BTL article (we have inherited 300k - invest in BTL?)

[Phooey]

http://www.telegraph.co.uk/money/ask-a-money-exper...

"Rather than buy-to-let Mr Connolly suggests investing in Isas and pensions.

Make the most of your Isa allowance, which is £15,240 a year. This will increase to £20,000 in 2017/20.

Mr Connolly also suggested looking at Venture Capital Trusts and Enterprise Investment schemes, which are tax efficient but high risk, so may not be suitable if you want to keep your money safe."



I appreciate I could google the answer but interested in what these Venture Capital Trusts and Enterprise Investment Schemes are, and if they are worth a closer look? Cheers

[Ozzie Osmond]

If you search in this finance forum you will find several detailed threads on this exact subject.

[Phooey]

Ozzie Osmond said:

If you search in this finance forum you will find several detailed threads on this exact subject.

Ah right, thank you. I obviously don't pop in here often enough

[MoneyLady]

Hi Phooey

I must say I'm not a big fan of buy to lets. I am a financial planner and have lots of clients who have had buy to lets, or still do. Hardly any of them make any significant money from them. They take up time to look after and sometimes they cost more than they make.

On top of that, they are expensive to buy and can be difficult to sell quickly if you need the money. It you can afford to tie up your money go ahead, but for most people it's not a great plan.

ISAs and pensions are a good idea although for £300k you won't be able to put it all in those!

Venture Capital Trusts and Enterprise Investment Schemes attract tax relief when you pay money in, so they can look good, but they are usually very high risk! The clue is in the name - they invest in ventures, and enterprises. In other words, start ups or young companies that could go big, or go bust. It is possible to make money there but it's a bumpy journey!

I suggest a mix of ISAs, pensions and a General Investment Account (i.e. investments that aren't in an ISA) and think about using a set of passive investments to keep costs down and get lots of diversification, so you don't have all eggs in one basket. It's easier (and you will almost certainly do better in the long run) if you do that through a good quality financial planner who charges £ fees (not a %).

Happy to explain more if that helps.

[cashmax]

MoneyLady said:

Hi Phooey

I must say I'm not a big fan of buy to lets. I am a financial planner and have lots of clients who have had buy to lets, or still do. Hardly any of them make any significant money from them. They take up time to look after and sometimes they cost more than they make.

On top of that, they are expensive to buy and can be difficult to sell quickly if you need the money. It you can afford to tie up your money go ahead, but for most people it's not a great plan.

ISAs and pensions are a good idea although for £300k you won't be able to put it all in those!

Venture Capital Trusts and Enterprise Investment Schemes attract tax relief when you pay money in, so they can look good, but they are usually very high risk! The clue is in the name - they invest in ventures, and enterprises. In other words, start ups or young companies that could go big, or go bust. It is possible to make money there but it's a bumpy journey!

I suggest a mix of ISAs, pensions and a General Investment Account (i.e. investments that aren't in an ISA) and think about using a set of passive investments to keep costs down and get lots of diversification, so you don't have all eggs in one basket. It's easier (and you will almost certainly do better in the long run) if you do that through a good quality financial planner who charges £ fees (not a %).

Happy to explain more if that helps.

I have never met a financial planner who is a fan of BTL. I wonder why?

People invest in BTL for a multitude of reasons, and I think it's difficult to generalise negatives such as not making money or difficult management and liquidity when these might not be considerations for an investor. As for not making money, I guess you are referring to income rather than cap gain.

EIS investments have a high risk / reward but the advantage of them is that assuming you match the investment with your tax liability, 30% of your capital is the worst case loss.

[AnimalMother]

MoneyLady said:

Hardly any of them make any significant money from them

what a crock of

[TFP]

cashmax said:

EIS investments have a high risk / reward but the advantage of them is that assuming you match the investment with your tax liability, 30% of your capital is the worst case loss.

Can you just clarify that for everyone please?

I wasn't aware of EIS investments attracting 100% tax relief. Where does the other 70% come from......?

[cashmax]

TFP said:

cashmax said:

EIS investments have a high risk / reward but the advantage of them is that assuming you match the investment with your tax liability, 30% of your capital is the worst case loss.

Can you just clarify that for everyone please?

I wasn't aware of EIS investments attracting 100% tax relief. Where does the other 70% come from......?

Rounded numbers

Your investment £1000
Tax relief on the investment £300
Capital at risk £700

Investment bombs badly and becomes worthless

Loss relief claim @ 45% £315

Your total loss is £385

So nearer 40% than 30% and I should have said % of your investment rather than your capital.

[Ozzie Osmond]

AnimalMother said:

MoneyLady said:

Hardly any of them make any significant money from them

what a crock of

Treating the newcomer gently - I'm aware that some private individuals THINK they are making money from BTL when they aren't. As well as quoting their gross rent as "percentage return" they tend to overlook the transaction costs of buying and selling property. Then you need to factor in Income Tax on the rent and Capital Gains Tax on the property.

In marginal cases they may be better off to buy a decent house and live in it themselves, free from CGT.

[GT03ROB]

Ozzie Osmond said:

Treating the newcomer gently - I'm aware that some private individuals THINK they are making money from BTL when they aren't. As well as quoting their gross rent as "percentage return" they tend to overlook the transaction costs of buying and selling property. Then you need to factor in Income Tax on the rent and Capital Gains Tax on the property.

