BTL and a balanced portfolio

mewbie_2

I wonder what percentage BTL should form as part of a balanced portfolio of say cash, bonds, equities?

Generali

mewbie wrote: »

I wonder what percentage BTL should form as part of a balanced portfolio of say cash, bonds, equities?

Depends on your age IMO. You want to be out of the stock market by the time you retire and have any investment properties fully or mostly owned.

The biggest single problem with BTL as an investment (rather than a business) is the illiquidity of the housing market. The next biggest problem for most is that as houses are so expensive, it means you're overexposed to housing if you own a couple of places (excluding the PPR).

More recently BTL has been a lousy investment as purchase prices have been toppy and if bought on a sizeable mortgage have been cashflow negative which is a terrible combination.

In the future I would be interested in possibly looking at BTL in expanding mining or farming areas, especially farming areas which have the potential for sub-division (that is breaking up part of the farm into building plots). Not now for me though.

dopester

Generali wrote: »

The biggest single problem with BTL as an investment (rather than a business) is the illiquidity of the housing market. The next biggest problem for most is that as houses are so expensive, it means you're overexposed to housing if you own a couple of places (excluding the PPR).

More recently BTL has been a lousy investment as purchase prices have been toppy and if bought on a sizeable mortgage have been cashflow negative which is a terrible combination.

In the future I would be interested in possibly looking at BTL in expanding mining or farming areas, especially farming areas which have the potential for sub-division (that is breaking up part of the farm into building plots). Not now for me though.

Third problem, may increasingly be location. Who wants a home or a BTL in an area where there is less available by way of employment opportunities, and wealth generation? Where travelling time increases to areas which do have more opportunity.

Mining and farming? Provided they pay well maybe. Remembering one of your other posts, you know as well as I how a turn of the market may be disastrous to certain areas, which are dependent on old market conditions forever continuing. Who have expanded in the assumption that things won't change and boom is here to last.

Australia hit hard by mining slump


Abandoned new houses are littering the landscape

I want a home I can move to a new location if necessary, but haven't decided upon what sort of design. (page 2 of 2)

dopester

mewbie wrote: »

I wonder what percentage BTL should form as part of a balanced portfolio of say cash, bonds, equities?

Zero %, imo.

Generali

dopester wrote: »

Third problem, may increasingly be location. Who wants a home or a BTL in an area where there is less available by way of employment opportunities, and wealth generation? Where travelling time increases to areas which do have more opportunity.

Mining and farming? Provided they pay well maybe. Remembering one of your other posts, you know as well as I how a turn of the market may be disastrous to certain areas, which are dependent on old market conditions forever continuing. Who have expanded in the assumption that things won't change and boom is here to last.

I want a home I can move to a new location if necessary, but haven't decided upon what sort of design. (page 2 of 2)

Location, absolutely, especially in Aus where there are lots of places that are uncommutable to another large employment base.

I've got a client who is looking to build a second investment place in a mining area and is looking to finance it. We've both done some research and it looks like a one-way bet that the commodity in question will see rising demand from the mines in the area of this community - the mines have a good solvent customers who are locked in to long-term contracts and there are big investments going into the area (AUD1,100,000,000 paid for mining rights in April 2009 alone) and the town has a population of substantially below 50,000 people.

That's the sort of research you need to do for BTL as well as checking the numbers actually work in cashflow terms under reasonable stress tests.

Oh, for the BTL haters, he had both properties built and there is definitely no shortage of available land in the local town - he's depriving nobody of anything.

Mr_Mumble

Have to agree with Dopester. Unless you're a multi-millionaire anyone with a mortgage or who owns their home outright already has far too much in residential property. If you have BTL property then you should be running it as a business not as a portion of a diverse investment portfolio.

The current FTSE APCIMS Balanced portfolio for reference:

42.5% UK Shares
22.5% International Shares
20% Gilts
7.5% Hedge Funds
5% Cash
2.5% Commercial Property

(note: I wouldn't recommend that mix of assets in a portfolio myself)

Gorgeous_George

I'm happy to stick with one BTL property (bought for reasons other than profit - that's just a nice extra).

Coupled with a final salary pension (or two), I hope to retire at 55 but may have to settle for 60. I'd like to be 'comfortable' financially for ten years after retiring after which, I couldn't care less.

If I had £200K to invest today, I'd be happy to move it into BTL providing the numbers stacked up. Otherwise, I'd save some and spend some on holidays.

GG

Thrugelmir

mewbie wrote: »

I wonder what percentage BTL should form as part of a balanced portfolio of say cash, bonds, equities?

Unless you've got the capital to purchase outright ( or inherit a property), then BTL isn't as such an investment. One factor thats overlooked is that ISA's and Pension Schemes are more tax efficent vehicles to build savings up in for the average working person.

mewbie_2

Thrugelmir wrote: »

Unless you've got the capital to purchase outright ( or inherit a property), then BTL isn't as such an investment. One factor thats overlooked is that ISA's and Pension Schemes are more tax efficent vehicles to build savings up in for the average working person.

And a lot less effort too. I would possibly consider as a small part of an overall plan, cash only, and a return over and above others on offer. Those times may appear, if the drops are sufficiently savage, but for now bonds and equities look good again.

Generali

mewbie wrote: »

And a lot less effort too. I would possibly consider as a small part of an overall plan, cash only, and a return over and above others on offer. Those times may appear, if the drops are sufficiently savage, but for now bonds and equities look good again.

Bonds look good again? Please tell me you mean corporate bonds not Gilts.

mewbie_2

Generali wrote: »

Bonds look good again? Please tell me you mean corporate bonds not Gilts.

Yes sorry, corporate. I wouldn't know what to do with Gilts. Corporate looks good, mind you it's been a bad last few years.