Only freedom will do

AlexLK

edinburgher wrote: »

One for all you BTL wannabes from the pension board:

It's illiquid, indivisible, typically undiversified, exposed to CGT, exposed to income tax, and packed with business risk - destructive tenants, voids, disappointing rents, unpaid rents, substantial costs, ..... If ever there were something to buy at a bargain price to compensate for all its disadvantages, it's property. So people with no business experience, no trade skills, and no legal skills plan to buy it as a geared bet for their retirements.

I can think of exceptions, but on the whole it's a horribly risky plan.

In my humble opinion very few 'have a go landlords' fully research the tax and legal implications of being a landlord. Fewer run it (BTL) as a business, as for many it's one or two properties fully managed by an agent and not providing much in the way of an income.

Tenants will be unpredictable, some will try to avoid paying, some will be destructive whilst others will be honest people that cause no trouble. Careful tax planning can mean tax costs are significantly reduced and the business is passed onto future generations without huge sums being taken in inheritance tax. Employing a decent solicitor well versed in property law will minimise risk and being at least competent in most areas of DIY will likely reduce costs. However, the 'have a go' lot don't seem to realise this and for them it is indeed a very risky plan.

Watty1

True. I thought it about for a while. Mr Watty is an excellent house renovator so at least had skills but the numbers don't stack up without a 40% deposit as far as I can see.

edinburgher

in_need_of_direction wrote: »

True but in some ways I'd sooner lose my own money that have someone pick up a large salary for the same end result!

I'd rather make money

In terms of DIY investment, you could invest from something like 0.35% fees if you're very thrifty. Your opportunity costs alone (for BTL) will likely cost more than that (for example, with a £100k property and a salary of £15/hr, you'd only be able to spend 24 hours a year on upkeep, enquiries and administration). I doubt many landlords spend 2 hours/mth looking after their properties...

If we're fair and compare managed investments vs. managed BTL, you'd be unlucky to pay more than 2-3% for investments, 10% would be perfectly common for managed BTL.

gallygirl

It's not an easy game that's for sure - though you could make a case for how risky shares are - think of the old folk with portfolios consisting mainly of 'safe' bank shares for the dividends :eek:. One advantage of BTL's is that with a mortgage you get 100% of the capital growth with maybe only a 20% deposit. Of course, that's assuming there IS any capital growth and building that into a business model is asking for trouble.

edinburgher

While shares can definitely be risky, I don't think that your comparison is appropriate unless you compare say, the risk of owning a single bank share vs. a single BTL. If the market tanks, the share is next to worthless, if the BTL has a void period, the poor ole retiree has no income.

Overexposure to any kind of asset over the long term is a crap idea. A balanced portfolio of a few types of investment will usually work best. The problem is, however, that a lot of people believe (anecdotally) that BTL is a one stop investing shop, discounting other options.

edinburgher

Way too excited to learn that P2P will be able to be included in ISAs in some form from April 2016 - a shot in the arm for anyone wanting to be FI!

And apparently even the gummint gets that B2L is become a problem

http://www.telegraph.co.uk/finance/budget/11724804/Buy-to-let-How-todays-Budget-will-affect-landlords.html

In real news, £15.54 to savings

gallygirl

edinburgher wrote: »

While shares can definitely be risky, I don't think that your comparison is appropriate unless you compare say, the risk of owning a single bank share vs. a single BTL. If the market tanks, the share is next to worthless, if the BTL has a void period, the poor ole retiree has no income.

That's what I was thinking of - I read about someone who had a couple of hundred grand in a few bank shares that tanked - he relied on the dividends to top up his pension. I suspect there were a fair few like that and though 'eggs in one basket' it probably didn't seem that risky at the time

edinburgher

Suspect I've read about the same chap. Of course you sympathise, but on the other hand, you can't help but think "what the hell were you doing?!"

Watty1

edinburgher wrote: »

Suspect I've read about the same chap. Of course you sympathise, but on the other hand, you can't help but think "what the hell were you doing?!"

Clearly never read on here did he???

edinburgher

Won £250+ on a free slot offer - happy Friday :beer: