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  • FIRST POST
    • bluefukurou
    • By bluefukurou 2nd Aug 18, 3:29 PM
    • 75Posts
    • 18Thanks
    bluefukurou
    Should I invest in index funds or stick to my BTL plan?
    • #1
    • 2nd Aug 18, 3:29 PM
    Should I invest in index funds or stick to my BTL plan? 2nd Aug 18 at 3:29 PM
    Shares / funds etc will not call you up at 3am when there's a leak in the roof, a broken sink, the heating doesn't work.
    Shares will not have a void period.
    Shares will not incur a 20% management fee (at elast, once you add on the more than usually expensive costs to have anything fixed if you are absent and leave it to the agent to arrage a plumber, electrician, roofer etc)
    Unlike property, shares can be sold fractionally to minimise or eliminate CGT.
    Shares allow you to diverisfy, With a property you are 100% in the (say) Sheffield / Student / Terraced house market. In Shares you can be in the global economy.
    Shares will not trash the entire investment, do a moonlight flit nor need legal action to evict non rent paying tenants.
    Originally posted by AnotherJoe
    Hi, Iím a UK expat looking to invest my savings, currently approaching £90k; I have no credit card debts or car loans, etc, so Iím ready to do something instead of continuing to get less than 1% interest from my UK bank account.

    I was planning to buy a 2/3 bed terraced house up north in cash for around £100k and then let it out for another income stream (I have colleagues that have done just that and now own two or three). However, Iím increasingly hearing that shares are less hassle than investing in property (see the quote above), and I understand the long term capital growth can be very good.

    If I lived in the UK, I would probably open a Vanguard account and put some of my money in index funds. However, due to my non-resident status, Iím unable to do that.

    So along with a thousand others, my current questions are:

    Whatís the best way for me (UK expat in Middle East) to safely invest in index funds?

    Is there a good alternative to Vanguard that doesnít charge exorbitant fees?

    Would Internaxx be a good choice?
    Iíve had a look at their website, but I donít fully understand their fees. They mention an account maintenance charge of Ä45 every quarter if you donít have any trade activity, and Ä14.95 + 0.1% per trade. Is Ä180 per year considered typical?

    Any advice much appreciated.
Page 2
    • Alexland
    • By Alexland 5th Aug 18, 6:47 PM
    • 3,816 Posts
    • 3,125 Thanks
    Alexland
    I!!!8217;d never heard of ICO and GDPR. Is that something all landlords need to do? A colleague has three properties that he lets and had no idea what I was talking about.
    Originally posted by bluefukurou
    https://www.rla.org.uk/landlord/guides/data-protection-legislation-for-landlords.shtml

    Alex.
    • jsinc
    • By jsinc 6th Aug 18, 1:22 AM
    • 113 Posts
    • 48 Thanks
    jsinc
    Some interesting points. BTL is certainly not what it was a decade ago, and the government does seem to be making serious efforts to stop people becoming amateur landlords. Add in the possibility of a Corbyn government, plus a no deal Brexit and itís anybodyís guess what things will be like in five years. I donít have a crystal ball and will keep my options open. Events may well influence what I end up doing, especially if house prices are affected by Brexit.

    I donít have other property, so any property I buy to let will not be part of a huge business. I donít feel bad about the idea of a young family paying me money to have a roof over their head. Itís just the way things are and I would have already paid for the house with own hard earned cash. Iíd still sleep well knowing if anything needs doing to the house, Iíll get it done and not quibble over petty things like the rogues you read about on these forums. Lifeís too short.
    Originally posted by bluefukurou
    Landlords are now too easy a target imo. My politics depends on the subject matter, but if a Conservative government increasingly considers landlords fair game that seems to be approaching game over. What meaningful electoral alternative is there for a more favourable perspective? None.

    e.g. Floating the idea of another hike in stamp duty surcharge:
    https://www.telegraph.co.uk/news/2018/08/04/hammond-urged-not-launch-tax-attack-second-home-owners-new-buy/

    I'm therefore less keen on the trade off between a low yield today vs potential future capital gains. Particularly when this government has already differentiated between CGT rates on additional property (28%/18%) vs other (20%/10%), in addition to putting off new-comers.

