property or shares

catoutthebag

Yes I know am age old debate.

But what is the general consensus in teens of retirement planning in say 25 years plus?

I know lots go down shares as preferred route

But I don't always see why jn terms of return (rather than hassle terms )

So someone has 25k to put 25% on btl. OK there's fees on top and periods of unoccupied property.

But all being well...you're left with a little bit over per month rental income plus a 100 k house that may now be worth 150 to 200k.

But 25k on shares? 7% average annual return? And YOU need to keep feeding that pot yourself.

MJ12

You are right, it is an age old question.

With stocks, the value will in general grow over time, dividends are paid out periodically.
Pros:
-Low maintenance, low overhead, liquid.
-easy to be diverse with your portfolio
Cons: Companies come and go, even the biggest ones can go bust.

With letting properties, the value will in general grow over time, rents are paid out periodically.
Pro:
-Tangible. You can go see it if you want.
-It occupies space, no one can just print more space
-You can re-purpose it later. e.g. live in it yourself.
Con:
-High maintanence.
-Negative sentiment from society towards landlords, seeking for regulations and taxation targeting landlords.
- illiquid. It's more difficult to get you money back out of a property.
- money is tide up per property + tenant. Hard to spread risk.

I would say go with shares.

Daniel54

catoutthebag wrote: »

Yes I know am age old debate.

But what is the general consensus in teens of retirement planning in say 25 years plus?
.

It's not that clear if you are talking about BTL instead of a pension or in addition

I would suggest suggest that for anyone with access to an employment scheme,the consensus would be always to take the "free' money provided by the employer's contribution and the tax relief on contributions.You are not feeding the pot by yourself

After that ( and after suitable emergency cash reserve) with a 25 year investment horizon the tax protection offered by ISAs ( no CGT,no tax on income drawn) is compelling,particularly if saving from income

If you happen to have a £25k lump sum to invest ,then the advantages of BTL are the gearing on the borrowing and the chance of capital appreciation over and above inflation.The disadvantages are income tax on profits and CGT on disposal

The 7% return from S&S ( although I take a somewhat more conservative assumption) is after inflation .In your example you are suggesting that UK property capital values will exceed inflation by 50% -100% in the next 25 years..Maybe so,but therein lies part of the risk

To summarise my view ,BTL is not as good an investment as paying into an employer's pension and it is not as good an investment as your own home ( the gains on which are non taxable and where you have a return on the imputed cost of rent not paid).

As I have a sizeable chunk of my net wealth in UK property via my home ,I have less than 10% of my investments in BTL as part of diversified portfolio

Hope this helps.

Aretnap

Some people seem to be under the impression that property is a one way bet and that prices can only rise, not fall. Those people have forgotten the early 1990s. They've also never met anyone who bought a house in Tokyo in 1989 and is still sitting on a loss two and a half decades later.

UK Property has certainly done well as an investment over the last few decades on the back of mortgage deregulation, steadily falling interest rates and supply and demand issues in many parts of the country. But those factors won't automatically continue to push them higher. Interest rates have nowhere left to go but up, and there's always the possibility that a future government might allow a million new homes on green belt in the southeast, or impose rent controls or punitive taxes on BTL, any of which would end the party quite quickly.

Plus property is illiquid, expensive to maintain and difficult to hold in a tax efficient manner (your primary residence aside).

Which is not to say that I think it's necessarily a bad investment, just that it's not a sure thing and not a basket in which I'd want to have all my eggs. More than half of my net worth is already in residential property (ie the roof over my own head) diversification is good and I have no great desire increase that further, so it will be mainly equities for the time being at least.

colsten

Just imagine what a Corbyn-led government would do to house prices (and the UK economy), and you know that you must have a diversified investment strategy. This includes that you must also invest outside the UK, which for most people is not possible with bricks and mortars alone.

catoutthebag

Thanks for input so far.

My current wealth is roughly split : equity in my first home vs personal pension contributions (private ) vs emergency money. I have a small bit then in vgls isa and also artwork that has appreciated.

I think it's the psychological factor...every other person seems to have a btl as their retirement plan so I somehow feel less financially secure and that I haven't done well enough.

jimjames

catoutthebag wrote: »

But 25k on shares? 7% average annual return? And YOU need to keep feeding that pot yourself.

Why do you need to keep "feeding that pot yourself"? If you are buying a house and leaving it for 25 years then surely you can do the same with shares? Buy them and let the dividends accumulate over time.
Advantage is that shares inside an ISA are tax free, don't phone you at 11pm that the boiler has broken or have void periods when you are paying out with no income back.

Archi_Bald

catoutthebag wrote: »

every other person seems to have a btl as their retirement plan so I somehow feel less financially secure and that I haven't done well enough.

Rest assured that you can be very well off and financially very secure without ever having any BTL to worry about.

It is perfectly possible, and sensible, to have property funds as part of a balanced and diversified portfolio.

Glen_Clark

We are seeing young professionals spending over half their income renting a slave box, and people on average incomes an even greater percentage. Hairdressers having to work 550 years to save enough for a house deposit. How can rents and property prices continue to rise when buyers and tenants don't have any more money?
The only way I can see is through more HMOs - but will the electorate stand for it?
As more young voters come through who have missed out on the property price bubble, the popularity in left wing politicians - Corbyn elected by an overwhelming majority after 33 years in obscurity on the backbenches, is a change in sentiment which has shaken the Establishment however much they try to play it down. Trickery like 'Help to Buy' which Shelter says has pushed up the average house price by over £8k, can only do so much. Sooner or later voters will demand a relaxation in the planning laws to build more houses, and then the landlords party will be over.

le_loup

colsten wrote: »

Just imagine what a Corbyn-led government would do to house prices (and the UK economy),

Or what actually happened in a Major led government.

Thrugelmir

catoutthebag wrote: »

I think it's the psychological factor...every other person seems to have a btl as their retirement plan so I somehow feel less financially secure and that I haven't done well enough.

Being contrarian is where the big money is to be made. Thinking outside the box. Doesn't require huge risk taking either. Dull and boring is more often or not the best approach.