Stock market, property or both?

grumiofoundation

d_barratt said:

dunstonh said:

Have initially put the majority of my focus/research on property and the idea of building a BTL portfolio, but i'd be interested to hear people's thoughts on better/other options to meet my goals.

That isnt consistent with  either of your "challenges".

Thanks for your message. You've pointed something out without really offering any advice on what could be a better option. As an IFA, what would you suggest to a client in my circumstances?

If your challenges are 

Minimise tax (where possible)
For you to have to have minimal involvement. 

You will have to pay tax on the rent - and as you are a 40% tax payer you can only get 20% tax relief on mortgage payments. 
Being a landlord has the potential to be a lot of work. Not just all the rules and regulations you have to follow and research you have to do before starting business but also the ongoing problems that can appear (you can get an agent to manage and although they can do a lot of the work for you the ultimate legal responsibility falls on you so you should still make sure you are involved). 

DireEmblem

1.  Max out both S&S ISA’s.

2).  BTL - you can outsource the running of this to a company, and you only need to put down a 25% deposit for a BTL mortgage.  A 1 bed flat in say Edinburgh can be had for 150k, which should get you £700 in rent or 5.6% return.  Say up to £100 a month off that would pay a management company to run it in your behalf, and £300 a month on the mortgage so you gain an extra £200-300 on that really.  If you set it up within a company structure, you can pay yourself a dividend when you need to withdraw funds.  Based on your salary, if you wanted to go down this route, I would pay one property off first, and then go for a second, using income from the first to pay off the second and so on, but take it slowly.

3.  Max out both your pensions as much as you are happy to.

steampowered

You should do some search into the FIRE (financial independent, retire early) movement. It sounds like your goals are similar. Have a read of some of the blogs at http://moneygrower.co.uk/fire-blogs-financial-independece-retire-early-website-list/.

A few thoughts:

- Your pension contributions look very low. £800 per month is only 6% of your £200k salary. You haven't mentioned employer contributions, but on the face of it that's not anywhere near enough to continue your current standard of living in retirement, especially if you want to retire before your late sixties.

- You should consider drastically increasing your pension contributions. This is a high priority for people in your tax bracket. Remember that for each £1 you put into your pension, you will get 45% tax relief as an additional rate tax payer. What other form of investment will give you an instant risk free 45% return?

- Buy-to-let is not worth considering until you have at least maximised your pension contributions and used up your £20k annual stocks & shares ISA allowance. Even after that, I'd suggest stocks & shares. BTL is just far too tax inefficient, especially for an additional rate tax payer.

- After you've increased your pension and filled up your S&S ISA, consider investing the rest into stocks & shares. It's usually best to do this through a diversified multi-asset fund, such as a Vanguard fund or HSBC All Share.

steampowered

DireEmblem said:

2).  BTL - you can outsource the running of this to a company, and you only need to put down a 25% deposit for a BTL mortgage.  A 1 bed flat in say Edinburgh can be had for 150k, which should get you £700 in rent or 5.6% return.  Say up to £100 a month off that would pay a management company to run it in your behalf, and £300 a month on the mortgage so you gain an extra £200-300 on that really.  

Your figures then need to take account of the fact that the Op is a higher rate tax payer, so will be paying 45% income tax on the rent.

Also worth mentioning that the Op would be paying £4.5k in additional rate stamp duty when he buys the property.

After you've taken that all into account, the return from that BTL property isn't great. Especially when compared to the 7-8% per year average return that stock market investments have historically generated.

Albermarle

d_barratt said:

dunstonh said:

Have initially put the majority of my focus/research on property and the idea of building a BTL portfolio, but i'd be interested to hear people's thoughts on better/other options to meet my goals.

That isnt consistent with  either of your "challenges".

Thanks for your message. You've pointed something out without really offering any advice on what could be a better option. As an IFA, what would you suggest to a client in my circumstances?

If you want personal professional advice , you will not get it on a consumer internet forum, you will have to pay for it ( and you can easily afford it ) 

Sailtheworld

I'd avoid BTL. Completely at odds with the desire for a passive investment and paying less tax.

Not sure what the pension situation is with upwards of £200k earnings - isn't there a taper?

Either way I'd make hay while the sun shines and max out, as much as possible, pensions and ISAs for myself & partner.

AnotherJoe

OP at your level of earnings there are Limits  issues with how much you can put in a pension, you need financial advice and should get that now. 

I woudl steer well clear of property, even with an agent it's not really hands off and asa high rate taxpayer the odds are seriously against you 

csgohan4

as above your pension contributions are low. Definitely get an IFA to minimize your tax exposure either through pensions for example, maybe salary sacrifice
if your branching into investment portfolio, below is a good read, will take you a while but worth it
https://monevator.com/

Passive investing probably is something for you

MEM62

dunstonh said:

Have initially put the majority of my focus/research on property and the idea of building a BTL portfolio, but i'd be interested to hear people's thoughts on better/other options to meet my goals.

That isnt consistent with  either of your "challenges".

d_barratt said:

dunstonh said:

Have initially put the majority of my focus/research on property and the idea of building a BTL portfolio, but i'd be interested to hear people's thoughts on better/other options to meet my goals.

That isnt consistent with  either of your "challenges".

Thanks for your message. You've pointed something out without really offering any advice on what could be a better option. As an IFA, what would you suggest to a client in my circumstances?

You state that you do not want to spend a lot of time working on your investments yet put up the idea of being a landlord.  Apart from the fact that BTLs are not, by any definition, tax efficient, being a landlord places obligations on you and you will need to spend time running your business.  This is not compatible with your stated challenges.    
An IFA might also suggest that your current pension contributions are woefully too low.  A pension is a very efficient tax wrapper and should be a far bigger part of your planning.  My monthly pension contributions are double yours and I have less than a third of your income.    

Sorcerer2018

Diplodicus said:

My advice: 
Live the best years of your life -at least 20 more- before thinking about money consumes you.  
You are well set.

So what you saying is forget about money until he is about 48 ish, and then worry about, great advice. .. not.