Why BTL vs shares ?

AnotherJoe

justme111 wrote: »

plus there was 1929 crash before which I guess everybody was extolling virtues of investments as well...

What do you reckon happened to house prices, and peoples ability to pay rent, in the aftermath of the 1929 crash?

I'm going to take a wild guess and say they also crashed, and that many defaulted on rent payments and landlords were left with devalued properties they couldn't sell and tenants who couldn't pay.

hey, what do you know (from http://www.people.hbs.edu/tnicholas/anna_tom.pdf)

Using new data on market-based transactions we construct real estate price indexes for Manhattan between 1920 and 1939. During the 1920s prices reached their highest level in the third quarter of 1929 before falling by 67% at the end of 1932 and hovering around that value for most of the Great Depression.

The value of high-end properties strongly co-moved with the stock market between 1929 and 1932.

A typical property bought in 1920 would have retained only 56% of its initial value in nominal terms two decades later.

An investment in the stock market index (including dividends) would have outperformed an investment in a typical property (including net rental income) by a factor of 5.2 over our time period

atush

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...

what will happen is those who dont panic sell will see their shares recover in value.

In all the time since 1900 or so, even with all the crahses that have happened, equites have outperformed both property and cash.

And I have lived thru a number of crashes since i began investing, and even after this last bad one, I have made money in the end.

snowqueen555

The good thing about shares is that someone else is doing all the work for you. Anytime you want out, you can just sell the shares and withdraw to your bank.

I'd only ever entertain having a lodger.

Wassa123

It used to be great.

You'd "buy" a £200k property for £30k, and receive £12k/p.a (6%).

On an interest only mortgage you may pay 8k/p.a (4%) interest to the bank, which was tax deductable.

You'd be left with £4k/p.a, but based on your deposit of £30k, that's like 13% return on your original investment before tax.

Now as property prices were increasing rapidly, the mortgage seems smaller and smaller and your equity increased. You could remortgage to get a bigger loan and release more equity as cash without paying tax on it.


Though you'd have to factor in the price of any repairs and voids which would affect your yield.


Nowadays though with the extra stamp duty and not being able to deduct interest from tax I'm not sure it's worth it.

demonloop

I must be the only one here who likes BTL

I have almost all of my entire savings tied up in BTL. Four properties, all local, all managed by myself. I love looking after the tenants and the properties.

OldMusicGuy

demonloop wrote: »

I must be the only one here who likes BTL

I have almost all of my entire savings tied up in BTL. Four properties, all local, all managed by myself. I love looking after the tenants and the properties.

You said it yourself, you love looking after properties and tenants. It makes sense for you. The point was made earlier that many people claim they "don't understand" pensions and investing but they do understand property - buy cheap, do it up, sell it/rent it out.

Nothing wrong with that but if you look at the hard numbers, over the long term investing in pensions looks like a better bet for less hassle than BTL. I have renovated several properties in the past and always assumed I would do a bit of property buying/renovating/rental when I retired but have decided it's just too much hassle (now I am retired).

Ideally, what you should be doing is putting the money from your property company in a pension, then you get the best of both worlds :T

AnotherJoe

demonloop wrote: »

I must be the only one here who likes BTL

I have almost all of my entire savings tied up in BTL. Four properties, all local, all managed by myself. I love looking after the tenants and the properties. It's my aim to add another 5 or 6 over the next ten years and to manage them full time.

I get a 7-9% return before tax (they're in a Ltd Co so I pay 20% CT) and have few issues.

The four I own are all owned outright, but I am going to take a mortgage on two more next year, which won't leverage past a point I'd be comfortable with.

Over 10 years, the Ltd Co will have them paid for, without any input from me. Free houses :beer:

I don't take any money from the Co, my other company pays my wage. When I retire, I'll draw from the Property Ltd Co. but in reality I don't need much money to keep me going, although I have a 1 yr old and another baba on the way so I guess they'll rob me :rotfl:

Just posting to show an alternative view..

Fair enough but a better alternative view would come from someone who had both BTLs and investments so they could compare the two. You dont know for example how your money would have done had it been in the stock market over the same period. Your views might also be different had you had a bad tenant who'd stopped paying rent, trashed the house and run off with your partner


We are also in a different regulatory environment than when you started. Say you started 20 years ago, the rules regulations and tax infrastructure was very different to now, same for stock market investments except they have, AFAIK, relaxed with the introduction of SIPPS ISAs, LISAs etc.


So going forward its not necessarily logical to assume the comparison between the two would work the same.

demonloop

OldMusicGuy wrote: »

You said it yourself, you love looking after properties and tenants. It makes sense for you. The point was made earlier that many people claim they "don't understand" pensions and investing but they do understand property - buy cheap, do it up, sell it/rent it out.

Nothing wrong with that but if you look at the hard numbers, over the long term investing in pensions looks like a better bet for less hassle than BTL. I have renovated several properties in the past and always assumed I would do a bit of property buying/renovating/rental when I retired but have decided it's just too much hassle (now I am retired).

Ideally, what you should be doing is putting the money from your property company in a pension, then you get the best of both worlds :T

I think my direction comes from a deep-rooted (and maybe in some repects justified) suspicion of bankers and the financial system as a whole, though I certainly understand those investments.

Everything you've said is accurate, but my fear would be that I'd work my whole life to build up the Property Co, invest in a pension and the stock markets would collapse. Irrational, but that's where my head is at.

When I retire properly, I'll let the kids manage them

demonloop

AnotherJoe wrote: »

Fair enough but a better alternative view would come from someone who had both BTLs and investments so they could compare the two. You dont know for example how your money would have done had it been in the stock market over the same period. Your views might also be different had you had a bad tenant who'd stopped paying rent, trashed the house and run off with your partner

The money I used to buy the BTLs was in a S&S ISA, and was making a greater return than the BTLs are now, but I feel better with the money in BTL. It's maybe a personal thing.

If I had a bad tenant who stopped paying the rent and trashed the place, I would resolve to improve my research. I think landlords can sometimes too easily blame tenants and governments for things not going to plan.

I should add, I also have a fair few quid tied up in Bitcoin, so not averse to tech investments.

When moon sir? :eek:

grey_gym_sock

demonloop wrote: »

I don't take any money from the Co, my other company pays my wage. When I retire, I'll draw from the Property Ltd Co.

so far as tax goes, that can all be done while paying some, but not huge amounts.

where it's becomes less favourable is if you want to sell properties and get the proceeds out of your company. because then the company will pay tax (at CT rates) on capital gains on the properties, and you'll also pay tax on cash taken out of the company: either income tax on huge dividends, or capital gains tax if you wind up the company or perhaps buy back some of the shares. so you can end up with double taxation of capital gains.

you may say you'll never want to wind up the company / wind down the property business. but unexpected things can happen. and then there's this:

demonloop wrote: »

When I retire properly, I'll let the kids manage them

you've said you enjoy property management. but are your kids showing an interest in property management, at ages 1 and less than 0?