Buy to Let now...or wait a year??

neverdespairgirl

JonnyBravo wrote: »

I suspect you are feeling guilty about the fact that the short supply of wheat for the world has meant that many people in the world have seen it disappear from their diet.... or perhaps you've stopped buying anything with wheat in it?

There is a difference, though, in buying enough bread for your own use and cornering the market.

Dithering_Dad

smartn wrote: »

I have real concerns for anyone expecting to get 10% annual returns long term from the stock market. It's obviously very difficult to say how things are going to go but if you look at the UK index over the last 10 years even taking into account dividends etc you wont have returned anything like 10% per annum.

Indexes only provide an average performance but they're a good initial investment for novices.

I went into www.fool.co.uk which is a real champion of the use of indexes for investments. I chose the L&G UK index as an example (it's the first one in their list).

http://www.fool.co.uk/Art/free/legalgeneral/pdfs/2007/05/factsheetUKI.pdf

It only goes back 5 years unfortunately (and we've had over 10 years of economic growth before it all crashed down this year), but it gives a good indication of stockmarket returns in even a mediocre index fund.

Here is the info replicated:

Mar 02 to 03 : -29.51% (ouch!)
Mar 03 to 04: +29.87 (wow, a 100% recovery in a year - I'd like to see housing do that!
Mar 04 to 05: +14.61%
Mar 05 to 06: +26.98%
Mar 06 to 07: +9.96

So over the 5 years, an investor would receive an average return of 16.34% each year on a mediocre index with absolutely no effort whatsoever! All tax free within an ISA wrapper.

So in the example provided by cleaver - had he invested his £45k in this index, after 5 years he would have made £7353 in tax free profit without having done a thing, apart from probably log on and watch his fund from time to time - I daresay he would have had kittens in that first year though! :rotfl:

JonnyBravo

neverdespairgirl wrote: »

There is a difference, though, in buying enough bread for your own use and cornering the market.

Indeed there is.... how much is reasonable though? Is it reasonable to freeze a loaf? How much can I keep for future use?

Who on here hasn't thrown away any bread?

I'm not suggesting there are black and white answers here, more suggesting that BTLing is a grey area too.

I have no problem with it, as I own a BTL.... but mine isn't based on a lie to buy and there is no real danger of my tenant being turfed out due to my financial incomptence.
sigh... I don't know I'm just rabbiting on....
I'm just trying to show that the real word is full of greys not black and whites.

Jonbvn

DD,

The period shown for equity investment is far too short to be representative - it paints too rosy a picture (even considering the 30% loss in 2002). Interestingly, a lot of fund information tends to do the same, conveniently forgetting the blood on the carpet with the dot.com crash and 9/11.

IveSeenTheLight

mewbie wrote: »

But anyway - its over now. Prices (and rents) are falling,

Not in all area's.
In my area, I see a 3 bed house opposite my 4 bed BTL just newly rented out for the same price as my 4 bed.
I increased the rent on my 4 bed in Jan 2007 by 22% and if I was to increase again to the current market rate then I could easily increase by a further 30%.
My strategy is different though. I dont increase rent while I have a good tenant in the property. I also market under the market rate to ensure no voids

smartn

Dithering_Dad wrote: »

Indexes only provide an average performance but they're a good initial investment for novices.

I went into www.fool.co.uk which is a real champion of the use of indexes for investments. I chose the L&G UK index as an example (it's the first one in their list).

http://www.fool.co.uk/Art/free/legalgeneral/pdfs/2007/05/factsheetUKI.pdf

It only goes back 5 years unfortunately (and we've had over 10 years of economic growth before it all crashed down this year), but it gives a good indication of stockmarket returns in even a mediocre index fund.

Here is the info replicated:

Mar 02 to 03 : -29.51% (ouch!)
Mar 03 to 04: +29.87 (wow, a 100% recovery in a year - I'd like to see housing do that!
Mar 04 to 05: +14.61%
Mar 05 to 06: +26.98%
Mar 06 to 07: +9.96

So over the 5 years, an investor would receive an average return of 16.34% each year on a mediocre index with absolutely no effort whatsoever! All tax free within an ISA wrapper.

