Is BTL now the best retirement investment?

julieq

It's a decent low risk long term investment Graham. That's why people do it. It has an element of yield and an element of capital growth over the long term.

If you want to put your money into a savings account, then be my guest. If you want to put your money into stocks and shares then be my guest too. But trying to claim that residential letting is somehow impossible to make money from is going to be a difficult trick when plenty of people are doing just that. Is it possible to lose money? Yes, of course it is. If you go into any business on a wing and a prayer then you have chances of failure. But residential letting is on the lower risk part of the spread for risk, and you have two chances to win, yield and capital gains. And even if you lose the chances of losing more than a small amount of your capital are fairly remote. Frankly it's far more dangerous to buy shares at the moment.

It's not either/or anyway. As Cleaver has been pointing out you need a basket of investments and you need to manage your basket over time as things change. There is an absolute obsession with amateur investors about trying to "win" on the back of what is essentially an emotional attachment to a particular theory. You see it with precious metals nuts, you see it with people on this thread listing their winning stocks and shares with the confidence of someone that's just won on a 3/1 shot that they can repeat that trick indefinitely, and you see it in the premise behind the original post. You don't win, you manage. The very idea that you might win or lose stops you from evaluating situations rationally, because you're letting emotion into the equation.

HAMISH_MCTAVISH

Graham_Devon wrote: »

I stopped reading at that point. Sorry.

Fair average!? It's the absolute lowest on moneyfacts when comparing BTL mortgages at 80% today.

Fair average, my rear.

You should read (or comprehend) a bit better then Graham.

We're using a 25% deposit, so the lowest would be 3.79%.

And bank margins are currently at record high levels... They can only drop from here.

Graham_Devon

julieq wrote: »

It's a decent low risk long term investment Graham. That's why people do it. It has an element of yield and an element of capital growth over the long term.

If you want to put your money into a savings account, then be my guest. If you want to put your money into stocks and shares then be my guest too. But trying to claim that residential letting is somehow impossible to make money from is going to be a difficult trick when plenty of people are doing just that. Is it possible to lose money? Yes, of course it is. If you go into any business on a wing and a prayer then you have chances of failure. But residential letting is on the lower risk part of the spread for risk, and you have two chances to win, yield and capital gains. And even if you lose the chances of losing more than a small amount of your capital are fairly remote. Frankly it's far more dangerous to buy shares at the moment.

Julie, shush. I have never said that, or even implied that. Infact, several times on this thread, I have said the opposite, and even Hamish agreed with me on the first page regarding this.

Graham_Devon

HAMISH_MCTAVISH wrote: »

You should read (or comprehend) a bit better then Graham.

We're using a 25% deposit, so the lowest would be 3.79%.

And bank margins are currently at record high levels... They can only drop from here.

Hamish, come on old chap. You can't honestly be serious in that 5% is a fair average mortgage rate.

Based on the above, it would only take a rate hike of just 1.75% to just 2.25% BOE rates, for your average rate to hit.

Banking on the fact banks will reduce profit margins over the next 10 years with all the hurdles in their way, let alone Basle III, is nigh on ludicrous IMHO.

Maybe we just take different investment risks. But I can honestly state basing your investment on such low rates is nigh on stupid.....especially when you yourself remind us of 14% rates, and when you yourself won't actually take heed of your own advice.

dunstonh

When was the last time your pension pot went up 25% in one year. It's a no brainer.

Ignoring the fact that tax relief does that, you had 2009-2010 when gains of 30-40% in one year were there.

Many investors look for long term averages of over 10% a year. Personally, I am running at over 13% a year long term.

I'm not going to say that mortgaged buy to lets can produce good potential for returns. However, it is higher risk than a pension. A mortgaged buy to let can bankrupt you and cause you to lose your own house. A pension cannot do that. So, worst case scenario is far worse with mortgaged buy to lets.

Its an option and can be a good one but it typically requires multiple properties to be used. A single mortgaged buy to let will not be enough.

