Invest or buy property?

alexanderalexander

lozzy1965 wrote: »

You'd be doing very well to clear 6% after ALL expenses. I'm in the "investments" camp.

Although I basically agree with you that if you aren't after leveraged capital growth shares are better than buy to let, I don't think 6% net return is totally unrealistic. There are many parts of the country where you'll get a rental yield of about 10% on a lot of property, so if you're then spending more than 40% of the rent you receive on maintenance, letting agent fees, voids and other incidental expenses you're probably doing something wrong....

kidmugsy

soupdragon10 wrote: »

I will be inheriting about £100,000 in the near future and need to decide whether
1. to invest this somehow to provide an income, or
2. to buy a property locally to rent out (there are suitable properties in my area, I have checked).

Do you have any advantages in the BTL biz? Trade skills, legal training, familiarity with the property market, source of good tenants .....?

Would you get a tax benefit from contributing as much as possible into pensions for the next three years - that is, do you expect to have some unused Personal Allowance versus income tax when you retire? Would you be happy to invest in NISAs at £15k p.a.? If you want to punt on housing, how about the variant called "HOUSA" from Castle Trust?

G_M

Putting money into equities, funds etc is an investment.

Putting money into a property to let out is a busienss.

Do you want to run a business?

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Thrugelmir

mike88 wrote: »

But to sink the lot into the stockmarket is not a good idea; that is my main point.

£50k into a "single" investment of any kind is rarely a good idea. When retirement income is the objective.

soupdragon10

Thank you for all your replies - just to clarify a few points
1. I am already self-employed so am familiar with the record keeping needed for running a business.
2. Yes there are a number of properties available within the local area, either ready to let for around 90k, and needing work for 70k upwards. I would not need to borrow any further money so would not eat into current limited savings.
3. there are also specific holiday properties to buy, although these offer less year round rental potential.


I had thought about property as it is tangible, and you have more control that with investments which inevitably rely on the skills of a third person to do the investing, and take a hit if they make wrong decisions.


I will look into a pension to pay into over the next 3 years, had not thought of this as an option but could certainly look into this.

kidmugsy

soupdragon10 wrote: »

I will look into a pension to pay into over the next 3 years, had not thought of this as an option but could certainly look into this.

Here's the most up to date info.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/332714/pensions_response_online.pdf

By the way, I think one problem for people in your position is that financial assets (and houses too) are currently expensive, so the long term outlook for satisfactory returns isn't too attractive. But your guess my differ from mine.

atush

mike88 wrote: »

Investing in shares at this stage of the investment cycle is daft. Drip feed by all means but huge lumps sums are an absolute no no in my view. On this board there is a huge following for shares but many have not seen the ups and downs I have seen in my investing lifetime which is now of over 40 years duration. Many on here I suspect have been investing in shares only since the current 5 year bull run so their recommendations are heavily influenced by the excellent returns they have received. Don't fall for it. Now is not the time to invest heavily in the stockmarket especially at your age near retirement so safety first should be upper most in your mind. Losses now will mean you have little time to recover if the market falls..

There is also an anti investment bias against housing on here. There are good reasons for that if you sink the whole lump sum in property. But what is required is investment balance - some of this and some of that. Don't be put off by the comments about tenants ringing up at 2am with a broken boiler. Hire an agent and then it becomes his problem and fees are tax deductable.

What is required here is some shares, some bonds, some cash and an investment property through buy to let.. Never leave your self short of readies as over time you may need money for things that you have not thought of and for holidays and a replacement car.

Sorry but that is a load of bull tink.

I have been investing in equities for decades, over 3. I have seen MANY ups and downs. I have seen economic cycles come and go. I still favor shares today in general.

I am not anti property, but someone with just 100K probably should not be in it, unless they are skilled in one of the trades. As they would probably have too much of their net wort in property if they own their own. If they didn't i'd say look to buy one to live in.

This is a very different cycle to those that have come before. and the anti equity options of bonds and gilts are not looking too good with the bubble they have been in, and the interest rate rises to come prices will fall.

So to the OP I say more pension is required if you want pension income. Unlike a property, your money will immediately be boosted by tax relief so markets would have to Crash big time before you lost anything. And you'd have to drip feed it in anyway.

So, pay off debt (maybe even your mtg if you have one and are abt to retire) put aside an emergency fund in cash, fund your pension up to your total income for a few years, open a S&S isa.

Freecall

atush wrote: »

This is a very different cycle to those that have come before.

Well one thing remains the same, someone always claims that this time is different!

JohnRo

It is different in many ways, central banks have become the market in a way they've never been allowed to before.

ZIRP for the privileged is allowing asset price pumping by the owners, borrowing counterfeit for nothing and using it on unproductive buybacks of their own stock. It manipulates the numbers but stores one heck of an adjustment when normal service is resumed, and it has to be resumed at some point.

We are constantly told there is a recovery by MSM as though saying it over and over and over will make it happen yet all that's really happened is counterfeit cash has been used to transfer wealth by manipulating and inflating asset prices.

Thrugelmir

Freecall wrote: »

Well one thing remains the same, someone always claims that this time is different!

That's because it's never happened in their lifetime......