70k to invest for income - best options

Thrugelmir

Technoholic said:

I would have a property worth 280k with no mortgage. 

That's pure assumption. The net return on letting the profit after accounting for all expenses, interest costs and income tax has to generate sufficient cash to repay the capital balance on the mortgage. Only way to check this is to crunch the numbers fully. With a realistic scenario. 

Technoholic

Thrugelmir said:

Technoholic said:

I would have a property worth 280k with no mortgage. 

That's pure assumption. The net return on letting the profit after accounting for all expenses, interest costs and income tax has to generate sufficient cash to repay the capital balance on the mortgage. Only way to check this is to crunch the numbers fully. With a realistic scenario. 

yes of course, I have been doing that in the background, it's looking like it's much more tax efficient for my circumstances to buy something through an SPV if I was going down the property route, I have a call with my accountant today for details round my existing Ltd so I will be having a quick chat about this too, but I will definitely run all the numbers properly before making any decisions of course

MEM62

Technoholic said:

I have considered a BTL property, I could use this as around 30% deposit for the average property around here with reasonable yield and potential to let to commuters, plus I do quite like the idea of starting to own a couple of properties down the line as income generators plus capital for the retirement fund. But I'm aware that it's not the easy option it might have been before, and will take work for not a huge gain. 

BTL's are not tax efficient, carry risk and require a lot work.  In effect you are buying a business and you have to run it.  There are better ways of using your money.     

Technoholic

Yeah I have to say it's looking like using the money in investments is a better option, especially if I want to provide a small amount of income from it. 

What I'm seeing is that by targeting a high income portfolio, I should be aiming for around 8% per year in returns to either take as income or reinvest for growth, am I looking at that right?

tebbins

Say you buy £280k of property, with a 75% LTV BTL repayment mortgage and somehow manage to average 3% interest over the 25 year life, you'll repay just about £1,000 a month.

You'll also pay 3% stamp duty, so that's £8,400 gone + at least £1,000 solicitor fees + at least £1,000 maybe 5 figures doing it up + a mortgage fee etc.

Say you get a gross rent yield of 5%, that's £14,000pa gross rent, straight away £12,000 of that is gone on the mortgage, the rest probably taken up with agency fees, repairs, maintenance, void periods, evictions, health & safety compliance etc 

You end up with little to no income, possibly having to pay out of your other income sources to keep it going and potentially a lot of time running it.

I think the mistake you're making is just assuming you'll come out of the BTL with a house + rent along the way - not so.

8% is an *extremely* high, almost certainly unsustainable rate of withdrawal that runs a real risk of capital depletion, more so if you want your income/withdrawals to keep up with inflation.
Very few stocks have yields that high, see dividenddata.co.uk and AJ Bell Dividend Dashboard. BATS is the only company with an 8% yield I would say is sustainable in real terms, but that's just my opinion.

Technoholic

tebbins said:

I think the mistake you're making is just assuming you'll come out of the BTL with a house + rent along the way - not so.

Yes you're probably right however if I expected no income then surely it's still a way to end up with capital at retirement that can be used then to supplement other retirement income? But even if that is the case, it seems I could achieve that similar goal by not worrying about a BTL. 

8% might be optimistic I know, I was just picking up on what someone else had said. But either way it's looking like a better bet than BTL. Plus I can always go to BTL if I want to in the future. The idea of dealing with tenants and and all the associated issues that brings actually excites me and I've pretty much built my current house internally from the ground up myself, as well as maintaining another BTL property for family so I guess that's why I actually feel more comfortable with property even if it's not the best choice

Thrugelmir

Technoholic said:

tebbins said:

I think the mistake you're making is just assuming you'll come out of the BTL with a house + rent along the way - not so.

The idea of dealing with tenants and and all the associated issues that brings actually excites me 

You are likely to get plenty of excitement. The world is full of people who aren't what they first seem. 

csgohan4

Thrugelmir said:

Technoholic said:

tebbins said:

I think the mistake you're making is just assuming you'll come out of the BTL with a house + rent along the way - not so.

The idea of dealing with tenants and and all the associated issues that brings actually excites me 

You are likely to get plenty of excitement. The world is full of people who aren't what they first seem. 

I doubt one would get excited by rental arrears in the thousands and a trashed place. 

If your really into property, you can invest in REIT if that really is your strategy

Thrugelmir

csgohan4 said:

Thrugelmir said:

Technoholic said:

tebbins said:

I think the mistake you're making is just assuming you'll come out of the BTL with a house + rent along the way - not so.

The idea of dealing with tenants and and all the associated issues that brings actually excites me 

You are likely to get plenty of excitement. The world is full of people who aren't what they first seem. 

I doubt one would get excited by rental arrears in the thousands and a trashed place. 

Then there's the legal process of eviction to be gone through. 

Alistair31

For every scummy tenant there are probably 99 decent ones. Obviously the horror stories will attract all the attention.

That said, I no longer have a rental and wouldn’t get involved now, but for different reasons.

Ultimately and no matter where you invest, if you want any chance of a decent return/income you are going to have to roll the dice.

Good luck!