Is BTL still worth it, cash buyer

[Whistle]

I know this has been done to death but I have just seen a potential BTL come on the market at a good price.

If it makes any difference I already own one across the road from the one I have seen and have had the same trouble free tenant for just over 3 years. I manage it so costs are minimal it’s only a mile or so from my permanent residence.

House price £115.00 plus costs to buy, 3 bed terraced.

Rent should be £550.00 to £600.00 per month, it would be in my wife’s name to avoid 40% tax

I would be a cash buyer, the money is doing nothing where it currently is.

Thoughts ?

[Mr Pointy]

You're in the best position to know, given that you already have one very similar to the one you are looking at. Surely you have a spreadsheet detailing all income & costs so you know the annual return you would get from the investment?

Fundsmith has an ARR of 18.1% & is 7.6% up over the last year in case you want an alternative.
https://www.fundsmith.co.uk/fund-factsheet

[Groat]

I’d like to buy this tomorrow but the wife’s forbidden buying any more:

https://www.futurepropertyauctions.co.uk/catalogue...

Pity, because I’ve a tenant to take it right away.

Does the arithmetic of yours make you happy? If so, do it. If not, don’t.

[bogie]

So you tie up £115k for £7200 of rent ....does not seem that good a return by the time you take off tax, purchase costs, maintenance and potential hassle factor.

Does the maths work out better if you buy say 2 BTL with £55k equity in each one of them and get £7200 rent off each property ?

Personally im more of a passive investor and would just put it in a fund and/or in ISA or SIPP pension to hide it away from the tax man. You and your wife than use £20k each ISA allowance per year and £40k into each pension....

[dmahon]

bogie said:

So you tie up £115k for £7200 of rent ....does not seem that good a return by the time you take off tax, purchase costs, maintenance and potential hassle factor.

Does the maths work out better if you buy say 2 BTL with £55k equity in each one of them and get £7200 rent off each property ?

Personally im more of a passive investor and would just put it in a fund and/or in ISA or SIPP pension to hide it away from the tax man. You and your wife than use £20k each ISA allowance per year and £40k into each pension....

Ive looked at BTL and came to the same conclusion lots of times. But don’t the markets look a bit over inflated considering the way our economy is self destructing by the day? Or do I have just have a way too pessimistic view of the current situation?

Though the numbers aren’t great, I’m thinking about BTL as it feels the safest route to some return and insulates a bit against bank wobbles etc which must be a risk later in the year.

[mike74]

dmahon said:

Ive looked at BTL and came to the same conclusion lots of times. But don’t the markets look a bit over inflated considering the way our economy is self destructing by the day? Or do I have just have a way too pessimistic view of the current situation?

The way it works these days is the worse the economy does the more money printy printy occurs...

and the markets just love money printy printy.

Edited by mike74 on Sunday 19th July 18:45

[irc]

Probably depends on the view for the value of the house going up. For me 7.5% less tax plus hassle and risk of expensive repairs is not worth it.

But 7.5% plus 5% a year capital gain, maybe.


Also depends how much skin I had in the game. Two houses alongside the same or more in funds or trackers is better than all eggs in the BTL basket.

[Mr Pointy]

bogie said:

So you tie up £115k for £7200 of rent ....does not seem that good a return by the time you take off tax, purchase costs, maintenance and potential hassle factor.

Well that's 6.3% return before all of the deductions, plus you've (hopefully) got the capital gain as the property rises in value. It would be hard to get 6.3% return from an investment without eating into the capital but the key issue is the net return after all expenses which the OP should already know. It would be interesting to know what that figure actually is.

The property Mr Groat linked to was nearer to 16% which is rather more atttractive.

[dmahon]

Mr Pointy said:

bogie said:

So you tie up £115k for £7200 of rent ....does not seem that good a return by the time you take off tax, purchase costs, maintenance and potential hassle factor.

Well that's 6.3% return before all of the deductions, plus you've (hopefully) got the capital gain as the property rises in value. It would be hard to get 6.3% return from an investment without eating into the capital but the key issue is the net return after all expenses which the OP should already know. It would be interesting to know what that figure actually is.

The property Mr Groat linked to was nearer to 16% which is rather more atttractive.

6.3% before costs is an outstanding return outside of slumlording. Would typically net 4%+ which isn’t to be sniffed at even with no capital gains.

The problem as of today is the potential for capital falls and more tenants not being able to pay the rent. Yes it’s a long term game but I’d rather buy with 10-20% off and a lot more information than take a punt today.

I am tracking BTL though especially if we start hearing about another financial crisis.

Edited by dmahon on Sunday 19th July 19:03

[dmahon]

mike74 said:

dmahon said:

Ive looked at BTL and came to the same conclusion lots of times. But don’t the markets look a bit over inflated considering the way our economy is self destructing by the day? Or do I have just have a way too pessimistic view of the current situation?

