Should I invest in index funds or stick to my BTL plan?

bluefukurou

AnotherJoe wrote: »

My point was, you were concerned about £180 fees for a share service and yet are unphased by numerous fees many of which are much more than that fee, and are annual, for a BTL.

I was only concerned in the sense that I wanted to know if it was a reasonable amount to charge, and if not was there another company offering better value. If I’m going to invest tens of thousands of pounds, a couple of hundred quid would be fine, as long as it’s not considered a ripoff.

AnotherJoe wrote: »

I agree, with cash and not a mortgage some of the current new downsides don't apply, but with £80k surely you'll need a mortgage?

I’m a northerner and whereas in London you’d get a garage next to a motorway for £100k, up here you could get a nice 2/3 bed terraced house with a garden.

I don’t have enough yet to buy in cash, but I’m not far away, so I’d rather avoid the hassle of arranging a mortgage; I’ve been in touch with mortgage providers who specialise in expat mortgages and been offered various mortgages, but after looking at what kind of property I wish to buy and then doing the maths, it doesn’t make sense to get a mortgage. Give me another year or so, and I could be in a position to buy something for around £100k. I’m simply trying to get all the information I need, so that when I’m ready to buy, I will know exactly what to do.

AnotherJoe wrote: »

I'll also point out that with the dividends from investments those can be reinvested and increase the amount you have and thus future dividends creating growth that feeds on itself.....I suppose you could do both, one BTL and trickle feed the income into investments.

Yes, I agree it’s prudent to eventually have both some kind of property investment and also money in equities. For me, it’s a case of which comes first. My options are limited as an expat compared to somebody in the UK. Many people at home would be putting money into Isas, topping up pension contributions, taking advantage of multiple high interest accounts, etc, but I cannot do those.

I only really see a choice between good old bricks and mortar, or an index fund, if I can find a suitable platform. The rental income would provide another income stream, and the equities would be for capital growth, and of course I would reinvest dividends.

Alexland

bluefukurou wrote: »

Sad to hear it. I'm loathe to give money to a letting agency if they are incompetent, so on my to-do list is trying to find a good one.

This local lettings agency seemed very reputable and sound but they still gave the deposit back without checking. I guess my parents could have tried pursuing them for incompetence but didn't for whatever reason.

bluefukurou wrote: »

Why was it unrecoverable? Assuming you had insurance for such events, are you saying the insurance company refused to cough up when the time came? Shouldn!!!8217;t they pay out on damage and lost rental income?

The tenant had no net worth, possibly psychological problems and I don't think landlord insurance was as popular in the 1990s. My dad was too tight to pay for a skip so I remember the many weekends where we would do about 5 round trips to the dump every day disposing of our damaged furniture, carpets and the smelly junk they had left behind.

It's a shame as the experience caused my parents to sell the property before market prices rises in the late 90s.

Alex

AnotherJoe

bluefukurou wrote: »

I was only concerned in the sense that I wanted to know if it was a reasonable amount to charge, and if not was there another company offering better value. If I!!!8217;m going to invest tens of thousands of pounds, a couple of hundred quid would be fine, as long as it!!!8217;s not considered a ripoff.

OK fair enough i think i read into that more than was intended


It depends what you get for your £180 but platform charges tend to be 0.25% to 0.5% at the lowish end for self management in the UK. Your £180 would be about 0.2%, so very low.


So its not a rip off at all. However it would be if they ran off with your money

I have no idea of the trustworthiness of this company or their track record, i imagine you'd have to go to ex pat forums. There certainly are some dodgy operators around in the ex pat area one comes up here from time to time where once your money is in it seems almost impossible to extract it. Cant recall the name unfortunately. What about local banks to where you work? They might be more expensive but perhaps an extra % might be worth the security?

bluefukurou wrote: »

Yes, I agree it!!!8217;s prudent to eventually have both some kind of property investment and also money in equities.

I wasnt suggesting that would be a good plan (nor that it wouldnt) , just that if you were set on a property, which you seem to be, that investing the income might be a prudent move (rather than looking to accumulate until you got enough to buy a second property and start a BTL empire.


I can see the attraction of keeping a foot on the UK property ladder if you ever intended to come back*, the issue with that is there are multiple ladders geographically and having one on the (say) Newcastle ladder wont necessarily help you step across to the South East ladder should the time come.


* I know a couple of people who worked in the states for a while, bought there and were caught by a reverse double whammy, US house prices fell, UK ones rose, they literally couldn't afford to buy when they went back despite having sold a house in the UK (to be able to buy in the US)

jsinc

bluefukurou wrote: »

...The main reason I started this thread was to flesh out some more answers regarding shares v BTL. The BTL option is increasingly being written off as !!!8216;not worth it anymore, too many costs, good old days have ended!!!8217;, etc, yet these arguments are only really true, it seems to me anyway, for people who are wanting to start out with a new BTL mortgage and then being at the mercy of interest rate hikes, lack of mortgage relief, increased stamp duty, etc. None of that applies to me. I!!!8217;m a cash buyer, mortgage free, stamp duty free and happy to pay (10-15%) of rental income in fees to be rid of the hassle.

I've been planning on a BTL (have been a landlord previously). But going off the idea for several reasons:

1) Government policy direction of travel is off-putting
2) Net yields locally are awful (~3% and not keeping up with inflation rate of change). Even worse when factor in management charges and potential for additional costs/time.
3) Demographics and affordability - if housing affordability doesn't improve who will be buying all these BTLs in 25+ years when I want to swap for liquid capital? If affordability does improve via lower prices why do I want a BTL? The current risk/return trade-off looks bad.
4) For reasons of diversification, and demographics above, not keen on greater individual exposure to residential property.
5) More personal - I have an increasing problem with the principle of it. Everyone needs a home and passive income is nice, but I'm no longer so comfortable with the idea of rental income/mortgage paid off by families with no affordable alternative.

However it will take some time to transfer allocated funds into tax efficient investment alternatives (ISAs/Pensions), so that's also not straightforward today. I can't speak to expat options specifically, where your choices may be more limited.

topgearfan08

Don't forget the costs of registering with the ICO for GDPR, and Legionnaires Assessments etc, accountancy costs, registering deposits in schemes The costs soon add up and dramatically eat into profits!

The impending letting fee ban will also stop you recouping costs of credit checks etc from tenants.

bluefukurou

AnotherJoe wrote: »

I have no idea of the trustworthiness of this company or their track record, i imagine you'd have to go to ex pat forums. There certainly are some dodgy operators around in the ex pat area one comes up here from time to time where once your money is in it seems almost impossible to extract it. Cant recall the name unfortunately. What about local banks to where you work? They might be more expensive but perhaps an extra % might be worth the security?

By most accounts Internaxx is a pretty solid company, they’re certainly not fly by night merchants. I do not trust local banks and I although I have an account here, it’s only used for salary payments. Internaxx is based in Luxembourg and I think is much better regulated than anything in the Middle East.

AnotherJoe wrote: »

I can see the attraction of keeping a foot on the UK property ladder if you ever intended to come back...

I do intend to come back, and this is another reason why I feel property is suitable for me. I will eventually need somewhere to live and so having a foot on the ladder won’t hurt. I don’t expect to build a property empire, just need somewhere to put my cash and property has many benefits due to my circumstances.

If possible I may buy a property that I could eventually live in myself, and with that in mind, I’m not overly worried about yields and profit margins. If it all goes to plan and I have good tenants, a small, steady income stream (even after all expenses) won’t be a bad thing. In a sense, if I find the right property, any tenants may just be house-sitters.

bluefukurou

jsinc wrote: »

I've been planning on a BTL (have been a landlord previously). But going off the idea for several reasons:

1) Government policy direction of travel is off-putting
2) Net yields locally are awful (~3% and not keeping up with inflation rate of change). Even worse when factor in management charges and potential for additional costs/time.
3) Demographics and affordability - if housing affordability doesn't improve who will be buying all these BTLs in 25+ years when I want to swap for liquid capital? If affordability does improve via lower prices why do I want a BTL? The current risk/return trade-off looks bad.
4) For reasons of diversification, and demographics above, not keen on greater individual exposure to residential property.
5) More personal - I have an increasing problem with the principle of it. Everyone needs a home and passive income is nice, but I'm no longer so comfortable with the idea of rental income/mortgage paid off by families with no affordable alternative.

However it will take some time to transfer allocated funds into tax efficient investment alternatives (ISAs/Pensions), so that's also not straightforward today. I can't speak to expat options specifically, where your choices may be more limited.

Some interesting points. BTL is certainly not what it was a decade ago, and the government does seem to be making serious efforts to stop people becoming amateur landlords. Add in the possibility of a Corbyn government, plus a no deal Brexit and it’s anybody’s guess what things will be like in five years. I don’t have a crystal ball and will keep my options open. Events may well influence what I end up doing, especially if house prices are affected by Brexit.

I don’t have other property, so any property I buy to let will not be part of a huge business. I don’t feel bad about the idea of a young family paying me money to have a roof over their head. It’s just the way things are and I would have already paid for the house with own hard earned cash. I’d still sleep well knowing if anything needs doing to the house, I’ll get it done and not quibble over petty things like the rogues you read about on these forums. Life’s too short.

bluefukurou

topgearfan08 wrote: »

Don't forget the costs of registering with the ICO for GDPR, and Legionnaires Assessments etc, accountancy costs, registering deposits in schemes The costs soon add up and dramatically eat into profits!

The impending letting fee ban will also stop you recouping costs of credit checks etc from tenants.

I’d never heard of ICO and GDPR. Is that something all landlords need to do? A colleague has three properties that he lets and had no idea what I was talking about.

ianthy

BTL represents diversification in our portfolio. We have 5 properties !!!8211; 3 long term rentals and 2 short term rentals !!!8211; the last property was purchased more than 15 years ago. The running costs are not high !!!8211; agent fees 4% for 2 properties, insurance, BGas contract for boiler and gas safety cert. Plus we assign 10% a year for repairs etc., We pay an accountant to manage the books for my limited co, personal tax for me and OH and BTL!!!8217;s = £1k a year in total. BTL is just like running a biz !!!8211; cash flow, legislation especially if you have short term/holiday lets. We like the diversification it brings to the portfolio !!!8211; OH has a DB pension and I have SIPP, if the markets are down we could live on the rents. I would say the income is fine £115k before tax but we did purchase some years ago and it takes considerable work. I don!!!8217;t think the numbers would add up If we purchased in the last few years, which may explain why a number of newer landlords (less than 5 years) are selling up.

Alexland

bluefukurou wrote: »

I!!!8217;d never heard of ICO and GDPR. Is that something all landlords need to do? A colleague has three properties that he lets and had no idea what I was talking about.

https://www.rla.org.uk/landlord/guides/data-protection-legislation-for-landlords.shtml

Alex.