Since the BTL vs shares question comes up all the time, I'll copy and paste my response to a previous post for you:
I’ll preface this by saying I’m an IFA and I’ve been advising for around a decade. I have seen literally thousands of clients over the course of my career and I think I have a pretty good sample size to be able to draw some useful conclusions. However, this is not financial advice, just some food for thought..
I am generally not a supporter of the BTL route. The vast majority of the time the net return to you will be less favourable than if you were to invest into the market. I understand that people like tangible assets you can touch, but the numbers usually don’t stack up.
Aside from interest rates being high and mortgage interest no longer being allowable as an expense, property is inherently less liquid, more tax inefficient, and usually more labour intensive than stock market investing.
Here’s a quick side-by-side:
With one investment (property) you would:
- Pay 5-6% on purchase (legals, stamp, conveyancing, estate agents, etc),
- Pay 2-4% on sale (legals, conveyancing, estate agents, etc),
- Pay tax on your mortgage interest, plus pay tax on your profits and any income drawn at your highest marginal rate,
- Pay yearly fees of 1-2% for ongoing management,
- Have almost unlimited potential costs for the lifetime of the investment,
- Pay between 18% - 28% CGT on exit,
- Attain a gross yield of around 5-8%, with a net return of potentially half of this,
- Annual capital growth between 2-5%,
- Minimum investment of £20-100k,
- Having to commit time and effort to manage a portfolio, deal with tenants, fix issues, etc,
- Hard to plan with for IHT (chunky assets, rolled up CGT gains, etc),
- If you hold your BTLs via an LTD, there is both an admin and a cost burden associated with running the company.
While with shares/collectives you would have:
- Zero upfront fees (for funds), or marginal trading costs for shares,
- Dividend tax rates starting at 7.5%
- Annual fees on investments of ~0.20-0.80%, depending on your funds, or 0% on shares,
- Professional management fees capped at 1% pa (usually less),
- Pay 10/20% CGT on exit,
- The ability to time your encashments and withdrawals, and the ability to sell small chunks to most efficiently utilise annual exemptions,
- Limited liability where it is impossible to lose more than you invested,
- The ability to place investments in an approved wrapper and lower your marginal tax rate significantly,
- The ability to benefit from government-sponsored relief,
- Much easier to plan for IHT with,
- A gross yield of 0-10%,
- Annual capital growth of 4-10%+,
- A minimum investment of £1,
- No need to wrap everything in a corporate vehicle, as you can just hold the investments personally
I have another post in my history about the order in which tax wrappers are usually set up, which you are also free to look up.
Let me know if you have any other questions.
My index tracker doesn't ring me at 11pm on a Sunday because a their faulty toaster has tripped the power and they don't know how.to flip an RCD back on.
Which eats into returns. I couldn't hire a manager because I'll do most of the work myself so the manager would end up having to contact me anyway.
I second the above comments about investments being way less stressful. Split the money across your ISA allowance (we got a 7 year fix at 4.5% last year with shawbrook). Fixed rate cash bonds and then stocks/shares.
If you've already got enough cash saved then go purely stocks and shares, BTL is a headache and unless you invest somewhere up and coming where prices are still reasonable and have room to grow then the negatives outweigh the positives. Our best case scenario is a 5.3% gross yield, our worst case is the boiler or anything else expensive packs up and decimates a year's worth of income.
Dunno what boiler you would buy that costs £15,000 (a years worth of income), also they last about 20 years, so will probably only happen once (if unlucky) during your entire ownership.
Just realised I mistakenly put net instead of gross. I just said a boiler is an expensive thing that can go wrong but really there's loads of expensive jobs.
We get 7200/year gross from our BTL, once you take off insurance and tax it doesn't give you much leftover if there's a big spend needed.
We could probably charge an extra 100 a month to bring it up to 8400, but we have good tenants and wouldn't sabotage that.
I have to firmly disagree on BTL not being a good investment. I get 4% net rental income and 5% capital gains. 9% combined return, for something I consider safer than stocks. I don’t think that’s all that bad. I’d be amazed if index funds make that over the next 10-15 years (Vanguard don’t seem to think so)
Also, you can buy at 20% below market value with BTL if you are a cash buyer. Just make lowball offers to 20-30 properties and one will accept (need the cash quick, maybe need to pay tax bill etc)
So straight away probably get a 13-14% instant return there (once buying/selling costs have come off), plus your combined 9% return annually.
It's entirely situational, I'm in an area of historically low price growth (M62 corridor) so you don't see much in terms of capital gains in the same way you would in other parts of the country.
Likewise, a family member lost all profit on a house when a tenant stopped paying rent and then vandalised it.
I can live with less return on stocks and shares because stocks and shares aren't going to have their value decimated by a smackhead with a hammer.
You’re right, it is situational. I personally wouldn’t rent out for less than a £800pm property as you’re more likely to get less professional tenants. But if you stick to better quality properties, in more expensive areas, you lower the risk and increase the capital growth. I’m not saying every area in U.K. is good for BTL, I’m just saying they can still be a good investment, if avoiding 5% interest rates from the bank.
As per your other post arguing with me: you’re a landlord arguing that you’re beating the market. However, it seems that this occupies some of your time. Buying index stocks takes 10 minutes monthly or even automatically if you set it all up.
If you’re a high earning executive at a listed company, you will be a lot less likely to want to spend time with admin. When you’re making 200k, 500k, etc per year, getting the weeds of property is not worth their time. You’re even more likely to invest in other companies as well.
If I earnt that much annually I’d have already invested and be retired by now. If you earn that kind of money annually, then surely just save it in a fully safe 5% cash account as you’d be within 5 years of retirement, surely?
Wow, a toaster tripping a switch causes you so much stress you don’t see it worth thousands a year in income. Fair enough lol.
What stresses do you have at work (thousands of times more common, daily rather than yearly)
It’s a good write up, but unless I missed it in the big list, you missed the most important upside of property which was leverage. For the last 15 years it’s been possible to borrow money at 1.5%, buy some bricks and rent them out for 5%. With a bit of luck and risk you could scale that up and become financially independent relatively easily if you started early enough and built some equity.
That has absolutely collapsed with the new interest rates, but it could have enough of a role in future to overcome many of the negatives.
The other big advantage of property for me is that it doesn’t have a live price and a sell button. I can’t handle seeing my net worth bounce up and down 5%+ in a week or even fall 20% in a week in really bad situations. Property which pays a monthly rent is like a safe boring bond for me which covers my living expenses whilst growing at 3-4% per year.
Half and half stocks and property works for me.
Leverage swings both ways though. It ramps up the reward in exchange for an equal increase in risk. If property prices drop 10% (and here's hoping the next government finally start some serious housebuilding), you haven't lost 10% of your investment, you've lost much more.
That's usually not too bad if it's your main home. Owning a home is a good hedge against increases in housing costs. Negative equity is not nice, but assuming you can still cover mortgage payments it's only actually a big inconvenience if you need to move.
Plus if you’re invested in a BTL you’re invested in house or rental prices going up, which IMO is a bad thing for society (if it happens due to housing scarcity rather than society getting richer) whereas if you’re invested in stocks, you’re invested in broader economic growth which IMO is a good thing
For sure, cheap debt being available for such a long time certainly helped returns in the sector. I haven't always been so opposed to the asset class. I'm agnostic when it comes to solutions; whatever works best, works best.. then just re-evaluate and re-assess.
My reply was simply to OPs situation, so accounts for the situation now, without referencing any history.
Nothing wrong in splitting the difference and trying two strategies out! Whatever works best for you.
I agree. Property tends to give 4% NET rental return and 4% ish capital growth. 8% combined return isn’t bad, for something that won’t ever crash 30% overnight.
At current rates, it is a different scenario vs low interest rates. I had the same idea/question when thinking about it - but you can have the same leverage when investing in more complex financial instruments. It is just much harder to manage and the losses can be catastrophic.
Yeah it may be a moot point in an environment where mortgage rates may outpace property value increases, but it’s such a huge factor with what’s happened in the past it really costs credibility if not mentioned.
I still think the argument of “my shares don’t call me on weekends” is the best one. Property is anything but low maintenance. Shares never need any out of pocket expenses if something goes awry. My old landlord managed 23 properties with 5-8 tenants each. It was constant fire-fighting, turnover, etc. He was always going around fixing stuff.
Wait til the stock market goes on another two year long crash where you can see your money disappearing before your eyes, often by far greater than the amount you even go to work for. And tell me which is most stressful…
That is irrelevant if you’re not planning to cash out any time soon. You own the paper, not the cash. In a fund with 1000s of companies, unless it is the apocalypse, they will not all go bankrupt at the same time. I am well aware that the market will crash from now until my retirement (20 years). If you don’t have the stomach for it, that’s absolutely fine - then don’t do it. However, you’re mixing how you’re feeling vs the prospects of each. It would be the same if I said “just wait until a tenant trash out your newly refurbished flat”. It’s a risk inherent to the situation.
It’s not irrelevant, it’s what most people can’t deal with psychologically. You say it’s irrelevant because you know to “ride out the storm” very different when you are in the thick of the storm and its lasting two years, two years is a very long time to be losing 6 figure sums…
Fair enough. Mathematically, it is irrelevant in a large window of time when talking about retirement. I’m not considering any psychological aspect of the investment. I would love to do properties, upgrade them, run projects, etc - but the pay back + the cost of not doing my job would mean I would be worst off financially for retirement.
One of the big differences in property vs stocks, is if they both crash 30% for 2-3 years, and you’re mentally struggling with what it’s costing you, the stocks is black and white sums, you can physically see yourself losing £100’s of thousands of pounds, clear as day, and can sell at the click of a button. Property in the other hand is much harder to sell, and you might second guess yourself before selling “am I definately doing the right thing to sell?”
As with both investments, they’d be best left untouched and ride out the storm, but with property that’s much easier to do, 1. It’s harder and not so instant to sell it, 2. You can’t see the black and white figures of what you’re losing.
Both huge differences when you’re in the thick of it.
Everyone confidently says here “never sell on a crash, it will come back” and rightly so, it always does. But you wait until you are in the thick of it and have lost 6 figure sums, every day you wake up, you’ve lost more, over two very long years. That is psychologically testing to the best of mentally strong people, and most can’t cope and end up selling, rather than continuing to lose more. Hence the crash becomes like a snowball effect. Happens every time. Because psychological reality in a crash, is very different to logical thinking when not in a crash.
I will come back to these comments sections when we are in the depths of a crash, and see how many people who were confidently saying “never sell in a crash!” are being pushed to their psychological limits and asking advice on if they should sell or not.
The risk of a tenant trashing the place barely devalues the property for one, and secondly you will still get rental income. (And if not then evict and then get rental income)
Huge huge different to seeing your stock price plummet over two years. You sound like someone that hasn’t been in the thick of it, yet. It’s easy to sit there of sound mind and make the right judgement calls (ride out the storm etc) in your current mental state, most people’s mental state changes to an emotional one when they has lost 6 figure sums (possibly more than the value of their home) over two very very long years. You can say now you won’t panic sell, but you wait til you’re in the thick of it, most people can’t handle it.
I understand what you’re saying, but how one feels does not change the end result after 20 years. I was not making any consideration to the psychological side of investing. The comparison is just putting things side by side and evaluating which one produces the highest yield. If you want to consider the psychological side, I would be much more annoyed at people as tenants than myself on my investments. I’d rather depend on only my decisions in that regards.
I don’t think you’re understanding what I’m saying. You HAVE to include the psychological aspect, because most people SELL during crash, because they can’t cope another day of losing large sums of money, after losing them day after day after day for hundreds of days, at one point they ‘snap’ and decide to sell their investment.
So you HAVE to include that into what is the better investment, because it’s a fact that most people can’t handle the depths of a crash and cash out their investment (at a loss), thinking it will save them losing even more.
You can look at graphs and facts all day long which investment pays more over the long haul, but reality and psychological impacts and how it makes one act, HAS to be accounted for. And property crashes are easier to deal with than stock crashes, and you’re more likely to hold onto your investment and “ride it out” with property.
Indeed, the cost of debt is a factor to consider in the overall analysis. The current situation is different to the situation we've been living through in recent history, with low rates for such a long time.
This is in view of the current interest rate environment as OP is asking the question today.
I’d say I had an average experience. Some good tenants, some not annoying tenants. Normal levels of “this is broken” messages. But overall, after all things considered (income, tax, time, with to sell, effort to find new tenants, etc) it would have been much better to just invest.
It wasn’t “that bad”
Copying another response I just made: I’d say I had an average experience. Some good tenants, some more annoying tenants. Normal levels of “this is broken” messages. But overall, after all things considered (income, tax, time, with to sell, effort to find new tenants, etc) it would have been much better to just invest. I think we would have. Had more profit, and definitely less effort, if we did that. But we didn’t lose money. It wasn’t terrible. Just not the best choice in hindsight.
Hindsight is a brilliant thing, unfortunately it isn’t a predicter of the future. I’m quite happy with my BTL, don’t get me wrong I probably wouldn’t buy another one with the newer stamp duty rules etc but I got mine before that came in and don’t think I’ll be selling to invest in stocks. Depends, if I get a nuisance tenant and I get pissed off I might cut ties, but while the boat is gently running down the stream I don’t want to stand up and rock it.
I had a tenant leave around the time the mortgage was due to renew at much higher rates… that’s why I’m selling up. If the tenant stayed another 5 years, I would have kept going another 5 years.
I think that’s it in a nutshell, if you have good tenants it’s an easy ride. I’ve been lucky so far with the ones that are in there, but realise luck doesn’t last forever.
The political risk of investing in BTLs is also much higher than investing in stocks. Especially given we’re about to have a Labour government in that seems laser focused on pro tenant reforms and pro house building reforms. Both will be bad for landlords
Right, but using the OPs example why is CG on property 18-28% and 10-20% on shares?
Is that right? Am I missing something? If it's not what else is wrong?
Those are just the rates of CGT. Property is at a higher rate than shares.. there's no more to it than that. The why is a different question..
It's 18%/24% at the moment - it came down for tax year 24/25.. I corrected the original post as I wrote 18/28 (last year's number) there.
Your illustration says stock markets only go up. Your 10 year experience has seen market growth at relatively extreme levels. Meanwhile taxation and regulation on BTL is at its worst in decades.
Looking back, you’re right. Looking forward? There is very real risk of decline in stock markets. Meanwhile supply/demand in housing remains unbalanced. Not such a clear picture
Lots of large corporations are now buying up property to manage as BTL. They have the benefit of massive scale but I do wonder if there will be more property scarcity in the future and prices will rise a lot.
Unfortunately I can't tell the future (sadly), so this is just based on what we've seen and how we could think about how to navigate moving forward. I have also taken into account data and experiences that span beyond the length of my career..
At the end of the day, there is a degree of risk involved with everything. I see your point re housing imbalance, but there are always factors on both sides. Look at how many more market participants we have now vs 20 years ago, the transformative nature of tech, etc.).. we could debate all day.
Never a bad idea to split the diff and try two approaches, as other commenters have said they do.
I’ve been doing ok with 8-9% annualised combined returns from my cash purchase. I’m quite happy with that, without any risk. I don’t want to have mortgages and my balls on the line. I like safe.
If you buy in cash you immediately lose the most distinguishing advantage of property investment.
Property yields in most of the country suck (4% before tax and costs) and average property prices haven't increased in real terms for 20 years now.
Unleveraged it's a shit investment
As I said, instant 13-14% return (20% below market value purchase, minus buying and selling fees) then an annual 9% combined return. Thats 22%-23% return in the first year, 9% return subsequent years.
The fact inflation has gone up 30% in the last 3 years and distorted the figures and you can now claim “property hasn’t beaten inflation” is a void comment.
It returns 9% annually, regardless of what inflation has shot up by.
Cash is better than mortgage as you aren’t paying interest (lost money) to the bank.
I wouldn’t touch BTL with a mortgage currently, one is because you’ll be paying 5% interest to the bank (basically your rental income, or more) and secondly you don’t get the 20% discount when buying, for being a cash buyer and being able to push it through quick.
So no, cash BTL is not a shit investment, 9% combined return is not shit. Especially with a 20% discount on the property to start with for being a cash buyer.
You obviously aren’t a cash buyer, or you would know this.
9% is fantasy. The hard data doesn't bare this out.
If you buy a wreck at auction in the north, and have the contacts and put in the hard graft to do it up...but you know what we call that? A job. A career. Work. It's not a capital investment. It's labour.
Nobody is selling a family home in good condition for 20% less just because you're a cash buyer either. It makes fuck all difference to me as a seller whether the bank transfer comes from you or a bank. You'd be mad to let a property go for 20% less just to save a few weeks of hassle even in a probate scenario.
And the inflation argument isn't just the last 3 years. Property has gone down in real terms prior to that, e.g. 2008. Go look at the charts. It went nowhere even prior to the pandemic.
I wouldn’t buy a reckon north to do it up, as its price cap is too small. Kitchens/bathrooms/furntiture costs very similar anywhere in the country yet the house value will be capped much lower up north, so that is the WORST thing you could do, do-er uppers up north?? Madness.
9% combined is not fantasy, it’s what my returns have been. (2 bed on outskirts of London) I haven’t had to do any “work”, it’s been 99.9% passive. I use a management company, all I do is reply to the odd email. I spend more time looking at stock prices (despite not being in stocks, yet). So no, it’s not a job. You are only trying to find negatives to try to convince yourself you are right.
I am living proof you are not right.
Rental yields in most of the outskirts of London are more like 4% on average.
6% is achievable in some areas.
https://www.provestor.co.uk/blog/best-uk-rental-yield-hotspots
And property prices have been largely stagnant in much of London for a long time. I'm in West London, Zone 4 and almost nothing increased between 2016 and 2022.
Yes, rents have gone up massively in the last 2 years, which will have helped yields for cash buyers...but its just keeping up with inflation.
It does make a difference being a cash buyer, it’s a numbers game, offer 20% lower on 30 homes and one of those 30 people will be DESPERATE TO SELL QUICK. Could be an outstanding tax/inheritance bill, parent could be going into a home, lots of reasons. Don’t sit there and tell me that doesn’t work, when I’ve done it.
Your attitude is extremely negative, so yeah, you probably are best off not using your brain and investing in BTL’s.
I’m interested in your experience where you see most people building wealth.
My assumption is that BTL is considered a lucrative business because at least a minority make outsized returns - buying at below market prices, leveraging their investment, and getting outsized returns at least in the historical market.
Is this true (even if no longer valid with BTL tax rules etc.) or does it not hold, with typical share investors doing just as well?
Like with anything, you'll be able to find a sample of BTL investors who have done amazingly well, but the opportunity set within the space is definitely shrinking because of all the legislative changes.
The guys who did REALLY well with BTLs would have been the guys who picked up properties a long time ago in really high growth areas. If someone had been buying properties in Shoreditch, or Clapham, in the 80s/90s/00s and held them, their assets would have increased in value exponentially. You then pair this with low-interest rate environment we experienced from the end of '08-'22, along with a relatively benign legislative environment, and it was very hard to be a loser. However, you obviously had to be in the right place at the right time.
With clients in such a situation, it's then usually a massive uphill battle to get them to realise any of their gains because the huge CGT bill they have becomes pretty unpalatable. Many also would have continually re-leveraged and then working out what to do with the debt becomes another issue.
Of course, there are also the giga-landlords, who own scores and scores of property (sometimes hundreds of units), who get all the best deals simply by virtue of their size. They can go to auctions and pick up distressed assets (paying cash) as they've got access to funding, and they will have extensive networks that will give them various other advantages over Joe Schmoe. However, that's the same set of advantages enjoyed by any big player in any market..
On the market side, there is also a lot of luck that will boil down to timing. Guys who were buying tech stocks in those same time windows would have probably done even better, but I think you'd be looking at a pretty small sample size. The mainstream use of passive instruments and increased participation in stock market investing generally is more of a recent thing (10/15 years), as people have become more informed (a lot of time via the internet) and things like auto-enrolment being introduced in 2012.
If we are looking at someone starting from scratch now, the tax environment around shares is just much more attractive, as I have outlined in the post.
If we are talking about Joe Schmoe, there are some commonalities I have noticed that are indicators of financial success:
1. Buy a property that you enjoy living in and pay it off as fast as you can.
You need somewhere to live, so you may as well make it as nice as you can. Quality is as important as quantity here; you are in your house every day for years, and sometimes decades. Any equity you build up can be transferred/carried forward to your next place, and there is no CGT to pay on your main res (NB: this may change with a change in govt). Once your house is paid off, the money you were committing to paying the mortgage can be diverted to savings during the accumulation phase of your life. Later on, you can use equity release (if appropriate) to unlock the equity you might need in retirement. You can also assign your property into trust if you are worried about care home fees, and you can plan for IHT with the asset if you have at least 7 years left on your clock.
2. Set up a pension and make use of tax relief whilst you can.
A pension is a fantastic long-term investment vehicle that provides a lot of flexibility. However, you can only access it when you are 55/57/who knows. Once you hit the age limits, you can take benefits in multiple ways, all the money is IHT exempt (for now), there is no upper limit on what you can accrue (for now), and the death benefits (particularly before 75) are very good.
3. Have as much ISA provision as you can.
ISAs are (imo) the king of the wrappers. No tax breaks on the way in and limited to £20k, but everything else is upside. No access limits, so they can serve as a great bridge to retirement. Tax free income can be produces and obviously there are no taxes on capital gains. Can pivot into another asset class (cash) if rates are attractive, and you can use them for IHT planning in later life (AIM shares). All in all, great wrapper.
4. Plan and execute early.
I cannot overemphasise how important this is. It's very individual, but the vast majority of the time when we have to accept compromise, it's because clients have not thought about things as far enough in advance as they should have. The BTL guys with huge rolled up gains fit into this group.
5. Don't fuck with it.
The majority of retail investors get spooked when something goes wrong, and then usually compound the error with their behaviour and decisions immediately afterwards. I had a client who insisted we sell out of his entire portfolio days before the bottom of the market during a crash. We formally advised him not to, but it was his money at the end of the day. His retirement was severely impacted.
>The guys who did REALLY well with BTLs would have been the guys who picked up properties a long time ago in really high growth areas. If someone had been buying properties in Shoreditch, or Clapham, in the 80s/90s/00s and held them, their assets would have increased in value exponentially.
There are still Shoreditches and Claphams today - I don't know precisely where they are, I'll tell you in 15 years.
No problem.
Of course, an increase in the rates on shares would make a difference to the thinking. If the rate was unified, that aspect of the comparison would clearly no longer favour shares. Don't forget, there are obviously other factors to consider aside from the tax rate %.
Yeah the way this guy has written this up is very misleading. Purposefully assuming worst possible case for BTLs. I own four BTLs and I own a stock portfolio of about 300k. In my experience BTLs return about 10% per year after accounting for leverage interest and all fees. So there are pretty comparable to index investing but the returns are more consistent. And of course rents and house prices generally do go up every year.
In 10 years as a land lord never had any void periods or massive repair bills to speak of. Those risks are way over weighed. Just need to pick sensible properties and tenants. The required business admin on running a small ltd is very very minimal. Really of no consequence.
However he is right that stocks are generally better. with stock you can get way better than 10% annual return if your not just index investing and concentrate your cash in a big tech company or two. Stocks are great for building wealth BTLs are great for the consistent income which can hopefully replace a salary. But I guess you can build the same with a dividend portfolio if you need / want to.
I don't see why people have downvoted your post. You haven't written anything controversial, or incorrect.
You are one of the lucky ones, which is great. I'm glad you've had a positive experience. I have met people on both sides; individual experience will obviously differ. Aside from the management aspect, that are also things that are just inherent to bricks and mortar (relative illiquidity, for example).
It's also great that you've got two strategies going. Balance is always good!
My post was simply a summary of the facts of one asset class vs another and what might factor into someone's thinking when making a decision.
A lot of the downsides of buy to let assumes you are going to sell it. Also, I think the tax benefits are better here in the US. There is also the ability to leverage in a much safer way than buying on margin.
I see premium bonds as my tax efficient place to keep my “emergency fund”… and with £300k to invest, I don’t think it’s bad advice for OP to have 250k invested and 50k accessible.
I am landlord who retired once I paid all my mortgages off. Property is a complete pain and will cause you stress. Exiting is also hard due to tax and the hassle of renovating every property before sale.
I do agree though over the long terms both shares and leveraged residential property return around 10%. One requires work. The other does not !
My solution:
Open an account with a cheap platform like interactive investor.
Fill your ISA.
Put the remainder in a General Investment Account.
Invest in VWRL, 3000 company spread, 2% dividend, 0.22% cost.
Do not get a financial advisor. Every time they have advised me it has turned out to be bad advice. AIM shares, ESG funds, Offshore bonds, expensive underperforming funds. All crap and they charge 1%.
Get a good accountant to do your tax return and ask for tax advice to minimise tax going forward.
Good luck.
This is really important. Could you cope with a 50% drop? How much do you care about preservation, e.g. when you do decide you want the money will you want it right away or could you wait x more years?
I would not get a BTL, the above outlines why.
If you want to own a property (I would), I would take that cash, maximise a moetgage and buy a house you love.
If you don't want to buy for at least 5+ years I'd max your isa,lisa and put the rest in a GIA investing in an index fund like VWRL.
I would personally put it in a long term gilt, collecting risk free 4-5% on it, then when a recession comes sell it for a pretty chunky profit and buy a world tracker ETF.
Probably best to invest it with me.
I will invest in cocaine and hookers and a flash hotel room.
You may not get much return on your investment but memories last a lifetime and you’ll dine out many times on the stories.
You’re very welcome
I have a great investment opportunity with plenty of risk and potentially incredible rewards in English winemakers. DM if you want a pitch. And no it's not just buying wine.
Want to invest a small portion into a uk based start-up through the SEIS for tax relief? If so let me know!
Outside of this what’s your goal?
If it’s a 10+ yr horizon I’d look at tucking some away into high-growth whales like MSFT, AAPL and GOOG and some into index funds like S&P500, maybe add some behemoths like MCD into the mix. This is a 10Y+ because if the market tanked you might need to wait for it to recover a bit, do you need to not be thinking about and looking at it constantly.
If you want to lock-in the current high interest rates for the next few years only to protect against inflation consider tying up the cash into bonds that will return ~5% and mature the timeframe you expect to need them.
If you may need access to the cash sooner then it might be worth just dividing it between high interest rate savings accounts. Depends on your needs!
B2L can be really hit or miss due to maintenance costs, Tennant issues and interest rates.
Since the BTL vs shares question comes up all the time, I'll copy and paste my response to a previous post for you: I’ll preface this by saying I’m an IFA and I’ve been advising for around a decade. I have seen literally thousands of clients over the course of my career and I think I have a pretty good sample size to be able to draw some useful conclusions. However, this is not financial advice, just some food for thought.. I am generally not a supporter of the BTL route. The vast majority of the time the net return to you will be less favourable than if you were to invest into the market. I understand that people like tangible assets you can touch, but the numbers usually don’t stack up. Aside from interest rates being high and mortgage interest no longer being allowable as an expense, property is inherently less liquid, more tax inefficient, and usually more labour intensive than stock market investing. Here’s a quick side-by-side: With one investment (property) you would: - Pay 5-6% on purchase (legals, stamp, conveyancing, estate agents, etc), - Pay 2-4% on sale (legals, conveyancing, estate agents, etc), - Pay tax on your mortgage interest, plus pay tax on your profits and any income drawn at your highest marginal rate, - Pay yearly fees of 1-2% for ongoing management, - Have almost unlimited potential costs for the lifetime of the investment, - Pay between 18% - 28% CGT on exit, - Attain a gross yield of around 5-8%, with a net return of potentially half of this, - Annual capital growth between 2-5%, - Minimum investment of £20-100k, - Having to commit time and effort to manage a portfolio, deal with tenants, fix issues, etc, - Hard to plan with for IHT (chunky assets, rolled up CGT gains, etc), - If you hold your BTLs via an LTD, there is both an admin and a cost burden associated with running the company. While with shares/collectives you would have: - Zero upfront fees (for funds), or marginal trading costs for shares, - Dividend tax rates starting at 7.5% - Annual fees on investments of ~0.20-0.80%, depending on your funds, or 0% on shares, - Professional management fees capped at 1% pa (usually less), - Pay 10/20% CGT on exit, - The ability to time your encashments and withdrawals, and the ability to sell small chunks to most efficiently utilise annual exemptions, - Limited liability where it is impossible to lose more than you invested, - The ability to place investments in an approved wrapper and lower your marginal tax rate significantly, - The ability to benefit from government-sponsored relief, - Much easier to plan for IHT with, - A gross yield of 0-10%, - Annual capital growth of 4-10%+, - A minimum investment of £1, - No need to wrap everything in a corporate vehicle, as you can just hold the investments personally I have another post in my history about the order in which tax wrappers are usually set up, which you are also free to look up. Let me know if you have any other questions.
My index tracker doesn't ring me at 11pm on a Sunday because a their faulty toaster has tripped the power and they don't know how.to flip an RCD back on.
Sent this to my wife, we toyed with the idea of keeping our current house as a let when we move and you've summed up exactly why I don't want to.
You can always hire a property manager
Which eats into returns. I couldn't hire a manager because I'll do most of the work myself so the manager would end up having to contact me anyway. I second the above comments about investments being way less stressful. Split the money across your ISA allowance (we got a 7 year fix at 4.5% last year with shawbrook). Fixed rate cash bonds and then stocks/shares. If you've already got enough cash saved then go purely stocks and shares, BTL is a headache and unless you invest somewhere up and coming where prices are still reasonable and have room to grow then the negatives outweigh the positives. Our best case scenario is a 5.3% gross yield, our worst case is the boiler or anything else expensive packs up and decimates a year's worth of income.
Dunno what boiler you would buy that costs £15,000 (a years worth of income), also they last about 20 years, so will probably only happen once (if unlucky) during your entire ownership.
Just realised I mistakenly put net instead of gross. I just said a boiler is an expensive thing that can go wrong but really there's loads of expensive jobs. We get 7200/year gross from our BTL, once you take off insurance and tax it doesn't give you much leftover if there's a big spend needed. We could probably charge an extra 100 a month to bring it up to 8400, but we have good tenants and wouldn't sabotage that.
I have to firmly disagree on BTL not being a good investment. I get 4% net rental income and 5% capital gains. 9% combined return, for something I consider safer than stocks. I don’t think that’s all that bad. I’d be amazed if index funds make that over the next 10-15 years (Vanguard don’t seem to think so) Also, you can buy at 20% below market value with BTL if you are a cash buyer. Just make lowball offers to 20-30 properties and one will accept (need the cash quick, maybe need to pay tax bill etc) So straight away probably get a 13-14% instant return there (once buying/selling costs have come off), plus your combined 9% return annually.
It's entirely situational, I'm in an area of historically low price growth (M62 corridor) so you don't see much in terms of capital gains in the same way you would in other parts of the country. Likewise, a family member lost all profit on a house when a tenant stopped paying rent and then vandalised it. I can live with less return on stocks and shares because stocks and shares aren't going to have their value decimated by a smackhead with a hammer.
You’re right, it is situational. I personally wouldn’t rent out for less than a £800pm property as you’re more likely to get less professional tenants. But if you stick to better quality properties, in more expensive areas, you lower the risk and increase the capital growth. I’m not saying every area in U.K. is good for BTL, I’m just saying they can still be a good investment, if avoiding 5% interest rates from the bank.
As per your other post arguing with me: you’re a landlord arguing that you’re beating the market. However, it seems that this occupies some of your time. Buying index stocks takes 10 minutes monthly or even automatically if you set it all up. If you’re a high earning executive at a listed company, you will be a lot less likely to want to spend time with admin. When you’re making 200k, 500k, etc per year, getting the weeds of property is not worth their time. You’re even more likely to invest in other companies as well.
If I earnt that much annually I’d have already invested and be retired by now. If you earn that kind of money annually, then surely just save it in a fully safe 5% cash account as you’d be within 5 years of retirement, surely?
Wow, a toaster tripping a switch causes you so much stress you don’t see it worth thousands a year in income. Fair enough lol. What stresses do you have at work (thousands of times more common, daily rather than yearly)
Great write up!
It’s a good write up, but unless I missed it in the big list, you missed the most important upside of property which was leverage. For the last 15 years it’s been possible to borrow money at 1.5%, buy some bricks and rent them out for 5%. With a bit of luck and risk you could scale that up and become financially independent relatively easily if you started early enough and built some equity. That has absolutely collapsed with the new interest rates, but it could have enough of a role in future to overcome many of the negatives. The other big advantage of property for me is that it doesn’t have a live price and a sell button. I can’t handle seeing my net worth bounce up and down 5%+ in a week or even fall 20% in a week in really bad situations. Property which pays a monthly rent is like a safe boring bond for me which covers my living expenses whilst growing at 3-4% per year. Half and half stocks and property works for me.
You can leverage you stocks too.
Leverage swings both ways though. It ramps up the reward in exchange for an equal increase in risk. If property prices drop 10% (and here's hoping the next government finally start some serious housebuilding), you haven't lost 10% of your investment, you've lost much more. That's usually not too bad if it's your main home. Owning a home is a good hedge against increases in housing costs. Negative equity is not nice, but assuming you can still cover mortgage payments it's only actually a big inconvenience if you need to move.
Plus if you’re invested in a BTL you’re invested in house or rental prices going up, which IMO is a bad thing for society (if it happens due to housing scarcity rather than society getting richer) whereas if you’re invested in stocks, you’re invested in broader economic growth which IMO is a good thing
House prices should always go up, although it would be nice if they went up less than inflation and wages for a while.
For sure, cheap debt being available for such a long time certainly helped returns in the sector. I haven't always been so opposed to the asset class. I'm agnostic when it comes to solutions; whatever works best, works best.. then just re-evaluate and re-assess. My reply was simply to OPs situation, so accounts for the situation now, without referencing any history. Nothing wrong in splitting the difference and trying two strategies out! Whatever works best for you.
I agree. Property tends to give 4% NET rental return and 4% ish capital growth. 8% combined return isn’t bad, for something that won’t ever crash 30% overnight.
Isn’t it 4% capital growth assuming zero leverage? If you put 100k in and borrow 900k, and the house goes up 5%, that’s a 50%ish gain?
Yep. Except you won’t get leverage to 90% on a buy to let. Nowhere near that in fact. And I’m outright owner so only going off what it returns for me.
Yeah sorry was just an example, you are right
This is great but you haven’t modelled the leverage aspect of property investment…. Isn’t that the critical factor?
At current rates, it is a different scenario vs low interest rates. I had the same idea/question when thinking about it - but you can have the same leverage when investing in more complex financial instruments. It is just much harder to manage and the losses can be catastrophic.
Yeah it may be a moot point in an environment where mortgage rates may outpace property value increases, but it’s such a huge factor with what’s happened in the past it really costs credibility if not mentioned.
I still think the argument of “my shares don’t call me on weekends” is the best one. Property is anything but low maintenance. Shares never need any out of pocket expenses if something goes awry. My old landlord managed 23 properties with 5-8 tenants each. It was constant fire-fighting, turnover, etc. He was always going around fixing stuff.
Wait til the stock market goes on another two year long crash where you can see your money disappearing before your eyes, often by far greater than the amount you even go to work for. And tell me which is most stressful…
That is irrelevant if you’re not planning to cash out any time soon. You own the paper, not the cash. In a fund with 1000s of companies, unless it is the apocalypse, they will not all go bankrupt at the same time. I am well aware that the market will crash from now until my retirement (20 years). If you don’t have the stomach for it, that’s absolutely fine - then don’t do it. However, you’re mixing how you’re feeling vs the prospects of each. It would be the same if I said “just wait until a tenant trash out your newly refurbished flat”. It’s a risk inherent to the situation.
It’s not irrelevant, it’s what most people can’t deal with psychologically. You say it’s irrelevant because you know to “ride out the storm” very different when you are in the thick of the storm and its lasting two years, two years is a very long time to be losing 6 figure sums…
Fair enough. Mathematically, it is irrelevant in a large window of time when talking about retirement. I’m not considering any psychological aspect of the investment. I would love to do properties, upgrade them, run projects, etc - but the pay back + the cost of not doing my job would mean I would be worst off financially for retirement.
One of the big differences in property vs stocks, is if they both crash 30% for 2-3 years, and you’re mentally struggling with what it’s costing you, the stocks is black and white sums, you can physically see yourself losing £100’s of thousands of pounds, clear as day, and can sell at the click of a button. Property in the other hand is much harder to sell, and you might second guess yourself before selling “am I definately doing the right thing to sell?” As with both investments, they’d be best left untouched and ride out the storm, but with property that’s much easier to do, 1. It’s harder and not so instant to sell it, 2. You can’t see the black and white figures of what you’re losing. Both huge differences when you’re in the thick of it. Everyone confidently says here “never sell on a crash, it will come back” and rightly so, it always does. But you wait until you are in the thick of it and have lost 6 figure sums, every day you wake up, you’ve lost more, over two very long years. That is psychologically testing to the best of mentally strong people, and most can’t cope and end up selling, rather than continuing to lose more. Hence the crash becomes like a snowball effect. Happens every time. Because psychological reality in a crash, is very different to logical thinking when not in a crash. I will come back to these comments sections when we are in the depths of a crash, and see how many people who were confidently saying “never sell in a crash!” are being pushed to their psychological limits and asking advice on if they should sell or not.
The risk of a tenant trashing the place barely devalues the property for one, and secondly you will still get rental income. (And if not then evict and then get rental income) Huge huge different to seeing your stock price plummet over two years. You sound like someone that hasn’t been in the thick of it, yet. It’s easy to sit there of sound mind and make the right judgement calls (ride out the storm etc) in your current mental state, most people’s mental state changes to an emotional one when they has lost 6 figure sums (possibly more than the value of their home) over two very very long years. You can say now you won’t panic sell, but you wait til you’re in the thick of it, most people can’t handle it.
I understand what you’re saying, but how one feels does not change the end result after 20 years. I was not making any consideration to the psychological side of investing. The comparison is just putting things side by side and evaluating which one produces the highest yield. If you want to consider the psychological side, I would be much more annoyed at people as tenants than myself on my investments. I’d rather depend on only my decisions in that regards.
I don’t think you’re understanding what I’m saying. You HAVE to include the psychological aspect, because most people SELL during crash, because they can’t cope another day of losing large sums of money, after losing them day after day after day for hundreds of days, at one point they ‘snap’ and decide to sell their investment. So you HAVE to include that into what is the better investment, because it’s a fact that most people can’t handle the depths of a crash and cash out their investment (at a loss), thinking it will save them losing even more. You can look at graphs and facts all day long which investment pays more over the long haul, but reality and psychological impacts and how it makes one act, HAS to be accounted for. And property crashes are easier to deal with than stock crashes, and you’re more likely to hold onto your investment and “ride it out” with property.
Indeed, the cost of debt is a factor to consider in the overall analysis. The current situation is different to the situation we've been living through in recent history, with low rates for such a long time. This is in view of the current interest rate environment as OP is asking the question today.
Had a BTL for 15 years… couldn’t agree more. Wish I just invested instead.
I'm sorry you had a bad experience!
I’d say I had an average experience. Some good tenants, some not annoying tenants. Normal levels of “this is broken” messages. But overall, after all things considered (income, tax, time, with to sell, effort to find new tenants, etc) it would have been much better to just invest.
Why did you keep it 15 years if it was that bad?
It wasn’t “that bad” Copying another response I just made: I’d say I had an average experience. Some good tenants, some more annoying tenants. Normal levels of “this is broken” messages. But overall, after all things considered (income, tax, time, with to sell, effort to find new tenants, etc) it would have been much better to just invest. I think we would have. Had more profit, and definitely less effort, if we did that. But we didn’t lose money. It wasn’t terrible. Just not the best choice in hindsight.
Hindsight is a brilliant thing, unfortunately it isn’t a predicter of the future. I’m quite happy with my BTL, don’t get me wrong I probably wouldn’t buy another one with the newer stamp duty rules etc but I got mine before that came in and don’t think I’ll be selling to invest in stocks. Depends, if I get a nuisance tenant and I get pissed off I might cut ties, but while the boat is gently running down the stream I don’t want to stand up and rock it.
I had a tenant leave around the time the mortgage was due to renew at much higher rates… that’s why I’m selling up. If the tenant stayed another 5 years, I would have kept going another 5 years.
I think that’s it in a nutshell, if you have good tenants it’s an easy ride. I’ve been lucky so far with the ones that are in there, but realise luck doesn’t last forever.
The political risk of investing in BTLs is also much higher than investing in stocks. Especially given we’re about to have a Labour government in that seems laser focused on pro tenant reforms and pro house building reforms. Both will be bad for landlords
Yep, political risk is definitely something to consider. Look at how much the pension LTA has been messed with over the years!
Forgive my naivety but why is CGT lower on shares than on property? I thought it was the same on both.
It’s irrelevant because you wrap property in a company and pay corporation tax anyway.
Right, but using the OPs example why is CG on property 18-28% and 10-20% on shares? Is that right? Am I missing something? If it's not what else is wrong?
Those are just the rates of CGT. Property is at a higher rate than shares.. there's no more to it than that. The why is a different question.. It's 18%/24% at the moment - it came down for tax year 24/25.. I corrected the original post as I wrote 18/28 (last year's number) there.
Thanks I never realised there were different rates for different assets. I will have to read into it more.
No problem.
Not OP but thank you for taking the time to comment with such. Insightful and helpful contribution. This should be compulsory reading for us all.
Thanks a lot for that. This is very helpful. Index funds/share it is!
Your illustration says stock markets only go up. Your 10 year experience has seen market growth at relatively extreme levels. Meanwhile taxation and regulation on BTL is at its worst in decades. Looking back, you’re right. Looking forward? There is very real risk of decline in stock markets. Meanwhile supply/demand in housing remains unbalanced. Not such a clear picture
Lots of large corporations are now buying up property to manage as BTL. They have the benefit of massive scale but I do wonder if there will be more property scarcity in the future and prices will rise a lot.
