Property or shares

MarcoM

Hi,

I was wondering what people thought of investing into property or investing into shares. I understand that BTL can have its problems such as problem tenants, legal issues with other owners etc etc.
But it would seem that over a period of say 10 years, property beats share investments easily.

Can anyone provide some rough numbers as to what the differences may be in terms of % yelds between the two investments?

For example if one has 50k cash to invest and can raise a BTL mortgage to cover a property for a total purchase prices of 100k or said person can invest the 50k straight into shares; which would be the better option?

thanks

darkpool

you could have a look at commercial property. the advantages of commercial are longer leases, better returns and a lot less hassle. though you might struggle to buy much with 50k.

i have a flat which i rent out, tbh the returns aren't that good.

have a look at alsop's auction catalogue for commercial property.

mr_fishbulb

MarcoM wrote: »

But it would seem that over a period of say 10 years, property beats share investments easily.

It depends which 10 year period you pick.

WhiteHorse

Land will never go away. Shares could vanish in an instant.

qpop

Residential property isn't one of the acknowledged investment asset classes, so you will have a hard time finding fair comparison.

Of the typical asset classes IIRC there isn't a 20 year period in history where shares have been outperformed by something else, even when you take 20 years from a peak.

BTL investment can work really well or go horribly wrong. A lot of people have been badly stung after investing in 2006/2007 and finding themselves in negative equity. They are typically highly geared (because the majority of the purchase of the "investment" is being funded by the bank) - Would you borrow £50k to invest in shares?

It can also be hard work.

Rental yields on low-end BTL properties tend to be around 4-6% gross (depending on area, market condition, etc), but most professional landlords would estimate net yields coming in at 20-30% lower than the headline figure.

The yield on commercial property collectives tends to be around 2.5-7% net (depending on how you invest).

The yield on the FTSE100 (for example) is ~3.2% today http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=FPFC5&univ=U


This might make interesting reading for you as well:
http://www.nationwide.co.uk/hpi/historical/Jan_2012.pdf

Linton

WhiteHorse wrote: »

Land will never go away. Shares could vanish in an instant.

If a well balanced portfolio of shares vanishes in an instant we are in Armegeddon territory and you will be looking to swap your land for tins of beans.

Back to the real world...

Shares can give you a range of long term returns balanced by a range of short term risks. So you can take your choice. For example a relatively steady portfolio may generate perhaps 5% annually, if you accept major short term risks 10% annually or more has been attainable without the need for too much unusual luck even over the past 10 economically troubled years. With property you dont get the choice.

There are tax advantages to share investing wrt BTL. For the small/medium investor investing in shares is tax free with care. BTL isnt - you will suffer from both income tax whilst you have the BTL and CGT when you finally come to sell.

A really serious disadvantage of BTL is that it is illiquid - you cant buy and sell in small amounts of cash. With shares, you can easily withdraw whatever amount of money you need whenever you need it. You can hardly sell off the odd bedroom in your BTL, nor add another one if you get a small windfall.

A final problem with BTL is diversification. With S&S you can spread your investments over a wide range of areas, ranging from, say, new mines which may or may not find gold through to a small cut of the profits from your local water company. The housing market may crash and that's a significant part of your life savings gone; its unlikely that shares in a wide range of industries across the world will all fail.

wazza24

Linton, do ya reckon you'll get more for Hienz or branston. Just wondering what i should stock up on...........:p

Linton

As in all things diversification pays - dont put all your savings into beans. Bearing in mind their very long shelf life and the high likelihood that they will increase in value with inflation perhaps you have a good investment idea here.

However storage could be a problem, personally I would go for the ETF, physically backed of course.

qpop

Mmmm baked bean ETFs, you run a very strong counter-party risk though - what if the administrator in charge of holding the baked beans receives a large windfall of sliced bread? You may find the ETF is no longer physically backed and the administrator is very full!

wazza24

It might be a good time to by a share off these bean companies, when the first nukes are launched thier share price is gona go through the roof, we could make a fortune..........;)