    But if not a second home and the sums still work for you then maybe fair enough and good luck. You're right that the numbers made more sense years ago for the effort, and personal situations/outlooks differ.

    Alexland - thanks I didn't know about that.
    • dean350
    • By dean350 6th Aug 18, 2:41 AM
    • 10 Posts
    • 6 Thanks
    dean350
    I work overseas and have been using Internaxx for some time. No problems to date. I think TD Waterhouse are another broker who accept non-residents.

    Shares are certainly less hassle and can be sold instantly and
    anytime at the press of a button. Unlike a house just part of the holding can be sold off if required. Also, as a non-resident be aware of the 3% ABSD and the CGT that becomes liable on sale of a property. UK Govt are also consulting about removing the tax free allowance for non-residents.

    As an expat you may be living somewhere with no CGT on share ownership and that can give you a big advantage whilst overseas.

    Shareholders must be in it for the long term though and be psychologically prepared to ride out drops along the way. The most successful investors are often those that have the stomach to buy on the dips. We had a dip from mid 2015 to mid 2016 and then another in February this year. Those that added to their holdings then will continue to do well.
    • bluefukurou
    • By bluefukurou 7th Aug 18, 11:11 AM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    BTL represents diversification in our portfolio. We have 5 properties !!!8211; 3 long term rentals and 2 short term rentals !!!8211; the last property was purchased more than 15 years ago. The running costs are not high !!!8211; agent fees 4% for 2 properties, insurance, BGas contract for boiler and gas safety cert. Plus we assign 10% a year for repairs etc., We pay an accountant to manage the books for my limited co, personal tax for me and OH and BTL!!!8217;s = £1k a year in total. BTL is just like running a biz !!!8211; cash flow, legislation especially if you have short term/holiday lets. We like the diversification it brings to the portfolio !!!8211; OH has a DB pension and I have SIPP, if the markets are down we could live on the rents. I would say the income is fine £115k before tax but we did purchase some years ago and it takes considerable work. I don!!!8217;t think the numbers would add up If we purchased in the last few years, which may explain why a number of newer landlords (less than 5 years) are selling up.
    Originally posted by ianthy
    I agree if the numbers add up and itís suits your circumstances, BTL is still an option. What works for one, may not be at all suitable for somebody else.
    • bluefukurou
    • By bluefukurou 7th Aug 18, 11:12 AM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    Landlords are now too easy a target imo. My politics depends on the subject matter, but if a Conservative government increasingly considers landlords fair game that seems to be approaching game over. What meaningful electoral alternative is there for a more favourable perspective? None.

    e.g. Floating the idea of another hike in stamp duty surcharge:
    https://www.telegraph.co.uk/news/2018/08/04/hammond-urged-not-launch-tax-attack-second-home-owners-new-buy/

    I'm therefore less keen on the trade off between a low yield today vs potential future capital gains. Particularly when this government has already differentiated between CGT rates on additional property (28%/18%) vs other (20%/10%), in addition to putting off new-comers.

    But if not a second home and the sums still work for you then maybe fair enough and good luck. You're right that the numbers made more sense years ago for the effort, and personal situations/outlooks differ.

    Alexland - thanks I didn't know about that.
    Originally posted by jsinc
    It seems to me odd that with constant news of a housing shortage and many people being forced to rent indefinitely, the government is making it harder for people who simply wish to invest in a property and bring some extra income in. Iím all for giving tenants better standards and making it easier for them to rent, but to come down so hard on smalltime investors who have worked hard and saved seems unfair. Surely thereís a way to give tenants more affordable options and also make it worthwhile for small time investors to provide for the rental market.
    • bluefukurou
    • By bluefukurou 7th Aug 18, 11:17 AM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    I work overseas and have been using Internaxx for some time. No problems to date. I think TD Waterhouse are another broker who accept non-residents.

    Shares are certainly less hassle and can be sold instantly and
    anytime at the press of a button. Unlike a house just part of the holding can be sold off if required. Also, as a non-resident be aware of the 3% ABSD and the CGT that becomes liable on sale of a property. UK Govt are also consulting about removing the tax free allowance for non-residents.

    As an expat you may be living somewhere with no CGT on share ownership and that can give you a big advantage whilst overseas.

