Is investing in property still the best long term option?

Retireby40

Thanks for the replies.

Yeah I've got a lot to learn and study with investments. I mainly look towards property as I understand it better.

If I take a mortgage of 400 a month rent it out for 550 a month in 20 years it could be paid and my input has been minimal. Yes there's time but if you get a management company to look after it it's less hassle and only 8-9% fee. These are only rough figures but say a £100,000 house I may have paid 30% of the mortgage through deposits, repairs etc while the tenant pays the rest. So even if the house stays the same price the investment has been successful. ( I wouldn't be buying in Belfast and the area I'm thinking has seen steady marginal increases in value over the last 5 years).

I'm unaware of how I could turn say 30k into 100k in 20 years time via any other way ( because as I say I have to study more).

I already put in enough to my pension and don't want to lock my money away until 55-65 as I may need it before and while selling a house can take a while it wouldn't take as long as waiting years to claim my pension.

Ken68

Economising has been my best income for the last 50 years.
And if you don't choose this option, at least remind yourself now and gain that it is lost profit.

fred246

Ken68 wrote: »

Economising has been my best income for the last 50 years.
And if you don't choose this option, at least remind yourself now and gain that it is lost profit.

You are right and I have done really well from economizing but it means different things to different people eg if we have a holiday we spend ages looking for cheap flights and go to destinations we hadn't planned on going to and stay in cheap but interesting airbnbs. We use all sorts of special offers. We still have a great time. Economizing to others will mean staying at home instead to avoid spending anything. I couldn't cope with that type of economizing.

MEM62

Is investing in property still the best long term option?

Was it ever?

It is a useful part of a diverse portfolio but risky if that is the only basket that you have eggs in. Property is not the holy grail of investments.

Retireby40

So if property isn't that good then where would one invest say 30k and in 20 years have 100k to show for that or an asset of similar status?

jonnygee2

So if property isn't that good then where would one invest say 30k and in 20 years have 100k to show for that or an asset of similar status?

Historically, an investment in an equity fund that spreads investment across Global equities makes between 5.5 – 6% annually over twenty years on average (roughly the rate you need to make 30k into 100k).

Of course both equities and housing has risk. Houses arguably have more risk, because as well as larger market factors, there are a lot of risks to individual properties that don’t show up in graphs (a local area can go downhill, a house can subside etc).

The most basic level of investment advice would be to spread risk over multiple asset types. So another house is unlikely to be your best option right now. Given the extent of your assets and your level of experience, it might be worth looking for an independent financial adviser.

Retireby40

Thanks very much Jonnygee.

kidmugsy

atush wrote: »

Property has NEVER been the best place to put your money.

Over any time period of 10 years or more, incl the recent credit crunch, equities have out performed property.

The international evidence weighs against those claims.

jonnygee2

In further illustration of what I mean, here’s an article about stocks vs house prices in the UK between ’91 – 2016.

https://www.moneynest.co.uk/property-vs-shares/

But in contrast here’s one about the US where a ‘real estate’ investment is the clear loser

https://www.businessinsider.com/real-estate-vs-stock-market-investment-2018-9?r=US&IR=T

So what you can see is that over the last 20 years in one market real estate is the clear loser and in another the two are roughly even. It is incredibly difficult to predict for the next 20 years in the UK or global markets. Maybe they will be even again, maybe one will be the clear loser. But what’s true in both the UK and the US is that if you had spread your money between both evenly, you’d be in a relatively strong position.

_CC_

Retireby40 wrote: »

Thanks for the replies.
If I take a mortgage of 400 a month rent it out for 550 a month in 20 years it could be paid and my input has been minimal. Yes there's time but if you get a management company to look after it it's less hassle and only 8-9% fee. These are only rough figures but say a £100,000 house I may have paid 30% of the mortgage through deposits, repairs etc while the tenant pays the rest. So even if the house stays the same price the investment has been successful. ( I wouldn't be buying in Belfast and the area I'm thinking has seen steady marginal increases in value over the last 5 years).

This approach tends to be most successful in times of house price increases due to leveraging i.e. the house appreciates at a rate greater than the cost of capital.


It's somewhat unfair to compare such returns to other unleveraged investments (e.g. equity funds wrapped in an ISA or SIPP) as there is clearly a greater risk attached to borrowing to invest regardless of the underlying asset.


It may work out well into the future.


I'd look at the tax implications though. There are new taxes for second home owners which make it less profitable. You will of course also have a CTG liability for the gain in value. This is far less favorable than holding assets in a tax efficient wrapper.

Retireby40 wrote: »

I'm unaware of how I could turn say 30k into 100k in 20 years time via any other way ( because as I say I have to study more).

That would require a ~6% annualised return compounded over 20 years. In nominal terms that could potentially be achieved with a diverse equity tracker held in an ISA. You'd have no tax liability or hassle either.