Is BTL now the best retirement investment?

lisyloo

It's reassuring to read here that I'm not the only BTL-averse person around.

Well I try to be objective. Perhaps I haven't looked at the right time.
I am sure it worked brilliantly if you bought in 1996-2001.
I have nothing against the idea per-se.

I think some people are also "averse" to pensions. I understand the lack of trust, but when your employer gives you "free" money and you get 40% tax relief then that is a genuine no-brainer.
I think you are right that not everyone is objective when they see something that they either have an attraction or aversion to.
I've always tried to be objective by working out the costs/risks/assumptions and putting down a business model in a spreadsheet.
It's never worked for me, but that might simply be because I've looked at the wrong time, or that I don't do any DIY or that I'm a higher rate tax payer (or all 3).

HAMISH_MCTAVISH

lisyloo wrote: »

ok, here's some figures just as a starting point for discussion.
.

It varies tremendously by property type and area.

You may find that a small flat in your area has a bigger yield than a house, for example. Or a nearby Uni town has better yields than a country village.

In my area:

1 bed flat rent £525. To purchase £80,000.

Yield of 8.1%....

2 bed flat rent £700-£850. To purchase £100,000 to £160,000

Yield of between 6.3% and 8.4%...

3 bed flat/terrace/semi rent £900 - £1200. To purchase £180,000 -£240,000.

Yield of around 6%.

[Deleted User]

lisyloo wrote: »

ok, here's some figures just as a starting point for discussion.
3 bed family home, North Cepen Park, Chippenham Wiltshire.
Cost to buy £250K
Rent £750 pcm.

I took a mortgage rate of 3.49% which I think is a very low rate and it's quite possible that would rise in future (I am not deliberately trying to make a biased example).
This does not meet the 125% of a repayment mortgage.

Rent £9000
Mortage £8725 (yes I know there is no deposit).

I would not personally want to run a businesse with £275 per annum to pay for all maintenance, insurance, repairs, fees and that assumes 100% oocupancy and a very low mortgage rate. This is also INTEREST ONLY.

I realise there will be issues with this example, but it's a least a starting point in the absence of any other figures.

Sorry for questioning the seriousness of your post, there are a lot of bogus posts made on here and the management of your parents made me wonder until you answered that point.

With regards to your/your parents property. I am assuming that they want to remain in the same property and you are only interested in doing this on their property. In which case the numbers you give are problematic. One possibility would be to go down the interest only route and then switch it (some allow capital repayments on interest only). However if you went down this route you have less room for maneuver should problems arise and it also assumes that you would be increasing the rent on a reasonable frequency which might be awkward with family.

If you are interested in BTL generally I'd be surprised if there wasn't the opportunity within your area but it doesn't look like this particular property, on the numbers given, adds up.

As there is, I'm guessing, a personal element to this with it being your parents home would it be worth paying a bigger deposit to make the numbers work? Over the long term it probably wouldn't make too much difference.

[Deleted User]

lisyloo wrote: »

Well I try to be objective. Perhaps I haven't looked at the right time.
I am sure it worked brilliantly if you bought in 1996-2001.
I have nothing against the idea per-se.

I think some people are also "averse" to pensions. I understand the lack of trust, but when your employer gives you "free" money and you get 40% tax relief then that is a genuine no-brainer.
I think you are right that not everyone is objective when they see something that they either have an attraction or aversion to.
I've always tried to be objective by working out the costs/risks/assumptions and putting down a business model in a spreadsheet.
It's never worked for me, but that might simply be because I've looked at the wrong time, or that I don't do any DIY or that I'm a higher rate tax payer (or all 3).

Can only talk from my own point of view but I'm a high rate tax payer, I also have a pension. I bought mine between 1998 and 2006 (although the last one was off plan and completed in 2008). I've found that BTL works well for me. My areas are London, Herts, Cheshire, Liverpool, Manchester, Greater Manchester, and Lancashire.

EDIT: Please ignore 'You can also put property into a SIPP as well to have the same advantages as a normal pension plan.' as I was mistaken as mystic_trev has pointed out below.

mystic_trev

[quote=[Deleted User];44026234]
You can also put property into a SIPP as well to have the same advantages as a normal pension plan.[/QUOTE]

You can only put Commercial Property into a SIPP. BTL's are not allowed.

[Deleted User]

mystic_trev wrote: »

You can only put Commercial Property into a SIPP. BTL's are not allowed.

Didn't realise they'd changed this, you used to be able to.

mystic_trev

[quote=[Deleted User];44026894]Didn't realise they'd changed this, you used to be able to.[/QUOTE]

No you've never been allowed to. The previous Government were going to change the rules in 2006 but it was scrapped.

macaque_2

HAMISH_MCTAVISH wrote: »

National average at the moment is 5%, which with a decent deposit and the current low void averages, is just about enough to break even from a cashflow perspective.

Buying an asset for capital gains is speculation. Speculation is great but only if timing (for both buying and selling) is well judged. Falling disposable incomes and long term credit tightening are 24 carat sell signals. Using a large deposit to 'dress up' the yield is, to say the least, amateurish. Using a large deposit to 'dress up' the yield on an asset which is falling in value, is foolish.

abaxas

Just a thought.

If we move from a owner occupied to a renting style society.

Wont all the advantages of letting be eaten by politicians wanting the votes of the renters?

Sort of the opposite of what we have now.

nollag2006

macaque wrote: »

Buying an asset for capital gains is speculation. Speculation is great but only if timing (for both buying and selling) is well judged.

Is this similar to the speculation that house prices will fall by 70% by Christmas 2009??

:j