    Shareholders must be in it for the long term though and be psychologically prepared to ride out drops along the way. The most successful investors are often those that have the stomach to buy on the dips. We had a dip from mid 2015 to mid 2016 and then another in February this year. Those that added to their holdings then will continue to do well.
    Originally posted by dean350
    Great to hear from someone who uses Internaxx. Maybe you can answer a couple of queries I have regarding charges. Iíve looked at their fees and commissions, but Iíve never used a trading platform and am not sure I understand correctly. I would like to invest in ETFs through Internaxx, but want to be sure I know how the following scenario would play out.

    Supposing I opened an account and immediately bought £10k of a particular ETF (UK or US) that had an ongoing charge of 0.25%, that would count as one trade and Iíd be charged Ä14.95 + 0.10% (Ä10), right? Then if I did no more trading for the rest of the year, I would only be charged Ä25 for the first quarter (because of the one trade), then Ä45 for the next three quarter because of inactivity. Is that right?

    On top of those maintenance charges, I would be charged the ongoing ETF fee of 0.25%, which is 0.25% of whatever the holding is currently worth, for as many years as I hold the ETF. Is that correct?
    • Thrugelmir
    • By Thrugelmir 7th Aug 18, 11:55 AM
    • 61,287 Posts
    • 54,529 Thanks
    Thrugelmir
    It seems to me odd that with constant news of a housing shortage and many people being forced to rent indefinitely, the government is making it harder for people who simply wish to invest in a property and bring some extra income in.
    Originally posted by bluefukurou
    How does more people investing in property help the property shortage. Increasing numbers of properties are now let by AirBnB on short rather than long term rental.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • jsinc
    • By jsinc 7th Aug 18, 12:44 PM
    • 113 Posts
    • 48 Thanks
    jsinc
    It seems to me odd that with constant news of a housing shortage and many people being forced to rent indefinitely, the government is making it harder for people who simply wish to invest in a property and bring some extra income in. Iím all for giving tenants better standards and making it easier for them to rent, but to come down so hard on smalltime investors who have worked hard and saved seems unfair. Surely thereís a way to give tenants more affordable options and also make it worthwhile for small time investors to provide for the rental market.
    Originally posted by bluefukurou
    I don't think there's a housing shortage, just a shortage of affordable owner-occupier houses to buy and social housing to rent. According to DCLG Table 102 3.07m new dwellings were built between 2000 and 2016. Over the same period the number of dwellings rented privately (bought by landlords) increased by 3.10m. i.e. In net stock terms landlords have bought every new property built since 2000.

    I therefore no longer find Government's policy reversal odd, and expect it to continue. Investors like me haven't/aren't buying because everyone wants to rent; increasing numbers are forced to rent because investors have bought up the stock, necessarily creating their own tenant demand and (subsidised) higher price demand. I'm fine with rental provision to and profit from people who want to rent, not so much otherwise.
    • bluefukurou
    • By bluefukurou 7th Aug 18, 2:18 PM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    How does more people investing in property help the property shortage. Increasing numbers of properties are now let by AirBnB on short rather than long term rental.
    Originally posted by Thrugelmir
    I don't think there's a housing shortage, just a shortage of affordable owner-occupier houses to buy and social housing to rent. According to DCLG Table 102 3.07m new dwellings were built between 2000 and 2016. Over the same period the number of dwellings rented privately (bought by landlords) increased by 3.10m. i.e. In net stock terms landlords have bought every new property built since 2000.

