Would you be a landlord?

System

Having a ball -

.The whole equities thing confuses me, which is why, although I have no real burning desire to be a landlord, the idea of keeping the property that I already own appeals.

You're not alone and its a reason why shares (equities) may be relatively underpriced compared to property

Check out this fund I'm in, it roughly doubles every 5 years (although historically it should only make 12% a year), it has more diversity and less volatility than the FTSE 100, small cap indices are less concentrated than large cap, and have more room for business growth

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000005OPT

Also check out the Monevator blog for a fun intro

slowpoke_rodriguez

havingaball74 wrote: »

Would you consider using an agent to deal with that stuff?
Which equities have you invested in?
The whole equities thing confuses me, which is why, although I have no real burning desire to be a landlord, the idea of keeping the property that I already own appeals.

Yeah, I'd consider having an agent deal wit that stuff, but at 10%?
Yields around here (Surrey) are about 3-4% so I'd need to look up North where yields are higher, but I don't know "up North".
Tax on capital gains is nearly 30% and buying and selling costs are high. With shares these costs are low, as is tax, or tax free inside an ISA. Dividends are also lowly taxed at 7.5% after allowances.
I can sell the lot in 10 minutes or sell a little at a time; try that with a house!
Which equities? This year's winners have been miners, especially gold miners, which have skewed the returns somewhat, but Japanese and Indian funds/trusts have done their bit.
Long term though, Real Estate Trusts have served me well, particularly Land Securities.

FBaby

Did you use a letting agent to eliminate some of these stresses? How much do they shield you from?

Like most first time LL, we thought that paying an agency for the full management would take away all our stress. It felt like hefty fee (10%), but that was the cost of being stress-free. We learnt I lesson! Cost of management boiled down to one phone call that always went the same way 'Hello Mrs X, Mr and Mrs Z have reported this problem, do you want us to call a repair person?'. The first time we said yes, and then realised they had charged us not twice but three times what it should have costed (OH is in the industry so knew very well). Then when they reported no water coming in the property, so they suggested calling a plumber, they hadn't bothered one bit to try to find out what the problem might have been. They closed the door at 5pm and left the tenants with nowhere to go for help. Thankfully, we contacted them directly to find out if he'd been sorted, and spent the rest of the evening arranging for an emergency plumber (turned out the issue wasn't with the property but the water supply).

After this, we realised that however much we didn't want to have to manage the tenancy, we were even less prepared to pay £100 a month to people who did nothing but to rip us off.

That's even not the worse scenario. How many stories have their been of poor novice LL relying on their agency to follow and advise appropriately in relation to legal requirements to find out they themselves struggle to get their heads around it and failed to comply at a potential huge cost to the LL, because ultimately, they are responsible, not the agency.

I think the best scenario if you are going to be a landlord is to educate yourself as to what it entails, and then make it a part-time job if not FT job and keep your expectation low, considering it nothing but a business as it can be a very heartbreaking experience otherwise.

chucknorris

I'm just starting the process of selling up, I've been a landlord for over 25 years, I was going to say don't do it OP, but maybe that is because after 25 years I'm just fed up with it. It has been a great investment for me, both income and capital growth, but I bought in a high interest/high yield, low property price environment, it's a different story now. When the base rate goes back to about 2%, I'll be just as well off with dividend income, and without the hassle of property. So I have decided that I will sell my properties as and when my tenants vacate, the first one leaves today. My wife who is 11 years younger than me (I'm almost 59) is going to keep her properties about another 10 years.

MonkeyDr

I let one flat, and am keeping it (for now), but would not invest from scratch.

I kept and let my 3-bed flat when my partner and I bought a house together. It's a decent size, close to a London tube in a bustling and not-too-grotty area, and I have had no trouble finding decent (if maybe sometimes a little careless / incapable of simple DIY) 'young professional' tenants for several years. Am on 3rd set of tenants now, and each time it has gone on the market I've had multiple offers on the first day of viewings. My LTV is around 40%, and the gross rent is around 350% of my IO mortgage.

