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Is it worth being a landlord in the UK?

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  • Crashy_Time
    Crashy_Time Posts: 13,386 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    Fortune favours the brave. Though as with any business idea. There's always the potential for things to go disasterously wrong. 
    Nothing particularly brave about the BTL model, it is just a basic debt ponzi leveraged move, the earlier you got in the better though, people wanting to get in now just don`t have any clue about other investments IMO.
    Can you suggest other better investments please?
    As long as interest rates remain low I don't see this trend changing, it could take even another decade or more to see a change in the real estate market - as a 2012 buyer I am not looking to sell now.
    Shop around for some funds that you like and that have a risk profile you are comfortable with, and diversify across sectors/countries/investment type, got to be better than having it all in one illiquid asset where the tenant could be soiling your carpets or doing God knows to the house, or maybe deciding not to pay rent for a year?
    https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-north-america-ucits-etf-usd-distributing?intcmpgn=equityusa_ftsenorthamericaucitsetf_fund_link
  • The advantages of BTL are:
    - Capital values are more stable than stock markets over the short term. 
    - Easy to leverage by using debt (though this of course dramatically increases the risk).

    The advantages of share investments are:
    - Tax free returns (through an ISA or pension).
    - 20% or 40% uplift from the government on the initial investment (if a basic / higher rate taxpayer investing in a pension).
    - Long term historic average returns of about 7-8% (this is what the major stock markets have historically generated over the long term).
    - Liquid and easy to sell quickly.
    - Diversified (assuming you are investing in lots of companies through diversified investment funds, not just 1 property which could have bad tenants).
    - No issues around higher rate stamp duty on properties. Possible to mitigate or eliminate capital gains tax (if exceeding ISA allowance) by selling and re-purchasing shares to use annual CGT.


    S&S and pensions are clearly the better option for higher rate tax payers, it could be more balanced for others.

    It is also worth noting that the total return (before tax) on UK property has declined dramatically since 2016 (https://www.propertypartner.co/blog/uk-residential-property-market-index-february-2019/), though that could go up again in future.
  • jumperabv3
    jumperabv3 Posts: 1,231 Forumite
    Part of the Furniture 1,000 Posts
    Shop around for some funds that you like and that have a risk profile you are comfortable with, and diversify across sectors/countries/investment type, got to be better than having it all in one illiquid asset where the tenant could be soiling your carpets or doing God knows to the house, or maybe deciding not to pay rent for a year?
    https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-north-america-ucits-etf-usd-distributing?intcmpgn=equityusa_ftsenorthamericaucitsetf_fund_link
    If you work by the book there can't be a situation where a tenant doesn't pay rent for a year. Firstly, you can use rent insurance, secondly - after 2 months of not paying rent you can serve notice and start court proceedings but yes, if you need to get to the point where Bailiff is required then it could be 6-7 months in total including the 2 months of unpaid rent, which is quite a long time indeed. I also do agree however having a nightmare tenant is indeed a nightmare - for that there is insurance, you get paid the rent regardless if the tenant pays or not - some letting agencies offer that insurance in their package of management ... thankfully I've never had to use it but I take it all the times. 
    What I've seen on TV what tenants can do is indeed a nightmare - personally, the way the UK system works - if I will reach a point where there is unpaid rent, I'd ask the letting agency to negotiate on my behalf, tell the tenant I'll forgive all the rent arrears if he/she just leaves the property right away without any delay .... the reason is because the legal system is so slow which could cost me more months of unpaid rent and potentially make the tenant angry so he would destroy the property.... but again, not wishing anyone to reach that position.

    I wonder what's your take about having scenarios where your tenant doesn't pay? Will you do the same as I suggest here?
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