Buy to let is for amateurs

economic

its all cycles. at certain periods property will outperform. others equities will. property cycles tend to last longer.

i think in uk and london political risks are not being prices into the market - especially london. my view is from this point onwards equities is a better bet. having said that i would always buy my own home irrespective of where we are in the cycle.

i gotto say i think a lot of the FTB buyers have a huge amount of their net worth in property. maybe even over 100%. that to me is worry. i myself have half and i find thats a bit too high.

Mr.Generous

MatthewAinsworth wrote: »

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!

So is all buy to let based on a mortgage? If so then you aren't talking like for like, get a loan and invest the cash on the stock market and factor in interest rates...

If you had £80k you could buy a house ready to let in areas of the north, a decent enough place that you could choose your tenant to some extent. You'd get about £500 pcm and pay costs for insurance and gas safety of about £150 (or even less). That's a return of about 7.5%, show me a professional investment fund giving that sort of return. You have the added benefit / risk in both scenarios that the asset will increase or decrease in value, but we aren't building enough houses so I'd say housing is a pretty safe bet.

I must admit to being tempted with regard to pension pot, basically it makes about a 3% return. Damn sure I could do better.

System

Mr generous - I would assume mortgage btl as prpfessionals tend to, in doing so they have more interest rate risk but less tenant risk if it affords them more properties

That's a return of about 7.5%, show me a professional investment fund giving that sort of return

Okay, 15% a year, global small companies (doubles every 5 years with compound interest). This index/fund has less volatility than the FTSE :

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F0GBR06FNN

There was a blip in 2008 for some reason but by 2010 you'd never know it happened. Funds give you diversity and do all the decisionmaking for you

I must admit to being tempted with regard to pension pot, basically it makes about a 3% return. Damn sure I could do better.

I'm sure you could, most pensions are terrified of the outside world and pile into gilts, which are close to negative returns right now, set up a sipp pension and you can track the FTSE for 7-9%ish, or go small caps like me, the more you gain the less chance of losing your initial investment

If you insist on property, there are funds for that, more so commercial ones, but more diverse than btl, and if done through a pension or isa have better tax

Pincher

Who is going to lend you £100k to invest, without collateral?

BTL works, because there is a house they can repossess.

In the good old days, self certificated 95% LTV means you put down £5k, borrow £95k, and you are in business. That's proper leveraged borrowing.

Lend me £100k to invest, ha, that'll happen.

System

I don't see why the shares / fund units themselves couldn't be collateral, its probably just down to creating some sort of wrapper that doesn't let you sell without repayment, and only in positive equity

fifeken

Mr.Generous wrote: »

If you had £80k you could buy a house ready to let in areas of the north, a decent enough place that you could choose your tenant to some extent. You'd get about £500 pcm and pay costs for insurance and gas safety of about £150 (or even less). That's a return of about 7.5%, . . . . .

You need to take off all your costs.

White goods, new boiler, central heating, windows, roof, 10% agency fees, carpets/flooring, decorating, external painting, legal fees for an eviction. Say each of these require expenditure once in 10 years and cost £3,000 each (obviously agency fees are ongoing but can count as 1 in 10 for this exercise). Your return is halved from what you hoped for.

bigfreddiel

My p2p currently pays 7% :-)

bigfreddiel

Mr.Generous wrote: »

So is all buy to let based on a mortgage? If so then you aren't talking like for like, get a loan and invest the cash on the stock market and factor in interest rates...

If you had £80k you could buy a house ready to let in areas of the north, a decent enough place that you could choose your tenant to some extent. You'd get about £500 pcm and pay costs for insurance and gas safety of about £150 (or even less). That's a return of about 7.5%, show me a professional investment fund giving that sort of return. You have the added benefit / risk in both scenarios that the asset will increase or decrease in value, but we aren't building enough houses so I'd say housing is a pretty safe bet.

I must admit to being tempted with regard to pension pot, basically it makes about a 3% return. Damn sure I could do better.

Are you doing better?

masonic

Pincher wrote: »

In the good old days, self certificated 95% LTV means you put down £5k, borrow £95k, and you are in business. That's proper leveraged borrowing.

Lend me £100k to invest, ha, that'll happen.

Spread betting and CFD trading enable the average punter to do this. The 95% LTV is equivalent to a 5% margin factor. Obtaining the leverage isn't the problem. The problem is avoiding losing the shirt off one's back while using the leverage.

bigfreddiel

fifeken wrote: »

You need to take off all your costs.

White goods, new boiler, central heating, windows, roof, 10% agency fees, carpets/flooring, decorating, external painting, legal fees for an eviction. Say each of these require expenditure once in 10 years and cost £3,000 each (obviously agency fees are ongoing but can count as 1 in 10 for this exercise). Your return is halved from what you hoped for.

......and factor in un-let periods, missed payments, dodgy tenants, council licences, cannabis farms.......:shocked::shocked: