I want to BTL, can someone reality check me?

OnlyGuyWhoLikesTwix

pjcox2005 wrote: »

The point above is a good one and can be drawn out further, as it's a second property you'd pay an extra 3% on stamp duty, so that along with a 25% deposit is significant savings.


If you don't trust pensions (which are just a wrapper in effect) then I would suggest no overpaying and building up some savings - either regular savers, high interest accounts or a stocks and shares isa are all likely to pay more than the interest you've currently saving. It would also mean access to cash in an emergency or as a deposit if you do go into BTL once you understand it better - quite a bit of research required.

I have little to no faith in pensions due to various scandals. Added to that, I tend to believe in long term investment goals as they pay off better. A house I own without mortgage is mine and no Robert Maxwell can take it away from me. I guess I'm old fashioned in that way.



As for savings accounts, there's not really that much about and while I could probably make a few £thousand over the 7-8 years, my main aim for overpaying is to be in a position at that point to do whatever I want to do. I don't intend to retire, but I don't intend to have to struggle until the state decides that I can retire chasing bills. But as I don't have a pension, I obviously need some sort of security for later life.



But I appreciate that while the idea of the second property as a retirement pot is one that holds my interest, I admit to being completely green about how that operates and what to do about it. However given the amounts people are touting (25% deposit, etc), it seems obvious it's more of a ten year plan rather than in the next year. I just asked as my old property came up for sale and thus interested me.

csgohan4

Eviction costs are very real and expensive


https://forums.moneysavingexpert.com/showthread.php?t=5896992


as mentions previously Pensions, ISAS, Savings account in that order. A IFA would be your best to tailor what your money can do for you

SouthLondonUser

OnlyGuyWhoLikesTwix wrote: »

I have little to no faith in pensions due to various scandals. Added to that, I tend to believe in long term investment goals as they pay off better. A house I own without mortgage is mine and no Robert Maxwell can take it away from me. I guess I'm old fashioned in that way.

Please elaborate! You have a huuuuge confusion in your head. You can't say that properties are a longer-term investment than pensions - this is simply factually wrong. If you say this, it means you don't know what you're talking about! Please don't take it the wrong way - I mention it only because your confusion risks causing you to make the wrong choices - big time.

As people have pointed out, pensions are just a wrapper - not an asset class. You can't put a residential property in a pension, but you can put all kinds of securities: shares, corporate bonds, government bonds, funds, ETFs, etc.

OnlyGuyWhoLikesTwix

SouthLondonUser wrote: »

Please elaborate! You have a huuuuge confusion in your head. You can't say that properties are a longer-term investment than pensions - this is simply factually wrong. If you say this, it means you don't know what you're talking about! Please don't take it the wrong way - I mention it only because your confusion risks causing you to make the wrong choices - big time.

As people have pointed out, pensions are just a wrapper - not an asset class. You can't put a residential property in a pension, but you can put all kinds of securities: shares, corporate bonds, government bonds, funds, ETFs, etc.

Well, this article is one that speaks to me a lot and makes sense from my initial standpoint.

https://www.telegraph.co.uk/property/landlord-guide/property-pensions/

Most notably through my overpayments, I will be mortgage free by age of 43. That is I will have completed paying for my current property. Now while it's already risen in value by a cool £20k in the 2.5 years I have been here, I don't intend to move out of it as it's enough for me (unless I decide at some point I need somewhere bigger for a prospective Mrs. Twix, though that isn't on the horizon right now).

My intention is at some point to BTL when my financial situation is a lot more viable to actually do so (I appreciate it isn't right now, as I said I was considering the jump as this particular house came up, I used to live there, did all the work, I know its history having lived there for 10 years). But it's not a possibility right now (though as as a complete aside I am considering selling and buying to move in, but that's a completely different line of thinking).

So firstly, the thing against pensions is the 25% slap if I want to start using it before I'm 60. Given my intentions, it's incredibly likely that I will. Basically when my mortgage is done, I would like to just go to contracting or part time work with the rental income being used to service the mortgage as much as possible. I mean, this is 7 years into the future so who knows what the general landscape will look like at that point, but that is the intention even if it is vague and not fully fleshed out yet. I am also prepared that if it's a minimum 25% deposit, I'll have to do some saving after my mortgage is done to make BTL a reality.

Another notable point is this:

As the recent Carillion and BHS pension crises have shown, there are no guarantees with a pension fund either. “Property is a tangible asset, which gives people comfort and security,” says Jake Russell, director at Russell Simpson. “Some high-profile private pensions have gone up in a puff of smoke due to bad investment, and workplace pensions have been wiped out by companies going out of business.”

Again this is something I have believed myself, particularly with the changes in policies future Governments could well install to attack the pension market. I believe if I own a house, it's mine. Nobody can come along and take it away from me. Sure they can tax me on rental income but dem's the breaks.

At the end of the day, I don't fancy ending up being like some of my relatives who invested in their pensions, had to wait til retirement age to actually use it and keeling over two years afterwards. I mean the prospect of getting to 68 or whatever retirement age is now to "really start enjoying life" just sounds like a gat danged horror story to me.

So while i know that property and BTL's aren't exactly a breeze and evidently I have an awful lot to learn, to me property seems to me the long term win all round. It's more guaranteed than a pension and most notably it allows me my goal of semi-retiring in my 40s, that is take less hours out of my week to slave away. Right now I work two jobs, going to three over the Xmas period. I'm a software developer, I also moonlight as a sports trainer and over Xmas when the training stuff kind of drops off, I'll be working (already set up) in retail stores. I'm willing to go out and earn the money to do these things and have done since my early 20s.

But if you fancy, do try and change my mind. If a pension wrapper can beat all the above, then please tell me how.

csgohan4

Everyone is different and you have valid points above, a pension is useful as they reduce your taxable portion of your income and if you have a good reliable pension you will have a reasonable standard of living from the returns.


However given the £1million pound limit and the annual allowance limit, high earners will be taxed more for contributing into their pension, opting out of pensions will only just delay things and lead to a tapered allowance meaning more tax if you still earn too much. Pensions are not for everyone, but Not many investments give you over 10% return from your employer every year from your salary as extra.

Stocks and shares ISAs are something you should consider as the returns are pretty decent with the right platform.




Ultimately an IFA would be your best bet to tell you which is the best course of action for your finances