In marginal cases they may be better off to buy a decent house and live in it themselves, free from CGT.

Very gentle & respectful Ozzie!

Very true as well!

[klmhcp]

Ozzie Osmond said:

Treating the newcomer gently - I'm aware that some private individuals THINK they are making money from BTL when they aren't. As well as quoting their gross rent as "percentage return" they tend to overlook the transaction costs of buying and selling property. Then you need to factor in Income Tax on the rent and Capital Gains Tax on the property.

In marginal cases they may be better off to buy a decent house and live in it themselves, free from CGT.

If you're paying income tax on the rent then you definitely are making money as all the costs you mention are deductable, as well you know.

[mike74]

AnimalMother said:

what a crock of

Someone's been watching too much Homes Under the Hammer... an entirety fictional programme aimed at feckless, greedy, simpletons

[klmhcp]

mike74 said:

AnimalMother said:

what a crock of

Someone's been watching too much Homes Under the Hammer... an entirety fictional programme aimed at feckless, greedy, simpletons

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

[mike74]

klmhcp said:

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

There's no conspiracy, it's just a fictional entertainment show aimed at naive gullible simpletons.

Full of hilarious claimed refurb costs, conveniently upgraded valuations from the EA's and fantasy figure profit margins

[Ozzie Osmond]

klmhcp said:

If you're paying income tax on the rent then you definitely are making money as all the costs you mention are deductable, as well you know.

Many amateur BTLers will already have a regular job, pension or other source of income which takes them well on the way towards 40% tax on their "top slice" BTL income. They have to make money from somewhere before they can get into the BTL game.

[GT03ROB]

mike74 said:

klmhcp said:

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

There's no conspiracy, it's just a fictional entertainment show aimed at naive gullible simpletons.

Full of hilarious claimed refurb costs, conveniently upgraded valuations from the EA's and fantasy figure profit margins

Interestingly I was looking at small properties down in Devon a while back. One came up advertised as "as seen on Homes under the Hammer". I saw the episode a few weeks later. The valuation given by the agents at the end of the programme was around 245k, it was up on Rightmove for 195k & hadn't shifted since the episode had been made. I know this is an isolated example but all the same....

[klmhcp]

GT03ROB said:

mike74 said:

klmhcp said:

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

There's no conspiracy, it's just a fictional entertainment show aimed at naive gullible simpletons.

Full of hilarious claimed refurb costs, conveniently upgraded valuations from the EA's and fantasy figure profit margins

Interestingly I was looking at small properties down in Devon a while back. One came up advertised as "as seen on Homes under the Hammer". I saw the episode a few weeks later. The valuation given by the agents at the end of the programme was around 245k, it was up on Rightmove for 195k & hadn't shifted since the episode had been made. I know this is an isolated example but all the same....

Out of interest what year was it filmed?

[hepy]

BTL is risky, and all about timing, so for most people, luck will play a huge part.

Would also think it depends where you are buying. Up north you can buy a decent 2 or 3 bed terrace, and charge £400-£450 per month rent, which should easily make a decent profit, and worst case you still have the property as an asset compared to a 'riskier' investment where you could lose much more.

I do agree with the comments on time though.

My wife has 2 BTL's with tenants that have been in for 10 years plus, so nice steady income, but one of the properties has had approx £7k spent on it over the last 3 years. However, before these tenants, she had a succession of timewasters and non-payers, which brings me back to the whole 'luck' thing.

If you have kids, you could also look on the BTL's as potential homes for them in the future, so a way of helping them on the housing ladder.

[GT03ROB]

klmhcp said:

GT03ROB said:

mike74 said:

klmhcp said:

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

There's no conspiracy, it's just a fictional entertainment show aimed at naive gullible simpletons.

Full of hilarious claimed refurb costs, conveniently upgraded valuations from the EA's and fantasy figure profit margins

Interestingly I was looking at small properties down in Devon a while back. One came up advertised as "as seen on Homes under the Hammer". I saw the episode a few weeks later. The valuation given by the agents at the end of the programme was around 245k, it was up on Rightmove for 195k & hadn't shifted since the episode had been made. I know this is an isolated example but all the same....

Out of interest what year was it filmed?

Fair question, I saw the property advertised earlier this year & it had been up on/off for about 18months, so I'm guessing maybe 2-3 years ago.

[klmhcp]

GT03ROB said:

klmhcp said:

GT03ROB said:

mike74 said:

klmhcp said:

Ah there you are.

Let's get ready for the 'it's all a massive conspiracy' balls.

There's no conspiracy, it's just a fictional entertainment show aimed at naive gullible simpletons.

Full of hilarious claimed refurb costs, conveniently upgraded valuations from the EA's and fantasy figure profit margins

Interestingly I was looking at small properties down in Devon a while back. One came up advertised as "as seen on Homes under the Hammer". I saw the episode a few weeks later. The valuation given by the agents at the end of the programme was around 245k, it was up on Rightmove for 195k & hadn't shifted since the episode had been made. I know this is an isolated example but all the same....

Out of interest what year was it filmed?

Fair question, I saw the property advertised earlier this year & it had been up on/off for about 18months, so I'm guessing maybe 2-3 years ago.

I ask as parts of Devon have seen significant drops over the last 7 years.