BTL or stock market

inferno_2

Hi guys,

I have BTL and shares but I am thinking of selling my BTL and invest in the stock market because the returns seem much better. 
I have 2 apartments in London.
The first was purchased in 2015 for 400K and is worth 500K, there is 250K left on the mortgage. It is rented for £1360 a month
Second property was purchased for 350K in 2017 and about 220K left on the mortgage. It is rented for £1150 a month.
My other investments are that I have 320K USD mainly in SP500 and Nasdaq ETFs. 
I am 30yrs old and I don't live in the UK but will return one day.  I know I am in quite a fortunate position.

Interested to hear and ideas.

Thanks a lot!

happy_hazelnuts

the pending abolition of section 21 - meaning you effectively give your tenant a life-long tenancy - is for me anyway one reason why i would sell the btl.

Malthusian

I have BTL and shares but I am thinking of selling my BTL and invest in the stock market because the returns seem much better.

That is a bad reason to sell the BTL and reinvest in the stock market. Reduced risk (systemic, currency, political), reduced hassle, increased diversification, increased liquidity, etc etc would be good reasons.

Bear in mind that returns from the US market - which I suspect you are comparing your BTLs to - have been exceptionally high over the past 11 years. There is no guarantee that will continue in the future.

The main reason to continue with BTL would be to continue gearing up (investing borrowed money and paying the mortgage interest with the rent), which is generally more difficult and risky with stockmarket investment. But you'd know if that was something you particularly wanted to do.

scaredofdebt

Your yield is terrible, that's your problem, I make it barely 4% on the first property.

I'm ignoring the capital growth as that's a paper profit, you may well not get that amount when and if you sell and prices can drop.

Another factor is what interest are you paying on the mortgage, that will reduce your net yield further.

I'd have a look at buying a BTL in an area that gives a higher yield.  Around where I live (north-east) 10% returns are fairly typical (gross).

I built a website a while back that worked out yields by postcode and generally speaking city centres in large northern cities worked out best, I am guessing due to students.  Hull and Sheffield were the top two if memory serves.

steampowered

Yes, the returns on stocks & shares are better.  S&S are also far more flexible and come with more favourable tax treatment.

Though, it is more difficult to use debt to buy S&S than it is to use debt to buy houses.

It sounds like you are potentially a very high earner. If so, making your investments work in the most tax efficient way possible is going to be a priority. You generally need to pay income tax on the rent as a non-resident landlord (or suffer a 20% withholding). As you are not in the UK the most tax efficient options are likely to vary from the ISAs/pensions that would be recommended for UK residents.

As you are spending much of your working life outside the UK you might not accrue enough qualifying years to get the full UK state pension, which means it is especially important to consider retirement planning if you might want to retire here.

dean350

With UK BTL you will also have to hand over a percentage of your profits as CGT whenever you sell. As an expat you may be in a jurisdiction where there is no CGT on gains from shares so that is worth thinking about. Continuing to pay voluntary NI contributions to ensure entitlement to a UK state pension is also worth consideration.