Discussion
Just interested in peoples thoughts. With the recent talk in the media of Interest rates going negative, stock market inflated and predicted low growth, job securities etc - will investors accept the lower yields of BTL as the safest place to invest cash? A few people I've spoken to recently feel safest putting their money into bricks and mortar than any of the usual alternatives on offer 
rockin said:
Phooey said:
A few people I've spoken to recently feel safest putting their money into bricks and mortar than any of the usual alternatives on offer
That's because they haven't realised it's about the most highly taxed place you can put your money in UK today.
I admit I personally know very little about the BTL game, but imagine you have a pot of cash sitting in the bank. Do you leave it to erode to inflation, take the risk of an even more serious downturn in the economy, throw it into the stock market, or stick to the security of owning bricks and mortar. I just wonder if there's more people happy to accept a 4-5% yield today (standard 2/3 bed resi's) than there was 12 months ago when a lot of amateur / accidental landlords were feeling the pain of the anti-BTL government.
Phooey said:
...the security of owning bricks and mortar.
There's IMO a lot of "belief" involved in that sentence. Compare, for instance,"the security of owning government bonds"
"the security of holding cash, guaranteed by the government under FSCS"
"the security of owning shares in the world's most successful companies"
Although BTL has been the automatic go-to investment for Brits for many years it's now so heavily taxed it's no longer the best place for a lot of people. IMO it's main role today is "diversification" unless you're a professional landlord and doing it through a limited company (for the tax relief).
anonymous said:
[redacted]
No. The exact opposite it will have an impact on people being able to pay their mortgage and all the associated bills and they therefore return to renting where there are no unexpected bills. There will also unfortunately be a lot of people defaulting on loans and businesses going bust even more people who can’t get a mortgage and have to rent. rockin said:
There's IMO a lot of "belief" involved in that sentence. Compare, for instance,
"the security of owning government bonds"
"the security of holding cash, guaranteed by the government under FSCS"
"the security of owning shares in the world's most successful companies"
Although BTL has been the automatic go-to investment for Brits for many years it's now so heavily taxed it's no longer the best place for a lot of people. IMO it's main role today is "diversification" unless you're a professional landlord and doing it through a limited company (for the tax relief).
Agree with that. Property should be viewed as diversification after cash, pensions and the stock market. "the security of owning government bonds"
"the security of holding cash, guaranteed by the government under FSCS"
"the security of owning shares in the world's most successful companies"
Although BTL has been the automatic go-to investment for Brits for many years it's now so heavily taxed it's no longer the best place for a lot of people. IMO it's main role today is "diversification" unless you're a professional landlord and doing it through a limited company (for the tax relief).
anonymous said:
[redacted]
Yes and no. Mortgages could become harder to obtain, larger deposits, reduced LTV's etc. Job security could well mean tenants defaulting yes, but equally I think many potential first time buyers will continue renting or look to renting due to unknown job security.rockin said:
That's because they haven't realised it's about the most highly taxed place you can put your money in UK today.
Just (today) paid the tax due on the wife's corporate portfolio of 9 resi. units. £3762.76p. She sole trades another one. Her s-e bill in January was £487.28p
Does that seem high?
Edited by Groat on Monday 29th June 20:24
BTL has done well for me so far, whilst I have some stocks and shares, a pension and cash, BTL has given me by far and away the best returns
I agree BTL isn't for everyone but its definitely for me. I've got a solid near guaranteed income when I retire and the mortgages are cleared. Its not without its hassles but look at the current annuity rates and tell me they are appealing
I agree BTL isn't for everyone but its definitely for me. I've got a solid near guaranteed income when I retire and the mortgages are cleared. Its not without its hassles but look at the current annuity rates and tell me they are appealing
dogz said:
BTL has done well for me so far, whilst I have some stocks and shares, a pension and cash, BTL has given me by far and away the best returns
I agree BTL isn't for everyone but its definitely for me. I've got a solid near guaranteed income when I retire and the mortgages are cleared. Its not without its hassles but look at the current annuity rates and tell me they are appealing
That's good to hear! Out of interest what type of properties do you have? I agree BTL isn't for everyone but its definitely for me. I've got a solid near guaranteed income when I retire and the mortgages are cleared. Its not without its hassles but look at the current annuity rates and tell me they are appealing
Still pretty attractive - https://www.thisismoney.co.uk/money/investing/arti... Five years old so I'm no sure what's changed since then.
Think it all comes down to leveraging - being able to invest mortgaged money. Definitely more complicated and involving than a simple index fund etc.
Think it all comes down to leveraging - being able to invest mortgaged money. Definitely more complicated and involving than a simple index fund etc.
PHers who lived through the 1990s housing crash might possibly take a different view to the question raised, from those who are younger. The 2008 financial crash was bad, but QE and other measures insulated distress in the housing market.
The pandemic will probably have a bad economic effect. Closing almost the entire economy has not been experienced by us before. As the furlough scheme is unwound, employers will face additional costs (possibly without normal revenue) and redundancies are likely to arise.
If high unemployment does occur, paying rent and mortgages is bound to become a problem.
Just a few thoughts.
We must remember, lockdowns have suppressed transmission of the virus, but it is still as active now, as when COVID-19 began and no vaccine yet.
Most people are not interested in stock market investment, but not every businesses suffers during a crisis. There are some quoted companies who sell products or services which are still enjoying strong demand, and so their shares prices are still doing well.
