Invest or buy property?

cynthiacharles

In my opinion the best investment will be,you buy a house for the purpose of living because by staying in it you can take care of it.

EdwinHearne

its has been great disscusion here.Thank You.

ManofLeisure_2

My advice would be to 'always' invest in what you understand. In 1999 I inherited a sum of money and sought the advice of an IFA. To be honest at that point in time, I hadn't a clue about whether the advice was good or bad, because I hadn't a clue about the products suggested. Yes, I had read a fair bit around the subject, but my understanding was still sketchy and my instincts told me not to proceed with the IFA's plan. At the time I was living in SW19, a fairly affluent area and I knew that it would be easy to buy a property and let it. So rightly or wrongly, that's what I decided to do.

I purchased a property for £90,000 and made a number of improvements which then enabled me to let it. I soon found tenants and that same couple still rent that property today. The rental income is £3,500 a month and the property is now valued at approx £900,000. I know I have been extremely lucky. In 1999 I would never have envisaged finding such good tenants or thought that property prices would have soared to the extent they have. At the time it was rather a gamble, but one I feel that has paid off. What that 90,000 would be worth had I invested in the products suggested by the IFA- well I haven't a clue.

Good Luck OP - hope it all works out for you.

mike88

Your property has been a great investment. For one I'm a fan of buying investment property and shares when the timing is right. However, I suppose you are aware that when you come to sell your investment property you will have a MASSIVE capital gains tax liability on your circa £800k profit.

Conrad

OP, given your age and circumstance I personally would go the property route.


I would likely invest in 2 properties by employing say a £55k mortgage on each as if done correctly would produce a higher income.


Here would be my model;




+ 5 year fixed rate interest only mortgages


+ Flats only as these are much less hassle to personally manage - no grounds, no fences, no roofs etc. Ok there is usually a service charge (often very small if ex council property) but those who argue against this are forgetting a house will require buildings insurance and others costs which a flat will not


+ Take care to work out best yielding flats in your area. In mine a 2 bed overall gives best returns.


+ Scum bag flats = scum bag tenants. Treat people like shcit and they will reciprocate in spade loads


+ Buy units that need minimal hands on ongoing maintenance, or renovate in full PROPERLY, meaning new plastering, new bathroom, the lot. In the long run this is cost effective and much less hassle


+ Install electric radiators. Best ones I have found are the brushed metal units by CONSORT. Tenants like the look of these.
They will never need painting!
No dusty pipes required that would also require painting ongoing.
Gas is potentially a lot more hassle and boilers don't last forever.



+ Big blocks or areas with lots of flats can be harder to let.


+ Find your own tenants - be VERY fussy.
My number one tip is to let to a harmless nerd.
So many LL's come unstuck letting to rough types. You cannot reason with a thicky, their way of processing the world is to work off of anger and emotion


+ Think like a mortgage underwriter. Do not let to a bloke whos just split from wife - he will be in for all sorts of financial pressure. This could bite you on the bum.


+ Paint the walls and ceilings a nice bright white, like a Spanish villa inside. There is then no need for cutting in between 2 different paints where ceiling meets wall.


+ Try and install brushed metal fittings - door handles etc, not brass looking as this is chintzy. Brushed metal will match the radiators.


+ Nice brushed metal light fittings with spot lights look really good, but do not require the intensive fitting that in-ceiling spots do. No dangling bulbs or chintzy light shades.


+ Put one flooring throughout. I prefer high quality vinyl over laminate any day is it wears better and is not generally fouled up due to water damage.


Over time rents go up whilst mortgage balances do not. Sure in 5 years the interest rate could well be higher but by then rents will have increased. 15 years from now your rent will seem a lot higher compared with the mortgage.




HOLIDAY LETS


Most people seriously under estimate the non stop maintenance and repairs required in this field.
As a holiday maker you expect everything to be 100% working and good, there is no leeway, no delay.
It's a proper business and very easy not to make a profit unless you really know what you're doing.
You will be forever answering new email enquiries, some people have dozens of questions before booking and many require your time and research to answer.