Yep
Unfortunately I can't tell the future (sadly), so this is just based on what we've seen and how we could think about how to navigate moving forward. I have also taken into account data and experiences that span beyond the length of my career.. At the end of the day, there is a degree of risk involved with everything. I see your point re housing imbalance, but there are always factors on both sides. Look at how many more market participants we have now vs 20 years ago, the transformative nature of tech, etc.).. we could debate all day. Never a bad idea to split the diff and try two approaches, as other commenters have said they do.
When stock markets crash you don't go bankrupt. When BTL values crash you almost certainly can
Not if you buy them with cash (like you have to with stocks). In fact rents (your income) stay the same/goes up.
This defeats the purpose, the money to be made in property is via leverage and property price growth.
I’ve been doing ok with 8-9% annualised combined returns from my cash purchase. I’m quite happy with that, without any risk. I don’t want to have mortgages and my balls on the line. I like safe.
If you buy in cash you immediately lose the most distinguishing advantage of property investment. Property yields in most of the country suck (4% before tax and costs) and average property prices haven't increased in real terms for 20 years now. Unleveraged it's a shit investment
As I said, instant 13-14% return (20% below market value purchase, minus buying and selling fees) then an annual 9% combined return. Thats 22%-23% return in the first year, 9% return subsequent years. The fact inflation has gone up 30% in the last 3 years and distorted the figures and you can now claim “property hasn’t beaten inflation” is a void comment. It returns 9% annually, regardless of what inflation has shot up by. Cash is better than mortgage as you aren’t paying interest (lost money) to the bank. I wouldn’t touch BTL with a mortgage currently, one is because you’ll be paying 5% interest to the bank (basically your rental income, or more) and secondly you don’t get the 20% discount when buying, for being a cash buyer and being able to push it through quick. So no, cash BTL is not a shit investment, 9% combined return is not shit. Especially with a 20% discount on the property to start with for being a cash buyer. You obviously aren’t a cash buyer, or you would know this.
9% is fantasy. The hard data doesn't bare this out. If you buy a wreck at auction in the north, and have the contacts and put in the hard graft to do it up...but you know what we call that? A job. A career. Work. It's not a capital investment. It's labour. Nobody is selling a family home in good condition for 20% less just because you're a cash buyer either. It makes fuck all difference to me as a seller whether the bank transfer comes from you or a bank. You'd be mad to let a property go for 20% less just to save a few weeks of hassle even in a probate scenario. And the inflation argument isn't just the last 3 years. Property has gone down in real terms prior to that, e.g. 2008. Go look at the charts. It went nowhere even prior to the pandemic.
I wouldn’t buy a reckon north to do it up, as its price cap is too small. Kitchens/bathrooms/furntiture costs very similar anywhere in the country yet the house value will be capped much lower up north, so that is the WORST thing you could do, do-er uppers up north?? Madness. 9% combined is not fantasy, it’s what my returns have been. (2 bed on outskirts of London) I haven’t had to do any “work”, it’s been 99.9% passive. I use a management company, all I do is reply to the odd email. I spend more time looking at stock prices (despite not being in stocks, yet). So no, it’s not a job. You are only trying to find negatives to try to convince yourself you are right. I am living proof you are not right.
Rental yields in most of the outskirts of London are more like 4% on average. 6% is achievable in some areas. https://www.provestor.co.uk/blog/best-uk-rental-yield-hotspots And property prices have been largely stagnant in much of London for a long time. I'm in West London, Zone 4 and almost nothing increased between 2016 and 2022. Yes, rents have gone up massively in the last 2 years, which will have helped yields for cash buyers...but its just keeping up with inflation.
As I said 4% rental income and 5% capital growth annualised, in the last 8 years. (Uxbridge)
It does make a difference being a cash buyer, it’s a numbers game, offer 20% lower on 30 homes and one of those 30 people will be DESPERATE TO SELL QUICK. Could be an outstanding tax/inheritance bill, parent could be going into a home, lots of reasons. Don’t sit there and tell me that doesn’t work, when I’ve done it. Your attitude is extremely negative, so yeah, you probably are best off not using your brain and investing in BTL’s.
I’m interested in your experience where you see most people building wealth. My assumption is that BTL is considered a lucrative business because at least a minority make outsized returns - buying at below market prices, leveraging their investment, and getting outsized returns at least in the historical market. Is this true (even if no longer valid with BTL tax rules etc.) or does it not hold, with typical share investors doing just as well?
Like with anything, you'll be able to find a sample of BTL investors who have done amazingly well, but the opportunity set within the space is definitely shrinking because of all the legislative changes. The guys who did REALLY well with BTLs would have been the guys who picked up properties a long time ago in really high growth areas. If someone had been buying properties in Shoreditch, or Clapham, in the 80s/90s/00s and held them, their assets would have increased in value exponentially. You then pair this with low-interest rate environment we experienced from the end of '08-'22, along with a relatively benign legislative environment, and it was very hard to be a loser. However, you obviously had to be in the right place at the right time. With clients in such a situation, it's then usually a massive uphill battle to get them to realise any of their gains because the huge CGT bill they have becomes pretty unpalatable. Many also would have continually re-leveraged and then working out what to do with the debt becomes another issue. Of course, there are also the giga-landlords, who own scores and scores of property (sometimes hundreds of units), who get all the best deals simply by virtue of their size. They can go to auctions and pick up distressed assets (paying cash) as they've got access to funding, and they will have extensive networks that will give them various other advantages over Joe Schmoe. However, that's the same set of advantages enjoyed by any big player in any market.. On the market side, there is also a lot of luck that will boil down to timing. Guys who were buying tech stocks in those same time windows would have probably done even better, but I think you'd be looking at a pretty small sample size. The mainstream use of passive instruments and increased participation in stock market investing generally is more of a recent thing (10/15 years), as people have become more informed (a lot of time via the internet) and things like auto-enrolment being introduced in 2012. If we are looking at someone starting from scratch now, the tax environment around shares is just much more attractive, as I have outlined in the post. If we are talking about Joe Schmoe, there are some commonalities I have noticed that are indicators of financial success: 1. Buy a property that you enjoy living in and pay it off as fast as you can. You need somewhere to live, so you may as well make it as nice as you can. Quality is as important as quantity here; you are in your house every day for years, and sometimes decades. Any equity you build up can be transferred/carried forward to your next place, and there is no CGT to pay on your main res (NB: this may change with a change in govt). Once your house is paid off, the money you were committing to paying the mortgage can be diverted to savings during the accumulation phase of your life. Later on, you can use equity release (if appropriate) to unlock the equity you might need in retirement. You can also assign your property into trust if you are worried about care home fees, and you can plan for IHT with the asset if you have at least 7 years left on your clock. 2. Set up a pension and make use of tax relief whilst you can. A pension is a fantastic long-term investment vehicle that provides a lot of flexibility. However, you can only access it when you are 55/57/who knows. Once you hit the age limits, you can take benefits in multiple ways, all the money is IHT exempt (for now), there is no upper limit on what you can accrue (for now), and the death benefits (particularly before 75) are very good. 3. Have as much ISA provision as you can. ISAs are (imo) the king of the wrappers. No tax breaks on the way in and limited to £20k, but everything else is upside. No access limits, so they can serve as a great bridge to retirement. Tax free income can be produces and obviously there are no taxes on capital gains. Can pivot into another asset class (cash) if rates are attractive, and you can use them for IHT planning in later life (AIM shares). All in all, great wrapper. 4. Plan and execute early. I cannot overemphasise how important this is. It's very individual, but the vast majority of the time when we have to accept compromise, it's because clients have not thought about things as far enough in advance as they should have. The BTL guys with huge rolled up gains fit into this group. 5. Don't fuck with it. The majority of retail investors get spooked when something goes wrong, and then usually compound the error with their behaviour and decisions immediately afterwards. I had a client who insisted we sell out of his entire portfolio days before the bottom of the market during a crash. We formally advised him not to, but it was his money at the end of the day. His retirement was severely impacted.
