Buy to Let investment advice

andybenw

I understand that this will have been raised before but I can't find a pertinent thread.

In two years time I will hopefully be in the position of having cleared the mortgage on the house in which I currently live and also having a spare 100k in the hip pocket.

I was thinking of investing that 100k in a BTL. With property at the moment in the doldrums would this be a wise move. Assuming the property market/interest rates etc are in the same state as now.

100k in my area would buy something yielding around 5/6% gross. I could easily get something just around the corner.

Or would I be better investing in dividend yielding shares. I know BTL would be a bit illiquid but at least it can't go bust.

bilbo51

You might do better on the mortgage forum...

atush

Go to the buying selling renting forum?

webmasterpolo

andybenw wrote: »

at least it can't go bust.

A well managed portfolio of shares is unlikely to "go bust" too, and will be more tax efficient, more liquid as you say and potentially produce higher returns than a BTL without the huge amount of hassle BTL brings with it.

But that's just my opinion.



-Web

real1314

webmasterpolo wrote: »

A well managed portfolio of shares is unlikely to "go bust" too, and will be more tax efficient, more liquid as you say and potentially produce higher returns than a BTL without the huge amount of hassle BTL brings with it.

But that's just my opinion.



-Web

Liquidity is generally accepted to be the ability to sell without a loss. Shares may well give a gain at most times, but there are times when a hefty loss (50% losses can happen) can occur.
Houses don't tend to ever suffer the same losses.

Also, houses tend to ALL rise. The skill in picking the best is not too hard to acquire (nothing new build, 2/3 bed houses have the widest appeal) shares are more varied and require much greater care in selection.

Houses can also be readily geared if you want to take a greater risk, but the interest can eat into returns.

Just my opinion. :cool:

Linton

real1314 wrote: »

Liquidity is generally accepted to be the ability to sell without a loss. Shares may well give a gain at most times, but there are times when a hefty loss (50% losses can happen) can occur.
Houses don't tend to ever suffer the same losses.

Also, houses tend to ALL rise. The skill in picking the best is not too hard to acquire (nothing new build, 2/3 bed houses have the widest appeal) shares are more varied and require much greater care in selection.

Houses can also be readily geared if you want to take a greater risk, but the interest can eat into returns.

Just my opinion. :cool:

I would take the liquidity concern to mean that unlike a share/fund portfolio you cant sell a bit of a house. Selling a house can be a long and stressful job which is not what you want when you unexpectedly need a bit of extra cash.

With shares/funds the important thing to do is to diversify into a wide range of investment areas, so you are most unlikely to loose 50% of everything even if there is a major economic crash.

So IMHO its shares and funds every time. OK, if you have a large portfolio of these diversification into property could be worth it.

bigfreddiel

Buy to let sounds good - nice 5-6% earner - is that before or after tax?

But now for the downsides of buy to let:

1 a few lean months not let so no income - each month equates to 1/12 drop in income or 8% approx

2 bad tenant - doesn't pay - gets Shelter on his side - legal expenses

3 renovation between rentals - decorating, carpets, repairs, updating safety certs

4 letting agreements to be drawn up and paid for

5 ongoing repairs/complaints - blocked drains, broken windows, dogs, appliances breaking, neighbours complaining and hashish factories

6 doing tax returns each year - record keeping, paying an accountant,

or a nice diverse £100k portfolio of funds, blue chip shares, cash isas, earning a steady 4-5%

the choice is yours

fj

Thrugelmir

bigfreddiel wrote: »

Buy to let sounds good - nice 5-6% earner

Is it worth the risk for that gross return?

BTL became a fad on the back of rapidly rising prices, i.e. capital gain.
Historically, let property was more often HMO's. Where rental yield and net returns are far greater.

brianrhill

As an IFA if I recommended that a client used a significant proportion of their total investments to invest in one share in one asset class, I would be hung out to dry. But that is what BTL is. No diversification, fairly illiquid, and an asset class that regularly takes a pounding - and when you come to sell you've got a potentially significant CGT bill. If you want to invest, there are alot better ideas out there.

atush

Liquidity is generally accepted to be the ability to sell without a loss.

Not what it means to me. To me it means being able to quickly get cash, by selling etc the asset. And property NEVER meets this criteria. Property can take months/years. Stocks can, (loss/gain means nothing) if by selling and getting your money in 3 days is quick enough. Even Cash can be illiquid if it isn't easy access or is in a postal acct.

andybenw

brianrhill wrote: »

As an IFA if I recommended that a client used a significant proportion of their total investments to invest in one share in one asset class, I would be hung out to dry. But that is what BTL is. No diversification, fairly illiquid, and an asset class that regularly takes a pounding - and when you come to sell you've got a potentially significant CGT bill. If you want to invest, there are alot better ideas out there.

I must admit I had a few shares prior to 2008 and they took a pounding compared to house prices. And although they recovered most of their value this probably skews my view somewhat. They were I will admit in the higher risk AIM, but still it showed me how the owning of shares could be regarded as somewhat akin to gambling if you pick the riskier types.

However with non risk shares I remember reading about what a great yielding share Connaught was (Not long before it went bust). I'm sure it was in a lot of top picks on this site if I remember correctly.

I am talking low liquidity really in that within the current market the only things that sell quickly in my area are cheap repos. I balance this against the up and down nature of shares. That low level of liquidity could be a saviour as compared to selling shares at an unadvantageous level. The huge capital Gains bill is not going to happen at the low value 100k property that I will be buying unless they change the rules.

Anyway I'm babbling. What would be the better ideas for me Brian?? I'm genuine here and not a housing nut.