Is there money to be made in renting?

steampowered

Don't think of the decision as "should I become a landlord or not".

Think of the decision as follows: "I have £xxx which I want to invest in my future. What is the best way of getting a return on that money?"

If you compare BTL with having cash sitting in a bank account, then BTL will win.

If you compare BTL with other normal investments, then other investments are better in most situations. It is easier than ever for people to invest in the stock markets through stock market tracker funds. For example, compare it to a stocks & shares ISA:

• Returns on stocks & shares have historically are higher than returns on property.
• Returns on a stocks & shares ISA are completely tax free. BTL has income tax on the rent, higher rate SDLT on the purchase and capital gains tax on sale.
• A stocks & shares ISA can be sold in part or in full, at any point. BTL can only be realised in full, when you find a buyer.
• Stocks & shares ISAs have minimal costs (e.g. the Vanguard funds charge a 0.2% annual fee; plus a small fee for your ISA platform). BTL has letting agent fees, void periods, maintenance costs, wear and tear costs, ground rent/service charge for flats, conveyancing fees, mortgage product fees and so on.
• Long term stocks & shares investments in diversified investment funds are low risk - since investing across the global stock markets spreads your investments across thousands of different companies. BTL can be high risk if you end up with a tenant who won't leave and won't pay.

Pensions have most of those advantages, plus the advantage of tax relief. Especially valuable if you are a higher rate tax payer.

The only advantage which BTL has over stocks & shares or a pension, is that you can easily leverage your investment with debt (i.e. you buy the property using the lender's money). That increases your risk. That can work for you; it can also work against you.

deannagone

Covid tax?  Have I missed that one?

andy444

I have two friends who are landlords and although they make a bit of money from it, they don't get rich from doing it.

It does involve a fair amount of work yourself in corresponding with your tenants and potentially fixing things, or else employ a maintenance company to act on your behalf which generally aren't cheap. I wouldn't say renting out properties is a guaranteed money printer.

Norman_Castle

[Deleted User] said:

It's also immoral as someone else could buy your house and pay much less on a mortgage than they will pay you in rent. There is a shortage of housing to live in and letting property makes it worse.

That assumes "someone else" could finance the mortgage and it remains cheaper than rent. It also ignores ongoing maintenance costs.

How does letting properties reduce the number of available homes?

andy444

Norman_Castle said:

[Deleted User] said:

It's also immoral as someone else could buy your house and pay much less on a mortgage than they will pay you in rent. There is a shortage of housing to live in and letting property makes it worse.

That assumes "someone else" could finance the mortgage and it remains cheaper than rent. It also ignores ongoing maintenance costs.

How does letting properties reduce the number of available homes?

At the end of the day you're making money from other people's hard work. I can understand why people do it but it's not the most moral pursuit.

canaldumidi

deannagone said:

Covid tax?  Have I missed that one?

NHS and Social Care Covid Relief Act 2020. Section 6 applies to 2nd properties.

Getting_greyer

andy444 said:

Norman_Castle said:

[Deleted User] said:

It's also immoral as someone else could buy your house and pay much less on a mortgage than they will pay you in rent. There is a shortage of housing to live in and letting property makes it worse.

That assumes "someone else" could finance the mortgage and it remains cheaper than rent. It also ignores ongoing maintenance costs.

How does letting properties reduce the number of available homes?

At the end of the day you're making money from other people's hard work. I can understand why people do it but it's not the most moral pursuit.

This is what most employers do. 

Stubod

..paying off my own mortgage, having a pension in place, then some savings, and then some investments...would be my priority list.

...assuming those are all done, would I then take out another loan/mortgage and consider a BTL option......probably not.

lookstraightahead

[Deleted User] said:

You can make money, but you take on a lot of responsibility owning someone else's home.

It's also immoral as someone else could buy your house and pay much less on a mortgage than they will pay you in rent. There is a shortage of housing to live in and letting property makes it worse.

Isn't it immoral to 'own' a house at all then? Whose land is it anyway?

Im very thankful to my landlord when I needed / wanted to rent. 

[Deleted User]

Norman_Castle said:

[Deleted User] said:

It's also immoral as someone else could buy your house and pay much less on a mortgage than they will pay you in rent. There is a shortage of housing to live in and letting property makes it worse.

That assumes "someone else" could finance the mortgage and it remains cheaper than rent. It also ignores ongoing maintenance costs.

How does letting properties reduce the number of available homes?

Do you know what the biggest reason people can't get a mortgage is? It's because they can't save a deposit due to paying 2x the monthly mortgage payment in rent.