Buying Cheaper Than Renting Everywhere except London

Cleaver

chucky wrote: »

you wouldn't calculate your yield on the gross amount but on the amount you've actually invested so the deposit amount so his yield would be much more.

companies would calculate their yield on this gearing.

Thanks Chucky. So if he did invest 40% then you'd work it out on the £176k, not the £181k? I know you let stuff out so I'm sure you're right, but in my own little head I wouldn't bother with what companies do, I'd want to know exactly what % return I was getting on the total amount of cash I had invested, because I could have put that same total in cash, equities etc. and would want a comparision.

Anyway, it's a bit pointless us discussing this as I don't think he owns any properties,

chucky

Cleaver wrote: »

Thanks Chucky. So if he did invest 40% then you'd work it out on the £176k, not the £181k? I know you let stuff out so I'm sure you're right, but in my own little head I wouldn't bother with what companies do, I'd want to know exactly what % return I was getting on the total amount of cash I had invested, because I could have put that same total in cash, equities etc. and would want a comparision.

Anyway, it's a bit pointless us discussing this as I don't think he owns any properties,

what i was trying to say and not very well was that if he bought a property for £200k and his cash investment was £25k you would work out his yield after all costs against this £25k. then compare against his return to savings rates or other investments.

i got the impression you were working his yield out against the £200k investment.

mewbie_2

chucky wrote: »

what i was trying to say and not very well was that if he bought a property for £200k and his cash investment was £25k you would work out his yield after all costs against this £25k. then compare against his return to savings rates or other investments.

i got the impression you were working his yield out against the £200k investment.

So the more deposit you put down, the higher your yield gets? That's fantastic.

chucknorris

chucky wrote: »

what i was trying to say and not very well was that if he bought a property for £200k and his cash investment was £25k you would work out his yield after all costs against this £25k. then compare against his return to savings rates or other investments.

i got the impression you were working his yield out against the £200k investment.

Chucky (and others) changing the subject what do you think of this:

I was about to put some more money from a maturing bond (about 25k) into a 5.15% fixed rate bond but the problem is that as a 40% tax payer it only nets me a paltry 3.09% pa. Instead I am thinking of buying a (non isa as I am fully subscribed) FTSE tracker because it is tax free (because the profit will not reach the CGT allowance when I cash it in). Obvioulsly there is a risk but as the FTSE is so low it hasn't got to rise much to outperform that 3.09% pa and of course you can choose your selling point to exit when (if) the ftse is doing ok.

I thought I would canvas opinions as it just ocurred to me today to do this today when I realised that this is a way of utilising my annual CGT allowance to get tax free income.

mewbie_2

Put 5k into an accountant and stop paying 40% tax.

Cleaver

chucky wrote: »

what i was trying to say and not very well was that if he bought a property for £200k and his cash investment was £25k you would work out his yield after all costs against this £25k. then compare against his return to savings rates or other investments.

i got the impression you were working his yield out against the £200k investment.

He said that he bought two properties for £440k and I just assumed that his deposit was 40%, which with fees comes to a cash investment of around £180k. Which gives him a yield of around 3.5%.

But as I say, I think we're discussing a hypothetical situation, so it doesn't matter very much.

Cleaver

mewbie wrote: »

Put 5k into an accountant

Sounds painful for the accountant.

mewbie_2

Cleaver wrote: »

Sounds painful for the accountant.

They'll do almost anything for 5k. But you knew what I meant.

Of course 25k into pension might be the easiest way to avoid tax, etc.

seraphina

julieq wrote: »

BTL isn't intrinsically risky compared with most other forms of investment, for example stocks and shares. The underlying asset is basically on an upwards ramp, despite short term falls, and there is a reliable income stream. There's a relatively low risk of slight negative cashflow, but the risk of ruin is negligibly small.

Prices in the UK have not decreased massively despite the biggest financial crisis there has ever been and effective credit rationing. That demonstrates the resilience of the market here, and how keen people are to buy.

Bzzzt! Wrong answer. BTL investors are usually leveraged to "invest" in BTL - don't know many investors at that level that would borrow to invest in stocks and shares. That's why BTL can go badly wrong compared to stocks and shares.

wageslave

julieq wrote: »

Yes, but a 4 year rental followed by 25 year mortgage just pushes back the time at which you start the mortgage. The danger is that you've increase the purchase price around 12% even at modest HPI, which is 24K for a 200K house, plus 48K or so in rent. That's a fair amount to claw back, so it really makes very little sense financially to rent if you're in a position to buy.

Unless you're hoping for big falls, or you're certain there'll be stagnation, in which case you're still down the 48K but *may* have gained a little on the purchase price. But to get to price falls we have to have more forced sales due to increases in interest rates (according to the bear big book of rules) so you've lost 4 years of repayments at low rates.

I'm not saying renting is bad, most people start out by doing it and have no option while saving a deposit, for other people it's the logical option for other reasons. But it's certainly not a given that sitting out of the market is a good thing to be doing at present, far from it.

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