    I therefore no longer find Government's policy reversal odd, and expect it to continue. Investors like me haven't/aren't buying because everyone wants to rent; increasing numbers are forced to rent because investors have bought up the stock, necessarily creating their own tenant demand and (subsidised) higher price demand. I'm fine with rental provision to and profit from people who want to rent, not so much otherwise.
    Originally posted by jsinc
    I wasnít encouraging more people to invest in property because itís so great, but perhaps it came across like that. I was just trying to make the point that because there are many people that canít afford to get on the housing ladder for whatever reason (be it theyíre unable to save for a deposit, or prices are just too high), they need somewhere to rent, but somebody like myself, who just wants to buy a place and then let it to somebody who needs to rent, is finding there are more hurdles and possibly more to come.
    • jsinc
    • By jsinc 7th Aug 18, 2:55 PM
    • 113 Posts
    • 48 Thanks
    jsinc
    I wasnít encouraging more people to invest in property because itís so great, but perhaps it came across like that. I was just trying to make the point that because there are many people that canít afford to get on the housing ladder for whatever reason (be it theyíre unable to save for a deposit, or prices are just too high), they need somewhere to rent, but somebody like myself, who just wants to buy a place and then let it to somebody who needs to rent, is finding there are more hurdles and possibly more to come.
    Originally posted by bluefukurou
    You didn't come across like that and I didn't intend to come across as lecturing. I do now have issues with BTL, but was meant as more explanation on why doesn't appeal to me as an investment after having researched again.

    It's impossible to know what future Government policy will be, but they currently appear to have conflicting aims - greater homeownership + no price falls. I don't know if/how that gets resolved but, if we assume both conditions must be solved for, the only targetable housing cohort are landlords (private and social). If solving for both isn't possible then who knows, as that gets even further into social and fiscal/financial policy.
    • thickasabrick
    • By thickasabrick 7th Aug 18, 3:24 PM
    • 52 Posts
    • 40 Thanks
    thickasabrick
    Should I invest in index funds or stick to my BTL plan?
    J L Collins has an article on international investors, although it is specifically about Vanguard funds.

    Having had a quick look I don't see any Vanguard online presence for the Middle East. There might be some links in the comments if you delve deeper.

    Stocks ó Part XVII: What if you canít buy VTSAX? Or even Vanguard?

    http://jlcollinsnh.com/2013/05/02/stocks-part-xvii-what-if-you-cant-buy-vtsax-or-even-vanguard/

    Another article on the same blog talks about housing as an investment, although it is more aimed at a persons home rather than BTL.

    http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
    • haf63
    • By haf63 7th Aug 18, 3:48 PM
    • 208 Posts
    • 53 Thanks
    haf63
    My strategy is both share and BTL to get investment diversity.

    Landlords are definitely seen as 'the enemy' so its not surprising that fewer people are seeing this as a way forward versus shares etc.

    My view is that a combination of house prices, gig economy and mortgage restrictions means there are an ever increasing number of people who will never be able to buy a house so they will have to rent and this needs landlords. Govt strategy seems to be to drive out the 1-2 BTL's type landlords in favour of larger portfolio companies and this does seem to be happening.

    Interesting times and I am looking at switching from BTL to development as an alternative property strategy going forward
    • dean350
    • By dean350 7th Aug 18, 4:11 PM
    • 10 Posts
    • 6 Thanks
    dean350
    The 0.25% is something that the ETF charges you and is reflected in the quoted price of the ETF. On top of that there are platform fees to pay (Internaxx being one such platform) and I pay about 75e per year so your figure looks about right. Everytime you trade there will be a commission (10-14E depending on size of trade) and then you pay stamp duty if they are quoted on the LSE. Just be wary of synthetric ETF's which do not hold the securities they represent and look at physical ETF's only which do actually hold the stocks they represent.
    • Johnnyboy11
    • By Johnnyboy11 7th Aug 18, 4:32 PM
    • 48 Posts
    • 40 Thanks
    Johnnyboy11
    If you want exposure to the UK property market, why not buy shares in several of the housebuilders, or a fund comprising of similar? More liquid than BTL, which can be an advantage.


    Worth pointing out here that if you had a pension fund open when you left the UK, a UK expat can pay in £2,880 that tax year and each of the following 5 tax years and get a free £720 top-up each year from HMRC. Free money, got to be worth having
    • Bimbly
    • By Bimbly 7th Aug 18, 9:09 PM
    • 145 Posts
    • 128 Thanks
    Bimbly
    The fact that you may want to move back to the UK puts a different spin on this for me.

    I'd be inclined you look at buying a dwelling for this purpose alone. You will have hassles and costs and all that, but also the certainty that it gives you a basis should you come back. Take a look at political thoughts about guaranteeing tenants the right to stay for ages, as you want to sell when you return.

    You could then invest profit from rental income into a fund.

    Not saying you should do this, but it's something to think about.