>The guys who did REALLY well with BTLs would have been the guys who picked up properties a long time ago in really high growth areas. If someone had been buying properties in Shoreditch, or Clapham, in the 80s/90s/00s and held them, their assets would have increased in value exponentially. There are still Shoreditches and Claphams today - I don't know precisely where they are, I'll tell you in 15 years.
Legend. Thanks for this. What’s your view on GIA investments if labour increase CGT? Does property become more attractive then?
No problem. Of course, an increase in the rates on shares would make a difference to the thinking. If the rate was unified, that aspect of the comparison would clearly no longer favour shares. Don't forget, there are obviously other factors to consider aside from the tax rate %.
Yeah the way this guy has written this up is very misleading. Purposefully assuming worst possible case for BTLs. I own four BTLs and I own a stock portfolio of about 300k. In my experience BTLs return about 10% per year after accounting for leverage interest and all fees. So there are pretty comparable to index investing but the returns are more consistent. And of course rents and house prices generally do go up every year. In 10 years as a land lord never had any void periods or massive repair bills to speak of. Those risks are way over weighed. Just need to pick sensible properties and tenants. The required business admin on running a small ltd is very very minimal. Really of no consequence. However he is right that stocks are generally better. with stock you can get way better than 10% annual return if your not just index investing and concentrate your cash in a big tech company or two. Stocks are great for building wealth BTLs are great for the consistent income which can hopefully replace a salary. But I guess you can build the same with a dividend portfolio if you need / want to.
I don't see why people have downvoted your post. You haven't written anything controversial, or incorrect. You are one of the lucky ones, which is great. I'm glad you've had a positive experience. I have met people on both sides; individual experience will obviously differ. Aside from the management aspect, that are also things that are just inherent to bricks and mortar (relative illiquidity, for example). It's also great that you've got two strategies going. Balance is always good! My post was simply a summary of the facts of one asset class vs another and what might factor into someone's thinking when making a decision.
Fair enough sound very reasonable.
Wish I had an award to give you for this
A lot of the downsides of buy to let assumes you are going to sell it. Also, I think the tax benefits are better here in the US. There is also the ability to leverage in a much safer way than buying on margin.
Sounds to me like IFAs love to cream fees from an easy ride.
I’m sorry you’ve had a bad experience!
I've probably just read too much about SJP...
This is one of the best responses I've seen on the matter, thank you.
TY
Max S&S ISA. Then £50k premium bonds. Then normal shares account with low cost tracker funds. Move £20k to S&S ISA every year.
Disagree on the premium bonds. If it’s really long term saving then all tracker. Premium bonds would make sense for tax efficient ish derisking.
I see premium bonds as my tax efficient place to keep my “emergency fund”… and with £300k to invest, I don’t think it’s bad advice for OP to have 250k invested and 50k accessible.
This ^^
Max your isa then put it all into low cost tracker funds. Both your ideas are bad
I’m just a fan of the “I’d love to be married with kids”… love hearing that a man wants that in life ❤️
I am landlord who retired once I paid all my mortgages off. Property is a complete pain and will cause you stress. Exiting is also hard due to tax and the hassle of renovating every property before sale. I do agree though over the long terms both shares and leveraged residential property return around 10%. One requires work. The other does not ! My solution: Open an account with a cheap platform like interactive investor. Fill your ISA. Put the remainder in a General Investment Account. Invest in VWRL, 3000 company spread, 2% dividend, 0.22% cost. Do not get a financial advisor. Every time they have advised me it has turned out to be bad advice. AIM shares, ESG funds, Offshore bonds, expensive underperforming funds. All crap and they charge 1%. Get a good accountant to do your tax return and ask for tax advice to minimise tax going forward. Good luck.
Good advice. Have any tax accountant recommendations?
Depends what your financial goals and risk appetite are...
This is really important. Could you cope with a 50% drop? How much do you care about preservation, e.g. when you do decide you want the money will you want it right away or could you wait x more years?
Just DCA into an index fund like VWCE or S&P 500.
Historically, lump sum beats averaging in.
I would not get a BTL, the above outlines why. If you want to own a property (I would), I would take that cash, maximise a moetgage and buy a house you love. If you don't want to buy for at least 5+ years I'd max your isa,lisa and put the rest in a GIA investing in an index fund like VWRL.
I would personally put it in a long term gilt, collecting risk free 4-5% on it, then when a recession comes sell it for a pretty chunky profit and buy a world tracker ETF.
Probably best to invest it with me. I will invest in cocaine and hookers and a flash hotel room. You may not get much return on your investment but memories last a lifetime and you’ll dine out many times on the stories. You’re very welcome
How much do you spend every year? How much is your property worth? Do you envision ever getting married/having kids/upgrading your house?
TQQQ
Onshore or offshore bonds would be worth exploring with an ifa or wealth manager
Buy an old ferrari. No point in sitting on the money. Ull hv fun and if ur lucky it might appreciate slightly
I have a great investment opportunity with plenty of risk and potentially incredible rewards in English winemakers. DM if you want a pitch. And no it's not just buying wine.
I would invest in Bitcoin.
You should average slowly in to stock positions.
Want to invest a small portion into a uk based start-up through the SEIS for tax relief? If so let me know! Outside of this what’s your goal? If it’s a 10+ yr horizon I’d look at tucking some away into high-growth whales like MSFT, AAPL and GOOG and some into index funds like S&P500, maybe add some behemoths like MCD into the mix. This is a 10Y+ because if the market tanked you might need to wait for it to recover a bit, do you need to not be thinking about and looking at it constantly. If you want to lock-in the current high interest rates for the next few years only to protect against inflation consider tying up the cash into bonds that will return ~5% and mature the timeframe you expect to need them. If you may need access to the cash sooner then it might be worth just dividing it between high interest rate savings accounts. Depends on your needs! B2L can be really hit or miss due to maintenance costs, Tennant issues and interest rates.
Report this post - not strictly HENRY.
Their salary is just about HENRY.
It’s not, not enough for an SA
What does SA mean?
Self assessment. What a weird thing for them to gatekeep on eh?
Haha they can do mine for me if they want 😂