Buy to let cash

tele951

I would like some advice.
I am thinking of buying a property to rent out.
I have found an area where my £60000 cash will just by a house.
The rent would be £60 per week.
I need the investment for 10 years and then I would like to spend the money on my retirement.
My question is do you think this is a good idea?
I am finding it hard to decided.

silvercar

£60000 cash in the bank would give 5% interest ie £3000 per year.

£60x 52 =£3120 less wear and tear, insurance, voids, gas certificates etc.

Not worth it on face value. If however you think property will increase in value then there will be a capital gain when you sell. If you think there will be a good gain then use your £60k as a deposit and borrow more, get a higher rental and make more gain.

If you want the positive spin visit singingpig.co.uk.

For the negative spin visit housepricecrash.co.uk.

BTW got my first BTL in July and seems to be going well, early days..

tele951

Thank you for your reply.
I wish I new if my investment would rise in property.
You must feel this is a good investment or you would not have bought your first property.
I have thought about a mortgage I am unable to get anyone to lend me money as I do not have an income.
So maybe the answer is to buy cash.

Zammo

Where an earth did you manage to find a house for 60000?

Are you from 1996?

dunstonh

Rather than borrow the money and get yourself into a high risk transaction that you cannot afford, why not look at property investment funds?

You can use these to invest not only in the UK Property market but also European and Global markets. Both of the latter have been outperforming the UK of late. The UK has been pretty flat over the last 2 months and all of the UK property fund managers are predicting a very poor year.

Actually buying the property is not the only way to get in property.

tele951

Zammo If you research there are still property to be found for that money needing work but they are out there.

Dunstonh Thank you for your reply.
Could you explain a little about fund investments.

Zammo

tele951 wrote:

Zammo If you research there are still property to be found for that money needing work but they are out there.

Dunstonh Thank you for your reply.
Could you explain a little about fund investments.

Not in my part of the cuntry.

The only thing you could get for 60k around here would be a centrally located parking space.

dunstonh

Could you explain a little about fund investments.

These are mostly held in investment trusts (IT) and unit trusts (UT) and going to be much more widely available from January as the Govt allows a greater range of property investment from then. UTs can also be held inside of ISAs, investment bonds and pensions as well as being held directly.

Your money is pooled with everyone elses and this can either buy property (usually commercial, such as retail parks, Govt offices, warehouses, office blocks, shops etc) or it can invest into property companies. The latter is more share based and is higher risk than buying actual property (although is still lower risk than a mortgaged buy to let).

A combination and spread of these is often a good way.

Norwich Union Property fund is a good example of a bricks and mortar fund although due to a shortage of property in the UK, they have allowed some investment into property shares (quite a common move over recent years).

http://www.trustnet.com/ut/funds/?fund=1453

A good example of a property share fund is Aberdeen Property Share. This invests in the property companies rather the property itself.

http://www.trustnet.co.uk/ut/funds/?click=top10&fund=1736

If you compare the two performance graphs you will see the bricks and mortar property fund is less volatile than the shares based fund although the shares based fund has outperformed (as you would expect as stockmarket has outperformed property over the long term).

You can also get overseas versions such as Fidelity Global Property or SWIP Euro Real Estate and more recently First State Asian Property. The first two I have myself in my portfolio and the last one will be joining my wife's ISA after I have paid my tax bill in January. There are other versions as well (and a few of those I also have) but I wanted to give you a few examples in case you want to google them to read more about it.

As for potential. UK Property (bricks and mortar) is likely to see around 2% next year and then reverting to around 8% p.a. thereafter as capital appreciation is reduced and rental income returns to being the main source of the return. However, if the property price slowdown doesnt happen as is being forcasted by every property fund manager out there, then you will see returns reflecting property price growth. Global Property is seen to have more potential than the UK and the European property funds are in high demand as Europe is behind the UK in property growth. Some countries by just a few years but some a lot more.

Advantages of property funds are that you can spread your money wider and access european and global developments without leaving your house. You can also utilise ISAs, pensions and other tax wrappers to give yourself no tax liability or reduced tax liability depending on the tax wrapper used. You have no personal liability and wont find yourself going to being sued or going to prison if a tenant suffers injury/death on your premises. You also dont have to run it as a business and dont have to spend as much time on it.

Disadvantages are that you dont have direct ownership of the property and you are paying for a fund manager in annual management charges (although you could argue that many do that with direct property as well). You are making no decisions on what is purchased (unless you happen to be a major investor).

Past performance is no guide to future returns but if you compare those performance figures against direct property ownership, you will see the funds have outperformed direct property ownership in most cases.

Tassotti

tele951 wrote:

I have thought about a mortgage I am unable to get anyone to lend me money as I do not have an income.
So maybe the answer is to buy cash.

There are BTL products which enable you to rely completely on the rental income,therefore no income required.

However, property at the moment only just about 'washes it's face' and, if everything goes wrong, property can become very expensive.

tele951

I have started doing some research on the information you gave in your post.
Do you think it would be better to use an FA or would it be possible for me to do this on my own.
If you feel an FA would be the answer where would I find one?

PoorDave

Zammo wrote:

Not in my part of the cuntry.

The only thing you could get for 60k around here would be a centrally located parking space.

Then you might have to realise that the world extends a little further...