Buy to let no longer worth it?

deaston

I'm hoping to buy a buy to let flat next year, but came across this article. Any current landlords see this as an issue?

http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11816720/Death-of-buy-to-let-landlords-wake-up-to-Osbornes-150pc-tax.html

Running_Horse

I hope we will soon see BTL landlords replaced by young FTB-ers.

Pixie5740

OP, what drew you towards BTL over other types of investments?

deaston

Pixie5740 wrote: »

OP, what drew you towards BTL over other types of investments?

I guess because your money is "always safe in property" and it's what all my friends and colleagues seem to do. Can you suggest alternatives...?

Pixie5740

Is money always safe in property? Try telling that to the landlord in Aberdeen right now who are dropping rents right, left and centre in a bid to secure tenants during the slump in oil price. Then have a look at the number of properties up for sale in and around Aberdeen. There's an awful lot for this time of year, many of which are sitting empty because they can't find tenants.

Have a read of "Smarter Investing" by Tim Hale and do your own homework.

deaston

Pixie5740 wrote: »

Have a read of "Smarter Investing" by Tim Hale and do your own homework.

How odd to question my choice of investment but then not actually be able to come up with anything better.

p00hsticks

deaston wrote: »

How odd to question my choice of investment but then not actually be able to come up with anything better.

We've no idea of your circumstances, attitude to risk or the amount you have to invest.

Personally I'd find a single BTL far too risky for my taste as there are too many things that could go wrong - you only need one bad tenant to completely trash the place, or buy in an area that subsequently goes to the dogs and your investment goes pear shaped. If you buy somewhere that's seeing real capital growth then you've a chance of making some money but the day to day eturns I generally see quoted on these boards don't seem any better than a lot of more passive investments such as stocks and shares, but with a lot more hassle.

HappyMJ

deaston wrote: »

I guess because your money is "always safe in property" and it's what all my friends and colleagues seem to do. Can you suggest alternatives...?

It's a good investment....if....you live in it and therefore are not paying rent.

You can earn more with much less effort in regular savings accounts, high interest current accounts and stock and shares ISA's.

I do own an investment property myself and although the gross return is about 5% there isn't really much money in it. I pay fees to find a tenant (50% of first months rent), fees to outsource the management of the property (8% plus VAT), fees to the gas safe engineer for a gas safety certificate each year (£50/year), to invest so much money you'll most probably need to leverage in to it using a mortgage which charges 4.5% interest, the property requires regular replacement of carpet, the walls need repainting regularly, the kitchen needs replacement at some point, the bathroom needs to be replaced at some point, the roof should last another 100 years but will require repairs before it reaches the end of it's useful life, windows need replacing every so often, doors need replacing....etc...I put aside 1% of the value of the property each year for major repairs.

Basically the property doesn't generate any cash flow for me.

There is capital gains to consider but over the last 10 years there hasn't been that much in the way of capital gains. Just enough to keep up with inflation. There's also tax to pay on capital gains.

I also have regular savings accounts and earn up to 6% interest. This has no fees or ongoing charges and the capital is 100% safe. The worst paying savings/current account I have pays 3% interest.

You need to try and beat inflation which can devalue your investment.

_CC_

The advantage of BTL, if the market produces positive returns, is it often involves a high degree of leverage which obviously maximises returns, i.e. you're gaining greater returns than the cost to borrow the capital. This, along with massive house price inflation is what has produced stellar returns over the past 15 years.

It really depends on your time frame, but for a long term investment I would personally opt for a SIPP given the big tax incentives, invested in cheap n' cheerful trackers. I would even favor them in a S&S ISA over BTL, but may just be personal preference.

I wouldn't say money is safe in property. It's not very diverse and is quite illiquid. The underlying price of the asset is also very expensive at this time, akin to buying a stock at a high PE. As the budget has shown, it's also in the firing line for tax changes which are popular given the state of the housing market.

deaston

p00hsticks wrote: »

We've no idea of your circumstances, attitude to risk or the amount you have to invest.

My circumstances, attitude to risk or the amount I have to invest have nothing to do with my original question of whether or not current landlords see the reforms in tax as an issue. I wasn't actually asking for advice on where I make my investment.

deaston

_CC_ wrote: »

The advantage of BTL, if the market produces positive returns, is it often involves a high degree of leverage which obviously maximises returns, i.e. you're gaining greater returns than the cost to borrow the capital. This, along with massive house price inflation is what has produced stellar returns over the past 15 years.

This is what I'm wondering. Although the tax on the returns might now be higher, it's the capital gain that seems the thing to focus on.

My house has gone up £200k (46%) in five years. If I can but a property of similar value, in 20 years time, I could have quite a nice return, regardless of the tax on the returns. And I understand that, by living in the property for a period, it becomes your primary residence, so no capital gains?