Regrets - London property VS shares

dw4518

I regret that I've had a large chunk of money in London property instead of the stock market, for the last couple of years.

I should have sold after Brexit but didn't know what to do and hung on through 2017/18 and then the house depreciated in 2019, then covid hit. My rental yield is only 4% after tax and I think I would have made far more in the stock market around 8% at least - in hindsight!

I'm planning to sell the house this year and put the money in shares. But I wish I'd sold in 2017, or even in 2019 at the depreciated values.

Anyone got a similar experience or agree/disagree that Shares > London property? My only positive is that my tenants are lovely and have been there for years and the house has been easy to manage. I am an accidental landlord after moving in with my husband so never wanted to rent property in the first place.

Shaztastic3000

What’s the point in dwelling on this?

dw4518

Shaztastic3000 said:

What’s the point in dwelling on this?

I know it's pointless but just kicking myself for being passive with my investments, as I could've had higher returns if I'd let go of the house sooner. Hoping someone would disagree with me and set out some arguments for why the house is a better investment. Just to make me feel less stupid haha. 

AdrianC

dw4518 said:

Hoping someone would disagree with me and set out some arguments for why the house is a better investment.

Nobody can agree or disagree with historical result. They are what they are.

The question is what'll happen going forward. If we knew that, we'd be rich.

steve866

It’s easy to predict the winner of the 3.40 at Ascot at 4.00. 

saajan_12

There's more than just the gross rental yield vs stocks yield - the house may / may not have been better in the end, but just saying make sure you compare the right figures

1. property has rental income plus capital gains, vs dividends and gains on stocks
2. expenses for each (repairs, agents, gas certs, stamp duty etc vs broker fees on stocks)
3. tax (rent @ income tax, property gains @ 18/28%, stock gains @ 10% / 20%)
4. leverage - if you had a mortgage, you could get the rent / capital gain on the full value while only investing part of the cash, though also deduct interest cost. could you get a margin loan on a stocks & shares portfolio? 

eg £50k to invest in stocks & shares with no leverage, which yields 8% -> £4k gain.
     £50k to invest as deposit / 50k mortgage costing 1% interest (=£500). You purchase a £100k house which yields 4% -> £3.5k gain after interest
Note this is simplistic as it ignores tax / fees but shows that the leverage may make one investment have a better or similar overall gain on the amount invested even if the headline yield is much worse. 

Then there's the whole unfortunate lack of a crystal ball.. so even if one was clearly better historically, you couldn't have 100% known that beforehand, and doesn't mean the same thing will be better in the future. 

Salemicus

Some things to consider:
* It's easy to judge with the benefit of hindsight. 
* It's easy to pick the reference class in retrospect. Why is it just "shares" rather than 70:30 (say) stocks:bonds? Why not compare to Bitcoin?
* Much easier to leverage your property than your shares. No-one will lend you hundreds of thousands to buy Vanguard at sub-2% interest! 75% LTV makes the rental yield a lot more attractive. 
* Most property owners don't pay CGT, or income tax on the "yield," so it's a better investment for them. The government has deliberately placed landlords at a significant tax disadvantage, in order to encourage owner-occupiers, and you are competing against them when you buy.

dw4518

Thanks saajan_12, sadly I'm not leveraged as paid the mortgage off in 2018, but agree with everyone's point about not having a crystal ball!

I feel like I know that shares is going to outperform this particular house (given it's already hit the capital appreciation ceiling) hence I'm planning to sell it. I kind of had that feeling in 2018 onwards but sat on my thumb not wanting to make a decision. 

dw4518

Thanks Salemicus, hehe I do use the "why don't I compare to bitcoin" argument to make myself feel better. But I never would have bought bitcoin, whereas I had thoughts about selling the house.

london21

dw4518 said:

I regret that I've had a large chunk of money in London property instead of the stock market, for the last couple of years.

I should have sold after Brexit but didn't know what to do and hung on through 2017/18 and then the house depreciated in 2019, then covid hit. My rental yield is only 4% after tax and I think I would have made far more in the stock market around 8% at least - in hindsight!

I'm planning to sell the house this year and put the money in shares. But I wish I'd sold in 2017, or even in 2019 at the depreciated values.

Anyone got a similar experience or agree/disagree that Shares > London property? My only positive is that my tenants are lovely and have been there for years and the house has been easy to manage. I am an accidental landlord after moving in with my husband so never wanted to rent property in the first place.

It is easy to look back and say should have done this and that. Do bear in mind that a lot of people who invest in shares lose money by buying high and selling low.

Tracker funds are possibly more stable and long-term yield stable returns.

I personally prefer property/funds to shares but depends on your strategy, age, motivation etc.

In the past i had a sharesave plan which yielded great returns but did not sell and now dropped in value so all assets do fluctuate.

[Deleted User]

With the benefit of 20/20 hindsight I should have kept my property in the Central Belt and let it out instead of selling it when I moved to the North East. C’est la vie.