Thinking of buying some property for letting...advice please.

Rjhsteel

steampowered wrote: »

Most people who are saving for the long term are better investing into a pension or stocks & shares ISA than into buy-to-let. It's lower risk and much more tax efficient - plus with a pension you get a big chunk of tax relief.



This is a really really bad idea. You would be paying a higher interest rate on a BTL mortgage; require a higher deposit; have less security; and pay income tax on the rent from your BTL.

I've checked the ROI and it's around 11%.
Can stocks and shares offer that?

Rjhsteel

AdrianC wrote: »

8-10% raw yield...?

What's his actual all-in return, averaged over a few years?

And why can't he give you advice?

When talking in yield its normally gross no?

Net yield around 4% after costs.

AdrianC

Rjhsteel wrote: »

When talking in yield its normally gross no?

Only if you're trying to deny reality - to others and/or yourself.

Net yield around 4% after costs.

That's the amount that goes in your pocket... And that'll be before tax.

tom9980

Rjhsteel wrote: »

When talking in yield its normally gross no?

Net yield around 4% after costs.

4% is not good given the risk think what happens when 1 year in 10 you have a bad tenant who doesn't pay rent and causes a £5k worth of damage, not unreasonable given you are a novice buying dirt cheap property only desired by tenants with little money.

Compare this to investing in your pension with tax relief, you wont be paying any capital gains inside a pension wrapper either.

Rjhsteel

tom9980 wrote: »

4% is not good given the risk think what happens when 1 year in 10 you have a bad tenant who doesn't pay rent and causes a £5k worth of damage, not unreasonable given you are a novice buying dirt cheap property only desired by tenants with little money.

Compare this to investing in your pension with tax relief, you wont be paying any capital gains inside a pension wrapper either.

You seem to be forgetting the roi of 11% as well.

AdrianC

Rjhsteel wrote: »

You seem to be forgetting the roi of 11% as well.

Except it isn't RoI of 11%.

Because 11% is ignoring the costs of sale. It's basic accounting.

Raw yield - rent received - is turnover.
https://www.accountingtools.com/articles/what-is-the-difference-between-turnover-and-profit.html

"Turnover is vanity, profit is sanity"

Rjhsteel

AdrianC wrote: »

Except it isn't RoI of 11%.

Because 11% is ignoring the costs of sale. It's basic accounting.

Raw yield - rent received - is turnover.
https://www.accountingtools.com/articles/what-is-the-difference-between-turnover-and-profit.html

"Turnover is vanity, profit is sanity"

And these haven't been factored in?
Ok. I've got a feeling you will be negative no matter what i say.

AdrianC

Rjhsteel wrote: »

And these haven't been factored in?
Ok. I've got a feeling you will be negative no matter what i say.

I prefer "realistic".

I was assuming your 11% RoI was a clarification of the "8-10% raw yield" - which is wrong, because that's simply your revenue, your turnover. You should be considering your profit after all expenses, because that's the only figure that makes it into your pocket.

If, by "11% Roi", you're referring to the profit relative only to your equity and ignoring the mortgage, then that's also wrong - because your investment is the full value of the property. It's just that the investment is leveraged via a large loan.

It's very simple - you are setting up a business. You need to get your business plan straight, and until you understand the basics of accounting, you can't do that.

tom9980

Rjhsteel wrote: »

You seem to be forgetting the roi of 11% as well.

4% or 11%??? you are going to have to write everything down for us to work out what your on about. Do remember we are trying to get you to make the best of your hard earned cash so if it feels like you are being interrogated it is because we are trying to give the best possible advice(for free).

Rjhsteel

tom9980 wrote: »

4% or 11%??? you are going to have to write everything down for us to work out what your on about. Do remember we are trying to get you to make the best of your hard earned cash so if it feels like you are being interrogated it is because we are trying to give the best possible advice(for free).

4% rental yield.
11% ROI.