Why BTL vs shares ?

BananaRepublic

There were three very good reasons to get into BTL. Firstly it was very easy to get a mortgage with a high loan to value ratio. Secondly house prices were rising very rapidly, so the gain in value combined with high gearing made it lucrative. And lastly there were very good tax incentives especially for higher rate tax payers who could offset mortgage interest payments against their personal tax bill.

However, since the great crash, you have needed a much larger deposit for a property, making it harder to jump on the bandwagon. And property prices are not rising anywhere as fast as before the great crash. Lastly the government recently changed the taxation rules for BTL, so it is far less lucrative. Overall BTL is no longer the get rich (fairly) quick scheme it used to be.

My own view is that the tax advantages of BTL were outrageous, but BTL owners respond by banging on about it being a business, it's hard work, I'm only jealous etc etc. Decide for yourself whose views you prefer!

Fatbritabroad

Fatbritabroad wrote: »

A friend of mine has just advertised his btl in great Yarmouth

Flat is on for 105k and rent is 500 a month. It has a sitting tenant. By the time you pay a repayment or interest only mortgage you'd be left with 300 to 150 a month extra income. That's before cost of repairs void period etc. Id then get taxed 40%

Ive never considered btl so freely admit to being uneducated as weirdly I always understood shares better. About the only attraction with btl that I can see is the leverage and you might get capital growth but id say that's unlikely now given prices vs wage growth.

I could just about buy it outright but then all my money would be in one diversified asset.

I guess my question is am I missing something here? The income would be nice and I could put 40k down and buy two as there's two available and use that to buy more shares but it just doesn't seem that good an investment

lulabelle1 wrote: »

Firstly, CGT - after allowance, would be £3,388. It still makes the B2L a good investment.

Secondly, I did not borrow £80k. My upfront cost £35,610.

Thirdly, I have no idea where your borrowed £80k is coming from? The only investment from my in to the B2L was the original £35,610

Fourthly, even if I had have borrowed £80k (which I didn't) and then added that to another £36k, that would be an amount of £116k, which if invested over 25 years @5% would be £261k. (Not £390).

So, I stand by my original thoughts......

I invested £35,600 in a B2L
After 25 years, the property will be paid for and I will also have at least £40k invested as a result of the monthly surplus.

This includes no property growth for 22 years, which as we know is unlikely, therefore making the investment even more interesting.

I'm not saying that everyone should invest in B2L. I do invest in both my SIPP and S&S ISA. I'm simply saying that I do not understand why people seem so against negative about B2L.

Just to say mine was a genuine question not slagging btl. Ive never done it so was genuinely asking what I'm missing

bostonerimus

I would never use an interest only or endowment mortgage to buy a BTL. Use a regular mortgage and make sure the numbers work out so you are building equity and seeing at least a 6% return.

I have a paid off BTL and the rental income is great,particularly with no mortgage. But being a landlord is work and I did it to diversify after I had a firm tax efficient regular investment portfolio.

kidmugsy

The idea that you can't buy stocks "on margin" is new to me. When did the procedure perish?

Anyway, it's not difficult to gear stock growth if you want to. I know nowt about futures, options, CFDs, spread bets, and all the rest of it, but I think anyone could understand investment trust warrants; easy peasy geared investment. You can also buy those 2x ETF jobbies, not that I would.

AnotherJoe

lulabelle1 wrote: »

Firstly, CGT - after allowance, would be £3,388. It still makes the B2L a good investment.

Secondly, I did not borrow £80k. My upfront cost £35,610.

What do you think a mortgage is?


The fact it was "funded" by the tenant is irrelevant, it was still a loan.

dividendhero

My tuppence worth

(1) People say shares are intangible - I don't go along with that. I'm a shareholder in Unilever, everytime I see one of their products being sold, be it a Cornetto or Persil - I get a tiny piece of the action.

(2) BTL is a lot of hassle. I can't think of any other product you've to keep supplying even if the "customer" is refusing to pay, on top of this politicians (including the Tories) see landlords as fair game to give a good kicking.

Thrugelmir

Fatbritabroad wrote: »

About the only attraction with btl that I can see is the leverage

Nothing attactive about leverage. As double edged. When times are good then fine. When you get it wrong then the losses correspondingly multiply.

First rule of investing don't lose your capital.
Second rule of investing don't forget rule number one.
Third rule of investing only risk what you can afford to lose.

BTL should be considered in relation to an overall strategy not a vs scenario. Everything has a time and place in a portfolio.

justme111

Apparently if broker goes bust the administrators can dip into investments to cover their fees...
So investment does not feel that secure. You will say " invest through FCA registered broker " but it is not that easy to tell even who is and who is not registered - see the Collateral debacle.
Plus what is going to happen to all those trackers that end up tracking themselves plus there was 1929 crush before which I guess everybody was extaling virtues of investments as well...
I do not say we should not invest. I say investments do not look like infallible holy grail option and other forms of wealth preservation/storage are better be used s well and there is place for btl in it.

Thrugelmir

justme111 wrote: »

Apparently if broker goes bust the administrators can dip into investments to cover their fees...

If the fund is invested in illiquid assets. Who bears the cost of realising same into hard cash. At a fair valuation. Be a fair number of experts employed at some considerable cost.

Malthusian

justme111 wrote: »

Apparently if broker goes bust the administrators can dip into investments to cover their fees...

No, they effectively dip into the Financial Services Compensation Scheme, unless you have a very large amount of money invested in a dodgy broker.

So investment does not feel that secure. You will say " invest through FCA registered broker " but it is not that easy to tell even who is and who is not registered - see the Collateral debacle.

If you invest in pawned jewellery via recently launched P2P operations then you can get caught out by the old "buying another company's FCA registration trick", but most people don't. There are no question marks over the FCA registration of the Hargreaves Lansdowns of this world.

Plus what is going to happen to all those trackers that end up tracking themselves plus there was 1929 crush before which I guess everybody was extaling virtues of investments as well...

"Total return" index data from 1929 is very difficult to find, but most people who invested just before 1929 were probably in the same position as most people who invested just before 2008, in that if they had a diversified portfolio (admittedly this took more effort in 1929) they had beaten cash within a decade once dividends are taken into account and the gap grew further apart every year after that.