£100k property or invest??

shykins

my hub and i are looking at buying a property for £100k with a montly income from it of around £375 less any tax thereon

having read these threads i wondered would i get as good a return elsewhere in an account for example.. or is there anything that gives a tax free return

i am not very knowledgeable on isa, tessa etc so any advice would be most appreciated
many thanks in advance

anticlaus105

375x12=4500pa

Take away ~20% (or are you a 40%er?)=3600pa

Don't forget any agents fees, white good replacements, safety certificates, voids etc etc will eat into this.

You will get around just over 3% return on you investiment if you are lucky.

You had better be confident the property will rise in value to improve this.

I manage 4.96% (or 8.52% if you count stoozed money) after tax with ISA (tax free) reg sav and instant access accounts with no risk what so ever.

EdInvestor

If you're looking for income you might like the High Yield Portfolio idea.This involves buying a portfolio of 15 blue chip shares based on various criteria to reduce risk.The dividends provide the income - about 5% is obtainable at present, tax free to people on the basic rate.

It's much the same as property in terms of offering likely capital growth over the long term as well.The income is higher than net yields from most BTLs these days and it's also more stable.

Here are a couple of demo portfolios

Note particularly the one that was bought in 2000, and thus went through the market crash. No problem [These are demo portfolios, you wouldn't buy all these shares now - check out the Fool for what you would buy now, if you like the idea.]

You could also try commercial property funds or trusts - again a more stable and higher income than BTL.A combination of the two might be quite a good mix.

Speaking as a landlord, I wouldn't buy in now, rents are too low and there's too much competition from other landlords (unless you have a really top class property), leading to increased costs and more likelihood of voids.And capital gains are no longer guaranteed.

dunstonh

Bit late in the day now to be buying to rent out. Yields are low against the capital outlay and by the time you take risk, tax and hassle into account, its probably not worth if in the short to medium term.

shykins

many thanks for everyones advice... we are still considering our options... we did find a really good property at a great price yesterday so may still do the buy to let.. luckily round here the rental market is very active

also considering that if we have savings it will affect our WFTC whereas if the rental is on my tax it wont..

gosh its almost more complicated having money as not lol

thanks again all

dunstonh

The market is active but look at the rent as a percentage of the capital and costs you will be putting into it. Then take off tax and allow another 1% for repairs, boiler servicing, maintenance etc. You will probably find you are lucky to get 2-3% as far as the income is concerned.

You also need to consider that property values are historically high and above the long term average increase rate. When this happens, a decrease in values usually occurs at some point. If you look statistically, we are due for one in the next few years. It doesnt mean it will happen. We could get more growth, it could remain level, it could drop. However, I wouldnt risk any new money into property at the moment.

also considering that if we have savings it will affect our WFTC whereas if the rental is on my tax it wont..

Don't see why it should have any difference.

shykins

i see what you are saying and i thankyou for your comments, i dont actually pay tax so thats one thing we wouldnt have to consider

with regard to effect on my WFTC etc this would be because it would take our savings above the limit to claim them. .. i have also recently become eligible for Incapacity benefit and this is savings related to , therefore any gain i would make placing the money in other than property may well be offset with the reductions in my ability to claim, if u see what i mean

never had these problems before as we were always skint lol

i really do thank everyone for their help here and its nice to know you are such a knowledgeable bunch of people who can always be relied on.

we are going to give this a lot more thought before we come to a final decision and no doubt the calculator will be out lol

dunstonh

with regard to effect on my WFTC etc this would be because it would take our savings above the limit to claim them. .. i have also recently become eligible for Incapacity benefit and this is savings related to , therefore any gain i would make placing the money in other than property may well be offset with the reductions in my ability to claim, if u see what i mean

When you say WFTC, do you mean working family tax credits? In which case, I dont believe capital is an issue as its based on who works, how long and how much is earned. Its been a while since I qualified to get any but I dont recall savings being asked on the application. I would expect the income from the property to have a greater impact as that would be treated as taxable income (still tax free if below the threshold but its called taxable income).

Some investment tax wrappers/funds are treated differently to others. Some have the growth treated as income, others its on the capital itself.

What income would you expect from the property? It may be an idea to write down what you would get from each method and what you would potentially lose in benefits/credits and then see what the bottom line is with each.

shykins

good idea... will get the pen and paper out and do just that

i dont foresee much differnce in WFTC as my earnings have gone to zero due to illness so any extra i earn from the property will probably equal what i used to earn.. i must check if capital affects as i thought it was on the form but u may well be right

just checked and from what i can see it says if u have capital over £8000 u do not qualify for WFTC