    Of course, as a previous poster said, if you want to live in Oxford, it may not help you that much to have bought a house in Newcastle.
    • kidmugsy
    • By kidmugsy 7th Aug 18, 10:16 PM
    • 12,186 Posts
    • 8,628 Thanks
    kidmugsy
    but we did purchase some years ago and it takes considerable work. I don't think the numbers would add up If we purchased in the last few years, which may explain why a number of newer landlords (less than 5 years) are selling up.
    Originally posted by ianthy
    Hang on, you're advocating market timing. That's a capital crime in these parts.

    Or maybe it's only a capital crime for equities but perfectly OK for property.
    Free the dunston one next time too.
    • Luke86
    • By Luke86 8th Aug 18, 10:40 AM
    • 27 Posts
    • 8 Thanks
    Luke86
    I can see why BTL has become much less attractive for traditional BTL investors: stamp duty hikes, mortgage tax relief changes, tougher mortgage rules, etc.

    But surely a house that you could let for £600 per month, still brings in £600 per month? As an asset that brings in an income stream it still does its job. When you say it Ďused to be goodí, are you talking about, what Iíd call traditional BTL investors, ie people that could get a cheap BTL mortgage and then let the tenants effectively pay for the house over 20 years?
    Originally posted by bluefukurou
    My parents have around 7 or so and it's done them well overall. It's good long-term but if you're relying on that 1 property, I wouldn't do it. In 10 years they didn't have much hassle, until one decided not to pay. It took over 12 months to get them out, meanwhile they were out court fees, rent, and the house I just spend 5 months renovating as it was a wreck.

    Like I said across all their houses, they've had just 1 bad tenant over the space of a year. In the grand scheme of things it's a minor expense, but if that was your only property, the story might be a little different.

    You have very little rights as a landlord, which is an absolute joke.
    • bluefukurou
    • By bluefukurou 8th Aug 18, 12:01 PM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    It's impossible to know what future Government policy will be, but they currently appear to have conflicting aims - greater homeownership + no price falls. I don't know if/how that gets resolved but, if we assume both conditions must be solved for, the only targetable housing cohort are landlords (private and social). If solving for both isn't possible then who knows, as that gets even further into social and fiscal/financial policy.
    Originally posted by jsinc
    I know one thing, Iím glad I donít have to find a place anywhere near London or surrounding areas. Iím very lucky in that I have quite a large disposable income, but when I look at the price of property in the south, I doubt I could ever afford to live there. How the young will ever have a chance of buying a place to live unless they are extremely well paid I have no idea.
    • bluefukurou
    • By bluefukurou 8th Aug 18, 12:07 PM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    J L Collins has an article on international investors, although it is specifically about Vanguard funds.
    Having had a quick look I don't see any Vanguard online presence for the Middle East. There might be some links in the comments if you delve deeper.
    Stocks ó Part XVII: What if you canít buy VTSAX? Or even Vanguard?
    http://jlcollinsnh.com/2013/05/02/stocks-part-xvii-what-if-you-cant-buy-vtsax-or-even-vanguard/
    Another article on the same blog talks about housing as an investment, although it is more aimed at a persons home rather than BTL.
    http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/
    Originally posted by thickasabrick
    Thanks for the links. The one about houses being a bad investment is rather tongue in cheek, but interesting.

    Yeah, Vanguard is not an option for me currently, but I wonít be in the Middle East forever anyway, so Iíd prefer to operate somewhere based in Europe, most likely Internaxx.
    • bluefukurou
    • By bluefukurou 8th Aug 18, 12:11 PM
    • 75 Posts
    • 18 Thanks
    bluefukurou
    If you want exposure to the UK property market, why not buy shares in several of the housebuilders, or a fund comprising of similar? More liquid than BTL, which can be an advantage.

    Worth pointing out here that if you had a pension fund open when you left the UK, a UK expat can pay in £2,880 that tax year and each of the following 5 tax years and get a free £720 top-up each year from HMRC. Free money, got to be worth having
    Originally posted by Johnnyboy11
    Itís not so much that I want exposure to the housing market, I just want a solid, longterm place for my money.

    Unfortunately, I donít have a UK pension, so Iím unable to pay in like you say, but thanks anyway.
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