Is there money to be made in 2nd/3rd properties?
Discussion
Condi said:
blueg33 said:
It is a gamble buy generally property gains far exceed growth in pensions if the hold is long enough
Not sure I'd agree with that. Too many variables in both pensions and houses.The current generation of property holders have been lucky in that capital growth over the last 20 years has been very good for properties, and the tax and investment regimes were far more generous than they are now for a new entrant.
blueg33 said:
As for ISA's, dont start me on that, may as well stuff the mattress with £20 notes
Why? There are plenty of stocks and shares which will have hugely outperformed your properties with no management required at all. An ISA is only a wrapper for other things - if you wanted you could get property exposure via building companies, brick manufacturers, even property funds all within a tax free vehicle. If your only comparison is a very risk averse cash ISA or index linked pension then of course your property has done better, but your property has also required a lot more time and management and you've taken a lot more risk in one than the other.
rockin said:
Compare and choose;
A. Stamp Duty + transaction costs to buy + voids + tenant default + management costs + interest costs + estate agent/legal costs on sale + Income tax + Capital Gains Tax.
or
B. Up to £20,000 p.a. (double if partner) which cumulates tax free and from which all withdrawals are tax free.
or
C. Up to £40,000 p.a. with full tax relief going in, cumulates tax free, 25% comes out tax free, potential for IHT avoidance.
Property is a good spread especially if you have maxed out your ISA A. Stamp Duty + transaction costs to buy + voids + tenant default + management costs + interest costs + estate agent/legal costs on sale + Income tax + Capital Gains Tax.
or
B. Up to £20,000 p.a. (double if partner) which cumulates tax free and from which all withdrawals are tax free.
or
C. Up to £40,000 p.a. with full tax relief going in, cumulates tax free, 25% comes out tax free, potential for IHT avoidance.
Groat said:
....which took them 25+ years to accumulate without providing them a ha'penny in spending money to enjoy
The great advantage of non-property investments is that they are fungible. You can target total return without having to think about reinvesting dividends / rental income.If you do want to draw some income, just sell some of your holdings. Otherwise let it accrue.
NickCQ said:
The great advantage of non-property investments is that they are fungible. You can target total return without having to think about reinvesting dividends / rental income.
If you do want to draw some income, just sell some of your holdings. Otherwise let it accrue.
Some might prefer to "draw some income" without selling anything whilst the asset continues to accrue (both value and increasing income). Try doing that with a pension If you do want to draw some income, just sell some of your holdings. Otherwise let it accrue.
Groat said:
rockin said:
Tell that to the people with £1m+ in ISAs which they can leave compounding tax free or access tax free whenever they like.
....which took them 25+ years to accumulate without providing them a ha'penny in spending money to enjoy 
Ever met a happy miser?
If you have the funds to buy property without a mortgage then another option is to establish an investment portfolio outside of any tax wrapper.
You are then able to set up a leverage account against it. Cost of around 1.60% over base pa.
Access the capital invested tax free, utilise your cgt allowance annually to pay down the debt/interest costs.
You are then able to set up a leverage account against it. Cost of around 1.60% over base pa.
Access the capital invested tax free, utilise your cgt allowance annually to pay down the debt/interest costs.
Joey Deacon said:
Or who had £1 million in their Vanguard LifeStrategy ISA and watched it lose £200K over night back in March when Covid started. Yes it has since recovered, but you have to have big kahunas to see a drop like that and just assume it will recover.
If you're withdrawing from these things to pay bills and fun what do you do when those slumps happen? Just keep withdrawing making it ever harder to get back to where you were? Naaa. That's a nightmare. Like refinancing an empty property in a price slump.
Joey Deacon said:
Or who had £1 million in their Vanguard LifeStrategy ISA and watched it lose £200K over night back in March when Covid started. Yes it has since recovered, but you have to have big kahunas to see a drop like that and just assume it will recover.
If you needed to realise £800k in March / April would you have preferred to be liquidating a £1 million ISA or a £1 million house?If you don't like volatility just don't check on the value as frequently.
NickCQ said:
Joey Deacon said:
Or who had £1 million in their Vanguard LifeStrategy ISA and watched it lose £200K over night back in March when Covid started. Yes it has since recovered, but you have to have big kahunas to see a drop like that and just assume it will recover.
If you needed to realise £800k in March / April would you have preferred to be liquidating a £1 million ISA or a £1 million house?If you don't like volatility just don't check on the value as frequently.
Condi said:
blueg33 said:
As for ISA's, dont start me on that, may as well stuff the mattress with £20 notes
Why? There are plenty of stocks and shares which will have hugely outperformed your properties with no management required at all. An ISA is only a wrapper for other things - if you wanted you could get property exposure via building companies, brick manufacturers, even property funds all within a tax free vehicle. If your only comparison is a very risk averse cash ISA or index linked pension then of course your property has done better, but your property has also required a lot more time and management and you've taken a lot more risk in one than the other.
Groat said:
NickCQ said:
If you don't like volatility just don't check on the value as frequently.
BBC News: "UK stocks fell sharply today......"Punter: "I will not look....I will not look......I will not look...."
Seriously, Nick?
But there is a serious point behind it - just because you don't know what the value of a property asset is it doesn't mean it hasn't changed.
blueg33 said:
I have property exposure in my pension as it happens. My ISA's are ok but not that great, performing inline with the average stocks and shares ISA's - very scary reading last March/April
What happens if your tenant refuses to pay rent and you can't kick them out because of Covid? What if you need to liquidate your assets - no matter what the price at least you can sell shares and have the cash in your bank within a few days - you can't do that with a property, and even if your stocks have gone down by 20% they don't require you to find money like what would happen if your property was empty and the mortgage still needs paying. At that point you have to reduce your own outgoings or find the money to prop up your investment. The other thing you do get with stocks and shares, which you don't with property, is compound interest. If you had 50k in an ISA returning 5% per year (less than the long term average), then in less than 15 years you've doubled your money, tax free. At 7% return then it's nearly doubled in 10 years, and within 20 years you have 4 times what you invested. To achieve that with property you're relying almost entirely on the capital growth, which is by no means certain.
Also, if you talk to a lot of London landlords at the moment, they'd probably be happy with an "average stocks and shares ISA return". My housemate negotiated a 25% discount and far more favorable terms when he renewed his contract in December. Plenty of properties are empty. If you need to find £1k/month to pay the mortgage for a flat which is now empty that is going to hurt a lot more than a short term paper loss on some assets.
NickCQ said:
But there is a serious point behind it - just because you don't know what the value of a property asset is it doesn't mean it hasn't changed.
Thing is, mate, if your investment is for income then what does it matter what the value is? And remember. The older you get the more meaningless and pointless growth of value becomes.
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