Buy to let is for amateurs

Legacy_user

New investors sometimes feel more confident in property than shares due to the tangibility of what they're buying and the demand underpinning it, and the ability to insure against the worst destruction, and the belief that shares are riskier and that buying 1 unit of property buys them 1x nice added income

But compared to stock market investors they are missing out on-

-Isa /sipp tax advantages
-Much easier and vaster diversification of risks, making shares safer overall in my opinion
-The ability to trade easily without so much fees (although that lack of freedom forces them to follow a better buy&hold strategy that they should follow with shares)
- the better performance of the stock market against enen leveraged property
- shares are already leveraged as the companies are in debt, without exposing you to a mortgage, but you could leverage yourself if you wanted to
- evicting people is an awkward thing to do

Glen_Clark

Yes but what you haven't factored in is the British Governments interventions in the property market to increase house prices.
What we don't know is how much more they can squeeze out of tenants (in London private tenants are already spending an average of 60% of their income on rent) or how much more the Government can borrow to sustain the rising housing benefit bill (housing benefit to private landlords doubled in the last 10 years)

System

Good point, its alright if you bought previously and now benefit. Newly investing though sounds like, as you say, a more precarious position

anselld

MatthewAinsworth wrote: »

Good point, its alright if you bought previously and now benefit. Newly investing though sounds like, as you say, a more precarious position

Come back in five or ten years then, when you will know if your opinion proves to be correct.

Glen_Clark

MatthewAinsworth wrote: »

Good point, its alright if you bought previously and now benefit. Newly investing though sounds like, as you say, a more precarious position

Exactly. Jeremy Corbyn for one could throw a spanner in the works, thats why he has got the Establishment worried. As more voters become priced out they become a stronger political force.

masonic

MatthewAinsworth wrote: »

- the better performance of the stock market against enen leveraged property

I don't think this is true. Unleveraged property is not far behind equities in terms of performance and if you magnify the returns 4-5 fold through leverage, property investments have the potential to deliver significantly better returns than equities after costs. Of course, that is dependent on property prices continuing to rise strongly. If they fall, then losses will also be magnified.

System

Masonic - when you subtract btl mortgage interest from the yield, your deposit is yielding better as you say but the borrowed asset is less performing, if you can borrow to fund equities instead then better!

Pincher

Buy To Let WAS great tax wise.

Full deduction of mortgage interest against rental income was a corner stone of the BTL. As this benefit disappears like MIRAS, it gets harder to have a massive BTL portfolio, but a single BTL is still perfectly fine for a basic rate tax payer.

18%/28% tax on property capitals gains is still attractive.
If you "earned" £100k, and paid 40% income tax, you will look on with envy.

System

I think small cap outperforms leveraged btl
And I suppose we can't consider performance without tax

EdGasket

MatthewAinsworth - your assumptions do assume a person actually makes gains on their investments, have not been a victim of fraud, and have not paid excessive fees for investment advice; none of which are guaranteed. Of course you can be unlucky with property too but I'd say it's more common with stockmarket investments.

atush

Glen_Clark wrote: »

Exactly. Jeremy Corbyn for one could throw a spanner in the works, thats why he has got the Establishment worried. As more voters become priced out they become a stronger political force.

That would assume he is electable, which I feel he isnt