New to investment - need some advice on buy-to-let

whatstheplan

I own 3 small BTL flats (mortgaged) and tbh if I could turn the proverbial clock back, I'd have invested my 3 x deposits into funds within a S&S ISA rather than buying property.  Although nothing's guaranteed, my returns between then, now and for the next 10-15 years would almost certainly have been higher.  Having said that I'm in Scotland and not a major city at that, so buying a flat in  central London might be a different prospect.  You do have to consider void periods though, the potential for tenants who stop paying rent and then know how to play the system to remain in your property for months thereafter.  Also, the risk of a tenant that essentially trashes the place leaving you with expensive repair/redecoration costs.  These are all more extreme things that hopefully wouldn't happen to you, however if they do ...

So yeah, on balance, if I had £110k now, I'd look at investments other than property. 

Thrugelmir

Roselondon_2 said:

Thrugelmir said:

Have you drawn up a financial plan?  BTL property is a little more complex than simply collecting rent, paying the mortgage and pocketing the difference. 

We are aware of the combination of costs including mortgage repayment, agent fees, maintenance cost and tax plus problematic tenants if unlucky. Anything else to factor in?

When property is void. You'll pick up all the standing charges yourselves. With a flat the term of the remaining lease will influence the resale value.  Flats will also have service charges to cover general building expenditure and upkeep. 

NorthernJoe

We really didn't think buying property is a high risk... We don't intend to sell. So only expect the property value increase as a general trend. Maybe we need to factor in the high risk of non-payment from tenant occassionally?

Haven't check the combined pension status yet! But really grateful you pointed all these out. I just looked up how much a retiree  needs to spend in a year. Shocking!

You're putting a significant proportion of your money into a single, essentially illiquid investment. I'd suggest you browse this forum further before taking the plunge - a key focus of investing should be diversification. 

Given the punitive tax rules around BTL, you really are depending on capital growth but you have to remember CGT on any ultimate sale.

While it's hard to see it now, property prices do fall - I live in N.Ireland where many areas are still in negative equity following the 2008 crash. 

jimjames

NorthernJoe said:

We really didn't think buying property is a high risk... We don't intend to sell. So only expect the property value increase as a general trend. Maybe we need to factor in the high risk of non-payment from tenant occassionally?

Haven't check the combined pension status yet! But really grateful you pointed all these out. I just looked up how much a retiree  needs to spend in a year. Shocking!

While it's hard to see it now, property prices do fall - I live in N.Ireland where many areas are still in negative equity following the 2008 crash. 

A lot of people have forgotten because it was a long time ago but property prices are not guaranteed to always go up and can crash like you say. We bought a house in 1989. When we sold in 1998 it was still 30% lower than the amount we'd paid for it and despite massive efforts to overpay the mortgage before selling we still had a shortfall to pay. The price now is over double what we'd paid for it but it didn't hit that level until the early 2000s. The buoyant market has blinded many people about property.

There are quite a few potential factors in play, who know if they will impact or not. Just a few - Covid19, massive government support, Brexit, immigration, borrowing, currency & debt. Any of these could trigger something unexpected.

@Rose - check out the tax situation for BTL. It's not as rosy as you think. What happens if interest rates rise, you have no profit but are still taxed on the income not the profit?

Nebulous2

NorthernJoe said:

We really didn't think buying property is a high risk... We don't intend to sell. So only expect the property value increase as a general trend. Maybe we need to factor in the high risk of non-payment from tenant occassionally?

Haven't check the combined pension status yet! But really grateful you pointed all these out. I just looked up how much a retiree  needs to spend in a year. Shocking!

You're putting a significant proportion of your money into a single, essentially illiquid investment. I'd suggest you browse this forum further before taking the plunge - a key focus of investing should be diversification. 

Given the punitive tax rules around BTL, you really are depending on capital growth but you have to remember CGT on any ultimate sale.

While it's hard to see it now, property prices do fall - I live in N.Ireland where many areas are still in negative equity following the 2008 crash. 

I was brought up in a fishing village which was very short of property. Immediately after the second world war people were paying £2-3k for a house. They were so expensive that families were sharing the cost and buying a house between two families.  A council house estate was then built further up the hill, and a lot of people moved into it. I remember houses in the 70s selling for £600. 

Roselondon_2

Genuinely appreciate everyone for the input. Thank you for putting me into a more realistic perspective.  

I'm off to research ISA investment from here...

Thanks to all.

ChilliBob

I'd not go near it. My partner is in the process of selling her flat, which she btl for 5 years. Some points:

* Bad tenants may cause you lots of stress, expense and time - do you want that with a family?

* Things are getting trickier for legitimate landlords, being forced to get licences etc which is an admin pain

* if you need to sell the asset to use funds for something else it can be *very* illiquid, especially the case in the current climate with the cladding fiasco.

So yeah, could play out really nicely, get a good income, no trouble in the property, sits and increases in value, lovely.. Or it could be a right pain!

If you are going to be landlords do it somewhere close by too to avoid having to travel often!