So in the example provided by cleaver - had he invested his £45k in this index, after 5 years he would have made £7353 in tax free profit without having done a thing, apart from probably log on and watch his fund from time to time - I daresay he would have had kitten in that first year though! :rotfl:

Interesting statistics, however the ftse 100 sat at approx 4600 back in 98 and here we are 10 years on with it sat at just over 5000... not exactly stellar returns even assuming dividends of around 3 to 4 percent.

Dithering_Dad

smartn wrote: »

Interesting statistics, however the ftse 100 sat at approx 4600 back in 98 and here we are 10 years on with it sat at just over 5000... not exactly stellar returns even assuming dividends of around 3 to 4 percent.

They're not statistics, they're actual real returns from a tracker fund. The problem with looking at the FTSE 100 is that there are only 100 UK companies in there and so it's not providing a decent spread of industries and there is certainly no geographical spread as they're all UK listed companies.

I certainly wouldn't invest in a ftse 100 tracker, that's for sure.

Dithering_Dad

Jonbvn wrote: »

DD,

The period shown for equity investment is far too short to be representative - it paints too rosy a picture (even considering the 30% loss in 2002). Interestingly, a lot of fund information tends to do the same, conveniently forgetting the blood on the carpet with the dot.com crash and 9/11.

I know, I did look on several investing sites and couldn't find one that would provide data over 10 years. If you can help I'd be grateful.

I also found this index in the same place:

http://www.legalandgeneral.com/factsheets/pdf/PAI.pdf

with the following returns:
yr to Mar 2004 - 38.84%
yr to Mar 2005 - 12.28%
yr to Mar 2006 - 34.99%
yr to Mar 2007 - 11.16%
yr to Mar 2008 - 9.68%

Which gives an average return of 21.39% per year. Had the £45k been split into two and placed into the two funds I've listed, it would provide a modicum of diversity and allow dips in the UK to be offset by increases in Asia. Even better if the £45k was split between a few funds - the fool ones include indexes for UK, EU, US, ASISA/PAC with pretty low management charges.

JonnyBravo

Dithering_Dad wrote: »

So in the example provided by cleaver - had he invested his £45k in this index, after 5 years he would have made £7353 in tax free profit without having done a thing, apart from probably log on and watch his fund from time to time - I daresay he would have had kitten in that first year though! :rotfl:

You've allowed for him only being allowed to drip feed his £45k into ISA's?

Anyway I'd just like to back up what Max Headroom says.... yeah on the sums you've given it doesn't add up.... ie it's hard to make it work at the moment.... that wasn't always the case and no doubt won't always be the case in the future.
It's just another part of my diversification I guess.

Dithering_Dad

JonnyBravo wrote: »

You've allowed for him only being allowed to drip feed his £45k into ISA's?

Anyway I'd just like to back up what Max Headroom says.... yeah on the sums you've given it doesn't add up.... ie it's hard to make it work at the moment.... that wasn't always the case and no doubt won't always be the case in the future.
It's just another part of my diversification I guess.

If the example bloke had a wife, then he could drip feed into 2x isas at £14k per year. However, I think it'd be unlikey that the example chap would sell his home and put the equity into a fund, and then arrange a 100% mortgage on his new home. Far too risky (yet people do this for BTL, curiously...)

A more likely scenario (and more financially sound that using home equity to fund investments) would be that our prospective BTLer would save up his deposit and so unless he could put away more than 14k a year in savings, he would already be filling his ISAs long before a BTL was purchased.

Besides, the chap would be able to invest the whole amount outside an ISA wrapper and then move it into ISAs over the course of the 14 years investment. We are allowed 8k in cap gains, so the gradual movement of 14k (or 7k) chunks into an ISA would not result in the example chap paying capital gains, yet he'd still benefit from the stock market returns.

I'm happy for anyone to provide me with real data, I've done it with ISAs but yet no one has posted any BTL figures. Is this because they don't stand up to scrutiny?