What is best investment - buy house to rent out or leave cash in savings?

archieboy

My husband and I are pensioners who own our 4 bedroom house outright as well as another 3 bedroom house we rent out to family. We are now wondering if it would be better use of our savings to buy another house to rent out or possibly rent out the 4 bed house we are living in just now and buy a smaller house for ourselves. Any advice would be appreciated.

jimjames

Any reason you're not looking for something in between on the risk scale? Cash is one end and BTL is the other. There are many other options other than cash.

Wilkins

Without knowing a lot more about your circumstances I don't see how anyone can give you useful advice. A couple of general things to consider:

- do you really need some extra money?

- do you really want the hassle of renting to strangers?

It sounds as though you have substantial savings. There are more relaxing ways to get extra income at moderate risk than BTL, but if you really enjoy the property game, why not?

atush

Sounds to me like you have plenty of cash and property. why not some equity exposure?

csikoszarand

It's better to leave on your own house than to rent.

mike88

As a former landlord myself I can tell you that many of the problems are over exaggerated. Use an agent to do the donkey work, find tenants etc and your return is likely to be far greater than cash as you will receive not only income but the prospect of capital growth. Filling out your tax return each year is a hassle but even that is straightforward. I found that tenants respect a well decorated and maintained property and in the event of any issues you have their deposit to pay for any damage. I always insisted that my tenants were non smokers and no young children but that was for an apartment. For a house a ban on young children would be impracticable.

If you need to downsize then renting out your own property is an option as long as you are able to afford to buy a replacement that is acceptable as you will not want to live in relative poverty while your tenants enjoy your existing home.

I am not a great advocate of entering the stock market for the first time in retirement as a major crash could leave you in difficulty with insufficient time to recoup your losses. Corporate bonds could be an option but that market is relatively unattractive at this time.

As others have said it is difficult to comment further without knowing more about your circumstances.

archieboy

Thanks to replies received.

We are not very keen to enter the stock market at our age but just felt that our cash savings could be working better for us than the low interest rates received on bank accounts at present.

We have rented to tenants other than family previously and did use a letting agent to find a suitable tenant who gave us no problems, (although realise that this may not always be the case). We would therefore use a letting agent again if we went down that route.

worried_jim

I bought a house in 1998 for £50k, rented it for two years making £25pm after expenses and sold it in 2000 for £100k. Easiest £50k I'll ever make.

jimjames

I have BTL as well as stock market investments but...

- It's entirely possible that property prices can drop as can share prices.
- If you need to realise some money it is much easier and faster to sell some investments compared to selling part of a house.
- Stock market investment is much more passive than having to deal with tenants.
- You are reliant on property prices increasing as income may not be a great amount after costs
- Shares can be held tax free from CGT and IT in an ISA unlike property
- Investments can be tailored to your risk preferences, with property you are stuck with the one and the tenants.

I've not really understood the rationale behind not investing as a pensioner. I don't know your ages etc but a new pensioner could have 20 years or more of retirement ahead of them. Even if not presumably the main thing is to get a higher income than from savings. To put it bluntly if you're not alive you're not really bothered what the value of an investment is and if the market has dropped so waiting for it to increase isn't an issue as long as you had better income in the meantime.

paddytt

For a simple way to achieve waht you want, Google "The Armchair Property Investor" or "The House Crowd". I haven't used them but the idea is interesting.

TT

debbiereynolds76

A balanced portfolio would be the way to go:

Some money in cheap index trackers across major equity indices,

Some money in a high interest savings account

Some money in gold

and

Some money in more risky investments like bitcoin for out sized capital growth.

The specific amounts for capital allocation would be dependant on your risk profile. A strategy like this, in these markets which are all uncorrelated, will return solid and importantly "risk adjusted returns" over the short to long term.

Unlike dumping you money into already, over inflated residential property - bearing in mind interest rates are on their way up!!