Property buying strategy. What would you do?

Idpullthecurtain

I would love to hear peoples thoughts on this one.

Which strategy would be the best investment in your opinion regarding property investment that would be rented out.

a) Use saved capital only to buy a cheaper investment property for cash only, without borrowing.

b)  Borrow as much as possible on the saved capital, and use that to buy more expensive property 4x cost of option a) but using borrowed money.  

It comes down maximizing borrowing potential for bigger investment?  Or do it without borrowing?

TIA

RHemmings

Personally I would use cash. Partially because it's no longer possible to claim back as much mortgage interest as tax relief as it was before. And because there's less risk - e.g. if interest rates go up again. 

If you are prepared to bet your life on house prices going up significantly, then a leveraged investment will give you a bigger return. However, I wouldn't be prepared to do that. 

You should read up extensively on being a landlord. E.g. join the NRLA and read every one of their resources: https://www.nrla.org.uk/resources/introduction

You should check whether there are better investments. 

Idpullthecurtain

RHemmings said:

Personally I would use cash. Partially because it's no longer possible to claim back as much mortgage interest as tax relief as it was before. And because there's less risk - e.g. if interest rates go up again. 

If you are prepared to bet your life on house prices going up significantly, then a leveraged investment will give you a bigger return. However, I wouldn't be prepared to do that. 

You should read up extensively on being a landlord. E.g. join the NRLA and read every one of their resources: https://www.nrla.org.uk/resources/introduction

You should check whether there are better investments. 

Thanks.  House prices always go up over the long term though?

I know the Interest rates are a concern.

Surely rental income would always more than offset the borrowing costs.

RHemmings

Idpullthecurtain said:

RHemmings said:

Personally I would use cash. Partially because it's no longer possible to claim back as much mortgage interest as tax relief as it was before. And because there's less risk - e.g. if interest rates go up again. 

If you are prepared to bet your life on house prices going up significantly, then a leveraged investment will give you a bigger return. However, I wouldn't be prepared to do that. 

You should read up extensively on being a landlord. E.g. join the NRLA and read every one of their resources: https://www.nrla.org.uk/resources/introduction

You should check whether there are better investments. 

Thanks.  House prices always go up over the long term though?

I know the Interest rates are a concern.

Surely rental income would always more than offset the borrowing costs.

You need to think about whether house prices will beat inflation or not. Nominal versus real house prices. 

Rental income may offset borrowing costs, but that doesn't mean that housing is necessarily a good investment. And, if you have a long period with no rent, e.g. if you have to evict a tenant, then you would be paying the mortgage with no income from rent. 

There are many costs involved, depending on what sort of property. E.g. if you own a flat in a building you may become liable for major repairs such as your share of the costs of a new roof. Etc. 

MEM62

Idpullthecurtain said:

RHemmings said:

Personally I would use cash. Partially because it's no longer possible to claim back as much mortgage interest as tax relief as it was before. And because there's less risk - e.g. if interest rates go up again. 

If you are prepared to bet your life on house prices going up significantly, then a leveraged investment will give you a bigger return. However, I wouldn't be prepared to do that. 

You should read up extensively on being a landlord. E.g. join the NRLA and read every one of their resources: https://www.nrla.org.uk/resources/introduction

You should check whether there are better investments. 

Surely rental income would always more than offset the borrowing costs.

That statement suggest that little research has been done.  First time landlord?  Have you properly looked into this -  your obligations and costs?  Both are often under-estimated.     

Elliott.T123

Have you looked into other investments? For the majority of people a combination of return and reduced stress and time other investments more often than not are better options that property.

Idpullthecurtain

MEM62 said:

Idpullthecurtain said:

RHemmings said:

Personally I would use cash. Partially because it's no longer possible to claim back as much mortgage interest as tax relief as it was before. And because there's less risk - e.g. if interest rates go up again. 

If you are prepared to bet your life on house prices going up significantly, then a leveraged investment will give you a bigger return. However, I wouldn't be prepared to do that. 

You should read up extensively on being a landlord. E.g. join the NRLA and read every one of their resources: https://www.nrla.org.uk/resources/introduction

You should check whether there are better investments. 

Surely rental income would always more than offset the borrowing costs.

That statement suggest that little research has been done.  First time landlord?  Have you properly looked into this -  your obligations and costs?  Both are often under-estimated.     

I have done lots of research over the years.  But I accept that I have never done this before, and I might underestimate.

Idpullthecurtain

Elliott.T123 said:

Have you looked into other investments? For the majority of people a combination of return and reduced stress and time other investments more often than not are better options that property.

Yeah Ive been considering for a long time.  Property seems to be the most appealing to me, for returns.  No other investments come close: Potential returns v risks?

MEM62

Idpullthecurtain said:

Elliott.T123 said:

Have you looked into other investments? For the majority of people a combination of return and reduced stress and time other investments more often than not are better options that property.

Yeah Ive been considering for a long time.  Property seems to be the most appealing to me, for returns.  No other investments come close: Potential returns v risks?

It is high risk. Void periods, repairs, bad tenants and onerous legislation being just some of the risks.  In addition, you, as the landlord, cannot end a tenancy. That can only be done by your tenant or a court. (Time consuming and expensive)  And all of that comes before you take into consideration that, as an investment, it is not the least bit tax efficient. 

It is far from be the best balance of risk / return.      

babyblade41

My advice... stay away from investing in rental property. now , far better investments out there .

Ex landlord of a large portfolio and still have one but tenant is a long term tenant and it is their home where they look after, update and actually improve the property and could never evict them from their home unless rent is not payed, but after quite a number of years have never been even one day late .

I even look after their cats when they go on holiday !!!

Idpullthecurtain

MEM62 said:

Idpullthecurtain said:

Elliott.T123 said:

Have you looked into other investments? For the majority of people a combination of return and reduced stress and time other investments more often than not are better options that property.

Yeah Ive been considering for a long time.  Property seems to be the most appealing to me, for returns.  No other investments come close: Potential returns v risks?

It is high risk. Void periods, repairs, bad tenants and onerous legislation being just some of the risks.  In addition, you, as the landlord, cannot end a tenancy. That can only be done by your tenant or a court. (Time consuming and expensive)  And all of that comes before you take into consideration that, as an investment, it is not the least bit tax efficient. 

It is far from be the best balance of risk / return.      

Good to hear your thoughts.  Thanks.  These are considerations that I have been juggling.

Alternatives like moderate risk stocks and shares seem to be less rewarding?  What would you do in that position?