Want 5% on £300k

dunstonh

I'm interested in what Jem16 says about returns - are you saying that the returns quotes on say HL or Morningstar ar AFTER the AMC's?

All the sources of data are after standard retail annual charges.

Rollinghome

confusedsteve wrote: »

I'm interested in what Jem16 says about returns - are you saying that the returns quotes on say HL or Morningstar ar AFTER the AMC's?

The figures given include the AMC for the fund manager and additional costs like trustee and audit fees.

They don't include any initial charge payable. Prices given are calculated using the "bid to bid" (the lower) price on unit trusts or mid to mid for OEICs and include all dividends or interest paid. They don't include any additional charges made by an adviser.

dunstonh

Some data sources can include any initial charge (financial express offer this option) and can include adviser charge where made explicitly with natural commission rebated (again a selectable option with some). In standard form (such as trustnet) they do include natural trail commission paid to the adviser as that comes out of the retail annual management charge and is not in addition to it.

Rollinghome

confusedsteve wrote: »

I'm interested in what Jem16 says about returns - are you saying that the returns quotes on say HL or Morningstar ar AFTER the AMC's?

He seemed to be specifically asking about the figures on HL and Morningstar

N1AK

FLAPJACK wrote: »

Anyhow we think we have found a home for £80k .....the house nextdoor is for sale, so if we buy that... spend maybe 5k doing it up... (it's not too shabby to start with) then we can rent it out for £400 a month, which is the average around here..no big bucks, but the area is pretty.

So where else would you get a return of £400 a month on 85k these days? Obviously the wife would be the Landlord as she is way under the tax threshhold even with her pension income.

So maybe you could consider the same idea of bricks and morter.

£80 for a property that can pull £400pm is a pretty good ratio. That said it's hardly a return of £400pm, anymore than investing in high risk funds is a return of 10%pa.

There are various risks involved in property. Your base return is ~5.5% (based on rent and value). You will need to maintain the property, and the decoration. If it is empty you get no return, if you get problem tenants it could be even worse. Property prices may well recover; or given the current economic situation fall further and not recover in your lifetime. Changes to housing allowances, could depress rental yields. Taxation changes could make BTL less cost effective, or alter the thresholds for capital gains or stamp duty.

Finally, managing property requires considerably more work than sticking the money in a standard savings vehicle. Given that you can get 4.15% on a 3yr fixed savings account; you're running a BTL property for £1250pa additional income.

mike88

Very often you find those who invest in anything do so after a prolonged period of growth and by the time the World and its wife cottons on to the idea investments begin their decline. Some say we are in or entering a bear market but there are many requests for advice on shares to buy and markets to invest in.

Just look how many people on these boards, having witnessed a couple of good years, are thinking of buying unit trusts and shares for the first time thinking exponential growth in technology and emerging markets will continue indefinitely. The time to buy is when outlooks are pessimistic not when shares are at their peak.

Buying property now might not be a bad idea. Prices might go lower but you can never be sure when markets hit their lowest point. But even if prices fall as long as you are in no hurry to sell house prices will recover eventually and in the meantime you will have an income as displaced houseowners will need somewhere to live.

I recall buying investment property at a time when everybody said I shouldn't. I went ahead and found I made more money from property than I ever made in 35 years of investing in stockmarkets. In general my property investments have nearly doubled my capital outlay in 5 years and I've received two thirds of the initial capital outlay back in rent net of tax and estate agents fees.

The point made about managing property by the previous poster is well made but as the house Flapjack is intending to buy is next door then that should present fewer problems.

Flapjack has to weigh up the pros and cons but personally I think investing in property is far less of a gamble than investing in stockmarkets at the present time.

FLAPJACK

Thanks for the encouragement Mike88.:beer:

The place has been a holiday home for the last 10 years, during whichtime the present owner has put in a new kitchen, bathroom and double glazing, and as it's a HH the house has hardly been used.

I think at the time he was thinking of living here full time.

The only thing we would have to replace is the central heating boiler and radiators...the cost of which we can bear, and a complete decorate throughout, only to freshen the place up....not doing it to personalise it though.

Also we have thought about the possibility of getting dodgy tenants, as we are only next door this may put off the type of tenant who wants to do what he wants in the first instant.

As we are ok for income and capital, if we didn't rent it out the only monthly outgoing would be the council tax and water rates ....combined £113 a month. Annual building insurance and Landlord insurance if we did let it out would be covered by the rental income.

Ok thats a loss of course but as Mike88 says, in the fullness of time that would be recouped by the rise in value of the property in the long term.
Which for passing on to the estate could be better than more risky ways of investing longterm.

Annisele

confusedsteve wrote: »

Thanks to everyone for their replies.
I need 5% income, which on my £300k investment, and my pension drawdown, will give me sufficient income. I am aware that this will not be inflation proof.

If you're a "low to medium risk" investor, are you absolutely sure that you want to be in drawdown? Drawdown is sometimes considered a higher risk product, because the growth on the investments needs to be enough to compensate for mortality drag. But, whether drawdown is a good idea depends on many things, and I assume your IFA has already discussed them with you?

Aegis

Rollerball wrote: »

It's a doddle. Just split the money between shares in Vodafone, Shell, Scottish & southern Energy, Severn Trent , etc.

And you won't have to pay any rip-off management and initial charges either.

Not really low to medium risk though, is it?

mike88

FLAPJACK wrote: »

Thanks for the encouragement Mike88.:beer:
The only thing we would have to replace is the central heating boiler and radiators...the cost of which we can bear, and a complete decorate throughout, only to freshen the place up....not doing it to personalise it though.

Also we have thought about the possibility of getting dodgy tenants, as we are only next door this may put off the type of tenant who wants to do what he wants in the first instant.

As we are ok for income and capital, if we didn't rent it out the only monthly outgoing would be the council tax and water rates ....combined £113 a month. Annual building insurance and Landlord insurance if we did let it out would be covered by the rental income.

Ok thats a loss of course but as Mike88 says, in the fullness of time that would be recouped by the rise in value of the property in the long term.
Which for passing on to the estate could be better than more risky ways of investing longterm.

Just a couple of quick points.

You will need a shorthold tenany agreement so that your interests are protected.

Don't forget that your new gas installation will have to be installed by a Gas Safe contractor and that as a landlord you will have to obtain gas safety certificates

On insurance you may find it difficult to insure contents but you will definitely need to insure the structure under a landlords policy.

Don't assume tenants are necessarily bad. I had only one bad tenant in 10 years and any damage was recovered from the bond.

Read up on the tax allowances you can claim and your tax obligations. HMRC used to produce a helpful booklet IR 150 but am unsure whether this is available but Google the booklet and lots will come up.

Join the Property Board Forum on MotleyFool.co.uk which is frequented by professional landlords and lawyers who are always willing to provide helpful advice.

Read my post above about purchasing the property via percentages as tenants in common with your wife so as to minimise any future capital gains tax liabilities but also have regard to your income tax position as regards income.