Just think about what people have to buy, not what they would like to buy.
Edited by Jon39 on Wednesday 1st July 10:01
Works well for me. Was sitting on a pot of cash for a few years so started to purchase flats and a commercial property. Well into double figure number of properties now, all mortgage free and returns are 7% overall. Gives us a good annual income.
The trick to the whole thing is getting the right tenants. Get good ones and it's pretty much passive income. I buy the best property I can in the local market, which pretty much guarantees immediate rental with top tenants who will look after the property. Anything that goes wrong gets sorted immediately and the tenants appreciate that. In 5 years with multi properties, I've had one flat with one months loss of rent.
Now buying more, investments anywhere else seem poor with higher risk. My friends who have decent pensions are telling me they've lost a fair chunk of their fund due to recent downturn in the market, one who was looking at retirement next year is now saying he'll have to work for another 5 years.
I have pensions too, but in the recent years the amounts you can invest have reduced, (so they can tax your income more) limiting future income.
If house values drop a bit in the short term, rental values will remain broadly the same and values will recover over time (as the stock market will).
Only worry is if a future Government penalise property ownership in a punitive way, but that could happen to any asset class.
Overall, I'm happy with my investments.
The trick to the whole thing is getting the right tenants. Get good ones and it's pretty much passive income. I buy the best property I can in the local market, which pretty much guarantees immediate rental with top tenants who will look after the property. Anything that goes wrong gets sorted immediately and the tenants appreciate that. In 5 years with multi properties, I've had one flat with one months loss of rent.
Now buying more, investments anywhere else seem poor with higher risk. My friends who have decent pensions are telling me they've lost a fair chunk of their fund due to recent downturn in the market, one who was looking at retirement next year is now saying he'll have to work for another 5 years.
I have pensions too, but in the recent years the amounts you can invest have reduced, (so they can tax your income more) limiting future income.
If house values drop a bit in the short term, rental values will remain broadly the same and values will recover over time (as the stock market will).
Only worry is if a future Government penalise property ownership in a punitive way, but that could happen to any asset class.
Overall, I'm happy with my investments.
My gut feeling is the BTL market will remain very strong, if not stronger.
2 and 3 beds (mainly modern semi's) rent very quickly in my local area - good demand. The yields are approx 4-5% max (fully let and self-managed). I think if I could buy them outright (no mortgage) it could still be worthwhile given the alternatives. I just can't get my head around whether it's best doing it through a limited company or not. And I really wouldn't want to manage them myself - so i'd have to factor in (10%?) management fees. In an ideal world I'd like enough to bring in £30-40k/yr which equates to approx 4-5 properties.
2 and 3 beds (mainly modern semi's) rent very quickly in my local area - good demand. The yields are approx 4-5% max (fully let and self-managed). I think if I could buy them outright (no mortgage) it could still be worthwhile given the alternatives. I just can't get my head around whether it's best doing it through a limited company or not. And I really wouldn't want to manage them myself - so i'd have to factor in (10%?) management fees. In an ideal world I'd like enough to bring in £30-40k/yr which equates to approx 4-5 properties.
dogz said:
Typically 2-3 bed semis or detached let to professional tenants / families
I've also got a couple of flats but service charge destroys the profitability
I usually look for distressed sales
Cheers dogz. Good idea re distressed sales - I wouldn't know where to start to find these today.. but I suppose with experience you learn this. I've also got a couple of flats but service charge destroys the profitability
I usually look for distressed sales
MrVert said:
Works well for me. Was sitting on a pot of cash for a few years so started to purchase flats and a commercial property. Well into double figure number of properties now, all mortgage free and returns are 7% overall. Gives us a good annual income.
Which part of the country are you buying? I have 3 BTLs in Surrey I bought about 10 years ago but whenever I come back to do the math on a new purchase I struggle to get the math to work.e.g. 2 bed flat in the commuter belt around London e.g. Reading, Woking etc. Lets say £275k, with £12k stamp duty on top. Rental income on that wont be higher than £1.6k a month.
So assuming you put down 30%, your interest-only mortgage is around £400 per month. Which, assuming top band of tax, means you are clearing around £550-600 per month so about an 8% yield on your initial investment- not bad. BUT it would still take you the best part of 2 years to recover the cost of the stamp duty before you actually make any real money.
Also, this is of course assuming rock bottom interest rates. I know this seems like a remote chance right now, but what if they were to increase (on a 10-15 year view how long can interest rates stay at 3-decade lows)?? Each 1% that is added to the base rate is taking £160/month out of your pocket pre-tax, so if things normalise to say 3.0% base rate (i.e. a mortgage rate of 5%), your £550-600/month profit turns into £100/month so a yield of 1.3% i.e. awful.
At the same time, if interest rates go up, it will be a headwind on property prices, so you get hit twice- on asset value and on finance rate.
In my mind this can only work if you think interest rates dont go up over the life of the mortgage or you buy the property in cash, but then your ROI yield numbers look much worse.
Seems a lot less hassle to just buy Fundsmith/Lindsell Train (which sure, isnt full proof but its liquid and self-sustaining), but keen to hear where I am wrong.
Edited by R33FAL on Wednesday 1st July 11:20
Edited by R33FAL on Wednesday 1st July 11:21
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