BUT if you ignore the rise in value (which of course could stall / reverse at any time), then my yield is rubbish. Net profit is a few thousand pa at best, and I am saving all of that and will spend most of it on a refurb in a year or 2. It is absolutely not hassle-free, and I find it quite demanding at times. I do pay an agent to manage, as I simply can't drop everything to deal with problems when they arise (busy full-time job + young family + it is 45 mins away). The management aspect of my agency is terrible, and I have learned that it's much better and cheaper if I sort out non-urgent things myself. E.g. tenants reported some minor mould in bathroom, and agency said they would investigate. Their assessment and solution: condensation related, repaint bathroom ceiling at cost of £450. Turns out extractor fan had not been working for some time, so my solution: replace fan, spend 30 mins cleaning mould off, have chat with tenants about importance of using fan. Mould has not recurred, and I will go and repaint ceiling myself (it's pretty small) assuming it is still mould-free after winter.

So, we don't think it is a great financial investment, compared to what we could do with the equity. But we're in it for the long-term, as having a flat in London seems like a lucky thing, and maybe our kids might want to live in it when they go to university etc. Negative equity seems very unlikely, and should it become unprofitable we would sell and can afford for that to take a year or 2 if necessary. I know there will be CGT to pay when the time comes, and that seems fair enough, as I haven't done anything magic to deserve bounty of rising house prices.

We have some small savings now and have absolutely no plans to invest further in BTL. I find it hard to see how people turn a good profit if they do it all properly, unless they have the time / inclination / skills to deal with problems themselves. I do also have some reserve about the morality of it all, and I acknowledge the cognitive dissonance with my actual position.

Fuzzyness

i became one about 8 years. not sure i'd chose it again as even though we've had reasonable tenants i still dread getting the call saying something isn't working or needs replacing.

might give holiday letting a go in the future but literally hand the keys over to a letting company and doing absolutely nothing in relation to managing or dealing with guests.

DCFC79

Give "Cant Pay ? We'll Take It Away" a watch on Channel 5. Might enlighten you to what kind of tenants are out there, although not all tenants are the same and some are good as gold.

slowpoke_rodriguez

I'm currently renting, having sold my house in the summer and not finding one I wanted to buy. My LL really doesn't like spending a penny on the house, and it shows! That's not a problem as it means the rent is 25% cheaper than it might have been. The property was empty for 2 months before we took it.
My last experience of renting was in a similar situation, selling house and looking for one to buy. That LL knew his onions! He had 50-60 properties and employed a full time maintenance manager, on call 24hrs a day, who would summon up the relevant trades pronto!
He looked after his properties and consequently had very low turnover of tenants. We were urged to treat it as our "own home". We had intended being there for 6-12 months but ended up staying 5 years...

Do it right and you'll make money, but it doesn't 'alf look like hard work!

EDIT: I've found the house I want to buy; this one! A new roof, heating system, plumbing, electrics, kitchen and bathroom and it'll be perfect!

deFoix

MatthewAinsworth wrote: »

No, buy a FTSE tracker in an ISA or SIPP instead, perform better than property with zero hastle or UK tax and much better liquidity. Treat equities in a buy and hold way, like you would property, don't try to time the market

I second this.

Just also add that it's better if the tracker fund automatically re-invests the dividends then you can effectively go 2-3% beyond the investment limits every year Stick to large funds which track very broad markets such as FTSE100/350 or MSCI World Inded (even better). DO NOT try and invest in some silly exotic fund like "Emerging Technology Asia". Pay no more than 0.4% fund management fees.

flashg67

Yes, but I take the 'easier' option and pay 10% to an agent to manage everything. I have mortgages, so after they're paid I only yield 5-6% but am really looking at the long term for capital growth. Just wish I'd done it sooner!