mean flats?

A flat for £50k??? or even £100k ??? where???

[johnfm]

groak said:

P101 said:

We have a House in a nice area of ChorleyWood, its value is approx £700k, there is no mortgage, and at present we get a rental income of about £2200 pcm.

We have been told loosely by a couple of financial people that we would be better off selling and investing the money elsewhere. I am not so sure about this. I feel that the money is relatively safe in bricks and mortar. Am I being blind here, would I be able to make more money investing? if so what kind of investments. I don't want anything high risk. Must be very low risk.

Opinions would be welcome.

Thanks.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

What quality of tenant will you get in £50k flats - or £100k flats?

7 flats @ 400/month is only £2800 - but at least 7x the hassle managing the flats, repairing damaging, fixing problems etc.

I am sure you can make it work Groak as part of a full time letting business - but for one non-professional landlord, 7 cheap units let to low rent tenants sounds like a nightmare.

[groak]

P101 said:

A flat for £50k??? or even £100k ??? where???

I've a deal just offered to me last week. It's for 3 x 2 bedroomed flats which are currently underoccupied (by solo tenants), but producing about £1kpcm. Properly occupied, they'd produce closer to £1300/1350pcm. The owner wants £69k for them. I'm skint, having just spent all my dough to buy a business, and will be staying skint till December at least. But I'll finesse the deal for you for a 3 grand fee, my agency will run them for 10%+vat, and if, next year, you really don't feel comfy with them, I'll buy them back off you, including repaying the £3k you paid me.

We (self and associates) originally bought a fair number in the same zone because we thought they were to be compulsorily purchased. But so far (3 years later) no sign of this, so we're milking out the decent yields instead.

ps: Just to clarify, that's £69k for the three of them, not each.

Edited by groak on Monday 17th October 22:44

[Mike Random]

N Dentressangle said:

Because you can offset mortgage interest payments against the income tax payable on the rent, but not against the actual loan repayments.

So what kind of tax % is payable then if on a repayment mortgage when borrowing 41k and renting for 400/450pcm with repayments at 385?

Thanks

Mike

[zbc]

Mike Random said:

So what kind of tax % is payable then if on a repayment mortgage when borrowing 41k and renting for 400/450pcm with repayments at 385?

Thanks

Mike

It depends on other variables such as your other income and other expenditures you might have on a house. But if you just look at your situation without other factors and assume a 5% rate mortgage and that the remaining capital amount is 40k over the year then you would have a interest payment of 2000 and income of 4800 and thus your taxable income on this would be 2800.

[98elise]

P101 said:

groak said:

P101 said:

groak said:

P101 said:

We have a House .... we get a rental income of about £2200 pcm.

We have been told ... we would be better off selling and investing the money elsewhere. would I be able to make more money investing?
Opinions would be welcome.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

By units do you mean flats?

A flat for £50k??? or even £100k ??? where???

Last month I bought a 2 bed 70's build EOT house in the south east, for 107k.

Its in a reasonable area, with off street parking and a garage, and good commuter links into London

[scotal]

groak said:

P101 said:

We have a House in a nice area of ChorleyWood, its value is approx £700k, there is no mortgage, and at present we get a rental income of about £2200 pcm.

We have been told loosely by a couple of financial people that we would be better off selling and investing the money elsewhere. I am not so sure about this. I feel that the money is relatively safe in bricks and mortar. Am I being blind here, would I be able to make more money investing? if so what kind of investments. I don't want anything high risk. Must be very low risk.

Opinions would be welcome.

Thanks.

If you sold it and bought 7 units at £100k or 14 units at £50k, wouldn't that net a rather larger income?

Or you could riaase some money out of the house with a BTL mortgage and use the funds to buy either
a: more property
b: another investment.


As an aside I sat through a presentation on attitude to risk the other day.
IF you have told an IFA that you have no appetite to lose any money on an investment they should only recommend deposit accounts and bonds. The FOS are upholding complaints where ATP wasn't properly guaged by advisors. who then stuck their clients into investmenrts with inherent risk.

Bear inmind that property does have risk associated with it. It can after all fall as well as rise.

[New POD]

Maxf said:

Mike Random said:

Please forgive my stupidity but how is yeild worked out when the house is mortgage free?

Thanks

Mike

The yield has nothing to do with ownership/financing - its £2200*12 / £700,000 - it's just a factor of the rental income against the value.

Measures of Performance for your investment ? I'm not sure what people mean but my take on it :

Growth ? Will your £700K turn into £1.4 million If the house market booms ?
Return on Investment ? The Income divided by the Equity YOU OWN
Yeild ? The income divided by the VALUE.

Interestingly the RoI and Yeild are equal if you own out right.

Then the Finace people use "leverage"

If you had £700K cash, and you wanted to borrow with lowish risk you could leverage another £700K (100% leverage)
If you wanted to take bigger risks you could leverage £1.4M (200% leverage) ? Would the bank loan you 1.4 Million if you had £700K ? I think they want 40% deposit for a Buy to Let.

So now the risks.

Ask yourself why someone who make money out of arranging loans or takes commission from offering investment advice would suggest you go you low risk, adequate yeild to higher risk but higher yeild investments?

One idea would be that you remortgage the current property, for say £350K. and then use that £350K to buy 4 more smaller properties. ? In terms of risk, you are spreadbetting on "Occupancy" such that if 2 are ocupied that at least pays the loans, but if 5 are occupied you are making double what you might have.

In terms of risk, you Still own the same level of equity, it's just that someone else has rights to flog it all if you default.

[groak]

scotal said:

Or you could riaase some money out of the house with a BTL mortgage and use the funds to buy either
a: more property
b: another investment.


As an aside I sat through a presentation on attitude to risk the other day.
IF you have told an IFA that you have no appetite to lose any money on an investment they should only recommend deposit accounts and bonds. The FOS are upholding complaints where ATP wasn't properly guaged by advisors. who then stuck their clients into investments with inherent risk.

Bear inmind that property does have risk associated with it. It can after all fall as well as rise.

People lose money in deposit accounts every day to inflation risk. In the event of bank crash, money is only guaranteed safe to a certain level...beyond that it's gone.