HAMISH_MCTAVISH

Graham_Devon wrote: »

.....especially when you yourself remind us of 14% rates, and when you yourself won't actually take heed of your own advice.

My advice is clear.....

I don't think base rates will cross 1% until 2012, possibly even 2013, 3% until 2015, and I don't think they'll cross 5% within the next decade.

I'm fully aware that margins are at record high levels due to lack of competition, and can only come down. It's inevitable.

So no, I think a 5% average for mortgage rates over the next coupe of decades is bang on.

lisyloo

Allowing for one month void and £500 maintenance per year on average....

My own personal opinion is that's way too low.
I did discuss this with my bank manager (nat west) at one point and the figure he said for occupancy they'd expect to see in a business plan was 70% and not the 91.67% that you are using.

The maintenance is far too low for commercial rates.
I would not expect tenants to look after a property like owner occupiers so would expect re-decoration say every 5 years although it depends on the type of property and clientelle.
For people who are paying commerical rates and not doing DIY I think you haven't allowed enough.
There is no insurance or agents fees included.

I think 5% interest is a little low, for the duration.
We don't know what is going to happen in future. Just look back at the credit brunch and banking crisis. Things can change beyond our immediate expectations.

Perhaps I'm too risk averse.
Maybe, but I think yours does not reflect the costs/risks fully.

I will still consider it but as prices are falling then I think it will be better value in future rather than right now.
If prices fall then the yields can only increase.
I would potentially jump in at some point, but not now.

HAMISH_MCTAVISH

lisyloo wrote: »

My own personal opinion is that's way too low.
I did discuss this with my bank manager (nat west) at one point and the figure he said for occupancy they'd expect to see in a business plan was 70% and not the 91.67% that you are using.

Well the current average void is 14 days per year.

So I conservatively estimated twice that amount.

The maintenance is far too low for commercial rates.
I would not expect tenants to look after a property like owner occupiers so would expect re-decoration say every 5 years although it depends on the type of property and clientelle.
For people who are paying commerical rates and not doing DIY I think you haven't allowed enough.

£500 a year will be plenty on average for a 1 bed flat.

I am assuming the landlord would do simple little things themselves, like replacing door knobs, painting or changing a washer on a tap, and only pay contractors for major works.

There is no insurance or agents fees included.

I think 5% interest is a little low, for the duration.

There is also no rental increase included, rents are currently rising at 4.4% a year.

And the profit cushion is there for contingencies.

We don't know what is going to happen in future. Just look back at the credit brunch and banking crisis. Things can change beyond our immediate expectations.

Indeed. Nothing is risk free. But this is less risky than most.

Perhaps I'm too risk averse.
Maybe, but I think yours does not reflect the costs/risks fully.

Perhaps.

I think I've been generous with costs, and conservative with income.

I will still consider it but as prices are falling then I think it will be better value in future rather than right now.
If prices fall then the yields can only increase.
I would potentially jump in at some point, but not now.

You keep saying that prices are falling, which is untrue for most..

They are stable or rising in 71% of local areas, falling in just 29%.

Regardless, I'd suggest you're probably too risk averse for BTL.

brit1234

HAMISH_MCTAVISH wrote: »

I think you're missing something rather important....

Could that be that you forgot to add Landlord insurance to your sums?

How much is that a month?

Also what are the solicitor fees and the mortgage fees each time you remortgage?

HAMISH_MCTAVISH

brit1234 wrote: »

Could that be that you forgot to add Landlord insurance to your sums?

How much is that a month?

For a 1 bed flat? About £150 a year.

Also what are the solicitor fees and the mortgage fees each time you remortgage?

Solicitors fees = zero. How is it possible you don't know that?

Mortgage fees, depends on product.... Typically a few hundred quid every few years.

So once again, I'll throw this question out to the bears.

Name me one other investment where you can invest 20K, and get around 100K back in real terms in 25 years, plus an inflation adjusted 5% plus yield for life?