The way it works these days is the worse the economy does the more money printy printy occurs...

and the markets just love money printy printy.

Edited by mike74 on Sunday 19th July 18:45

Which puts me off even playing the game. Markets are completely divorced from reality so putting your life savings in them is barely better than taking them to the casino.

[TCX]

£100k into EUA @20p ish a share =£800k by the end of next year latest,maybe

[Phooey]

I think BTL is a good game atm and 6-7% return on your money (sat doing nothing) is not to be sniffed at. If the stock market crashes you still have your house and tennant.

Is it worth purchasing through a ltd co (SPV) with a view to adding more maybe

[bogie]

Im a 40% tax payer, so how does that work out for me ? 4% after tax or before ?

Ive been getting more than 5% tax free from Shell dividends over the last few years.......the tax free part really helps, particularly if buying them in a SIPP. So buying with 40% discount in the first place. Bought a load more when they went under £10 a few months back. In my ISA im in profit at anything over £12 a share, getting >5% dividend every 3 months and hopefully they will get back to nearer £20 a share as the world starts to use oil again over coming years.

Anyway, theres no right and wrong, we can discuss pros n cons of property vs shares all day..... if you like property do property, if you like shares, funds etc do that....or ideally have both.

[CraigyMc]

dmahon said:

Which puts me off even playing the game. Markets are completely divorced from reality so putting your life savings in them is barely better than taking them to the casino.

Not a fair comparison.

Casinos are regulated.

[bogie]

Ive lived through the last 2 housing market crashes and if do a quick search there are the usual warnings due to the current situation.

https://www.investmentweek.co.uk/investment-week/n...

but when the housing market crashes you dont usually sell your house(s) on a whim in the hope of buying it back cheaper next week ....unlike some people do with shares

If you have cash, then traditionally property is a great way to generate income, and always has been. Whether its worth the potential hassle for a few percent after tax, depends on your personal situation.

[anonymous-user]

dmahon said:

Markets are completely divorced from reality...

Alternatively, the markets ARE reality.

Would I think BTL was a good idea for any new entrant these days? Not unless they've already maxed out the tax-free wrappers (ISA and SIPP) and are keen to assist UK government by paying voluntary taxes.

The biggest financial risks are always political, and if anything looks ripe for even higher taxation than the enhanced taxes that already apply it's second homes and BTL properties. They're a sitting target, owned by wealthier people and in a fully registered system of ownership so the taxes are cheap and easy to collect.

[leemanning]

I would say that a cash buyer BTL is probably not ideal these days. However buying with a mortgage and benefitting from leverage, is absolutely still a valid long term investment.

If you can buy an asset using only 25% of the required amount, generate a small yield each year and have multiples returned against your investment in the form of capital appreciation then that's got to be the way to go.

However without the leverage and being a cash buyer I'm not sure it is.

[CraigyMc]

bogie said:

If you have cash, then traditionally property is a great way to generate income, and always has been. Whether its worth the potential hassle for a few percent after tax, depends on your personal situation.

Traditionally, the number of people has always been increasing. That's changing. In various developed countries it's already gone into reverse (notably: Japan, Spain, Italy, Greece, as well as most of Eastern Europe).

Economically, the rate of increase of people is a primary driver of expansion.
As the population starts to plateau, the growth rate will tend towards zero and then as the population rate falls, it'll tend towards shrinking (the only thing that can stop this is increases in PP productivity).
As the population falls, housing will become less scarce.
Successful ventures will become much scarcer, investing becomes harder, pensions start to fail.

Property values will continue to rise if demographics mean continuous population growth. In the UK we'd already have had population decline without immigration; it'll be interesting to see what happens if Brexit means a large drop in immi.

[BoRED S2upid]

Phooey said:

I think BTL is a good game atm and 6-7% return on your money (sat doing nothing) is not to be sniffed at. If the stock market crashes you still have your house and tennant.

Is it worth purchasing through a ltd co (SPV) with a view to adding more maybe

This. If the stock market isn’t your thing cash in the bank is loosing you money every year so BTL does make sense still especially if you can avoid 40% tax.

[S7GVC]

leemanning said:

I would say that a cash buyer BTL is probably not ideal these days. However buying with a mortgage and benefitting from leverage, is absolutely still a valid long term investment.

If you can buy an asset using only 25% of the required amount, generate a small yield each year and have multiples returned against your investment in the form of capital appreciation then that's got to be the way to go.

However without the leverage and being a cash buyer I'm not sure it is.

This is BTL's main attraction. The leveraging / gearing the mortgages give. Especially now at such low interest rates.