I would steer well clear if it were me contemplating a peaceful retirement.

ManofLeisure_2

mike88 wrote: »

Your property has been a great investment. For one I'm a fan of buying investment property and shares when the timing is right. However, I suppose you are aware that when you come to sell your investment property you will have a MASSIVE capital gains tax liability on your circa £800k profit.

Thanks Mike - yes I've taken advice and this time will act upon it

alexanderalexander

Conrad wrote: »

+ Flats only as these are much less hassle to personally manage - no grounds, no fences, no roofs etc. Ok there is usually a service charge (often very small if ex council property) but those who argue against this are forgetting a house will require buildings insurance and others costs which a flat will not

I agree with most of what you wrote but I have to say I completely disagree with this point. To adapt a Mae West quote, I've owned freehold and I've owned leasehold, and believe me -- freehold's better.

I have an ex-council flat and the service charge is bad (£1700 a year). You say that there are no issues with roofs etc., but that's not true -- these issues still exist, but it's just you have zero control over getting them fixed in a prompt and cost effective way (but you still have to pay for it via the service charge). One of my flats had a leaking wall panel for months because the freeholder was so uninterested, and my tenants were quite understandably giving me no end of grief (I had to arrange and pay for a temporary repair myself when I realised it was going to be months until the freeholder did it). Also you do still need insurance -- you pay for insurance via the freeholder, but most landlords will need further insurance on top of this to cover landlord's liability and contents. This will probably come to more in total than full landlord's buildings and contents insurance for a freehold house.

Also there's less opportunity to add value in a flat -- no possibility of loft conversions or extensions. And let's not forget the hassle and expense of getting leases extended....

BucksLady

ManofLeisure wrote: »

My advice would be to 'always' invest in what you understand. In 1999 I inherited a sum of money and sought the advice of an IFA. To be honest at that point in time, I hadn't a clue about whether the advice was good or bad, because I hadn't a clue about the products suggested. Yes, I had read a fair bit around the subject, but my understanding was still sketchy and my instincts told me not to proceed with the IFA's plan. At the time I was living in SW19, a fairly affluent area and I knew that it would be easy to buy a property and let it. So rightly or wrongly, that's what I decided to do.

I purchased a property for £90,000 and made a number of improvements which then enabled me to let it. I soon found tenants and that same couple still rent that property today. The rental income is £3,500 a month and the property is now valued at approx £900,000. I know I have been extremely lucky. In 1999 I would never have envisaged finding such good tenants or thought that property prices would have soared to the extent they have. At the time it was rather a gamble, but one I feel that has paid off. What that 90,000 would be worth had I invested in the products suggested by the IFA- well I haven't a clue.

Good Luck OP - hope it all works out for you.

Wow, what a wonderful story and real encouragement to those who are considering buy-to-let.

bowlhead99

BucksLady wrote: »

Wow, what a wonderful story and real encouragement to those who are considering buy-to-let.

Well, it's a great story, no doubt about that. And I'm sure it would be encouragement to those who are considering buy-to let.

But it's more encouraging to those who have the ability to travel back in time 15 years to before the last couple of property booms. The average london property price is now well over 10x the average london salary. Are we going to see house prices, and the rents that tenants pay, quadruple from here over the next 15 years like median house prices did over the last couple of decades?

Manofleisure got a good deal on his place so I expect his tenants started off paying a level of rent that was commensurate with a property worth more than £90k, and so won't have faced an 800%+ rent rise over the period, and he's been lucky they've wanted to stay - void periods and problem tenants can be a nightmare for some. #

But basically if you're going to take 'encouragement' from the fact that he made it work for him, you should also take 'discouragement' from the many thousands who lose their shirts in their own BTL venture.

Thrugelmir

BucksLady wrote: »

Wow, what a wonderful story and real encouragement to those who are considering buy-to-let.

Best to understand the far wider macro events of the period. As there's no magic money tree as some appear to believe. Argually the boom was an illusion built on global debt. What went up will eventually come down.