Is this a good time to put money into real estate?

BananaRepublic

Nope:

http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/Q4_2014.pdf

cells

BananaRepublic wrote: »

Nope:

http://www.nationwide.co.uk/~/media/MainSite/documents/about/house-price-index/Q4_2014.pdf

I should have said property investment with 25% down and 75% mortgage has been a terrible investment at least over the last 10 years for 3 regions of the UK where prices are lower now than a decade ago. A mortgage has amplified the losses just as it does the gains when prices are going up

And your link is out of date a year.. Be good enough to paot the q4-2015 when its released...

cells

chucknorris wrote: »

Savings accounts are not the natural alternative to investment property (if you are not old, and also looking to invest for the long term). Your alternative investment would be equities, and making full use of ISA and pension tax wrappers (although god only knows what is soon going to be announced about pension tax relief).

In a way savings accounts are property investments. Savings accounts get pooled and lent out for BTL investment or for an owner to buy. The real or imputed rent pays for the interest on the savings account.

some £1.5 T of deposits is used in this way

Gulash

Generali wrote: »

Personally I wouldn't touch it. The Government has made it clear that it wants to wreck it as an investment.

Could you elaborate please?

Gulash

chucknorris wrote: »

When you say invest do you mean 'invest' or do you mean buy your own home, if you mean buy your own home, I'd say buy it.

But if you really do mean 'invest' then nobody knows when the market will crash, but it's usually nailed on that it will at some point, that's one of the reasons why property is a long term investment. Because if you invest with say a 15 to 25 year horizon, it really doesn't matter if there is a major correction (as long as there isn't one when you actually sell. Therefore an exit strategy is necessary, which means flexibility when you eventually sell is important. There is a poster on here that keeps telling me that I'll be doomed if I don't sell soon, but the truth is that if the market isn't good when I want to sell, I'll just wait until the market is good.

Last year I would have said if you are investing for the long term, property is a very good investment. Now I'd be more wary, there have been some important changes, which in isolation aren't critical but together they are a major drag (to new investors) on the profitability:
- Reduction of mortgage interest relief
- Loss of the wear and tear allowance
- Additional stamp duty

Changes to come (and also possibly introduced)
- Mortgage % restrictions (I'm not up yo date on this because I have no intention of further investment).
- One change that I can see eventually coming but it hasn't been implemented yet is annual electrical inspections (on a par with the gas safety).
- I think in my lifetime we'll see some sort of minor rent controls (that won't be bad, but could be the thin end of the wedge).

Some of the above can be mitigated by buying via a limited company (not much help if you already own). If you plan to eventually have a large portfolio it might also mean that you wouldn't have to pay the additional stamp duty too (they are still defining the detail on that, 15 properties has been mentioned).

EDIT: This bit is very important:
I can see from your subsequent posts that you did mean invest. One thing that I didn't mention (it doesn't apply to me) is that if you invest in just one property and it isn't part of a diversified portfolio, you are putting all your eggs in one basket. If you get a problem tenant you could end up in serious financial trouble. Investment property (excl my home) is now only 48% of my overall portfolio, as I have been really making an effort to diversify for the last decade.

Thanks for your very informative post. However:
1) I don't think I will need mortgage. I will buy a studio/1bed in cash and use the rent and some cash leftovers to buy a 2bed myself to live in. Isn't this a good movement? I will indeed end up with no cash and probably a small mortgage (for my home to live in).
2) Are you sure that a problematic tenant will give me serious financial trouble? Because I thought I would give my investment property to a company to manage, and they will charge me for insurance if the tenant damages the property and if the tenant doesn't pay his rent. Do I miss anything?
3) As for the loss of incentives, they don't seem really considerable. Do I miss something?

chucknorris

Gulash wrote: »

Are you sure that a problematic tenant will give me serious financial trouble? Because I thought I would give my investment property to a company to manage, and they will charge me for insurance if the tenant damages the property and if the tenant doesn't pay his rent. Do I miss anything?

Well that would reduce your risk, but not entirely eliminate it, because the management company that you use might also run into trouble. I personally don't believe in insurance, but maybe its not a bad idea if you are determined to invest all of your money into one BTL. But IMO a diversified portfolio would be a more desirable aim though. I'm not saying don't do it, I am just saying be aware of the risks that you would be taking on, but it sounds like you were addressing that issue, good luck whatever you decide to do.

Gulash

chucknorris wrote: »

Well that would reduce your risk, but not entirely eliminate it, because the management company that you use might also run into trouble. I personally don't believe in insurance, but maybe its not a bad idea if you are determined to invest all of your money into one BTL. But IMO a diversified portfolio would be a more desirable aim though. I'm not saying don't do it, I am just saying be aware of the risks that you would be taking on, but it sounds like you were addressing that issue, good luck whatever you decide to do.

I agree with you about diversified portfolio, but what kind of diversification can you do with let's say 200k?

chucknorris

Gulash wrote: »

I agree with you about diversified portfolio, but what kind of diversification can you do with let's say 200k?

I don't know how old you are or where you live, and property values vary so much within the UK, and it isn't for me to tell you what to do with your money. But if it was me, I would invest in both a home and equities (partly making use of both my full ISA and maximum possible pension tax wrappers).

Running_Horse

Is this a good time to put money into real estate?

It might be, but you would need to ask on an American forum.

getmore4less

Gulash wrote: »

Is this a good time to invest in property? Or there will be a huge crisis in 5-10 years and we will end up having a house worth half of what we paid 5 years ago?

Depends what you are trying to do, in most cases you need to have both elements of property working .

As an asset the value can go up/down.

As a business does the asset make any money, in most cases that is surplus rental income.

If you get the business right you can go in for the long term so asset value is less of an issue unless you have to exit for other reasons.

The big issue at the moment is as a business it is hard to predict what will happen next especialy around taxation and regulation.

even then the basic guide of if you get in at 10%+ gross yield on a fairly decent place it should wash it's face long term.

In the US crash people were entering the rental market at 20%-30% yields renting back the foreclosed property to the previous occupants with goverment backed rents
those picking have probably gone now.