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I always felt that buy-to-let was over-hyped. Although many investors have done well, generating attractive rental yields and capital growth from rising house prices, it is such an effort.
And today it demands more effort than ever, while the rewards have declined dramatically. Investors have to secure the right property, slap down thousands in stamp duty and spend money doing it up. They then have to find tenants, sign contracts, collect deposits and rent, check tenants aren’t trashing the place, replace them when they leave, and sort out any problems with the property. There there’s maintenance and wear and tear.
Oh, I forgot. If you take out a buy-to-let mortgage you also have to allow for a valuation, survey, legals, arrangement fees, mortgage interest charges and future remortgage costs.
At the same time, the tax burden has got heavier, including a 3% stamp duty surcharge, reduced wear and tear allowances, and the loss of higher rate tax relief on mortgage interest. Landlords also have to jump through many more regulatory hoops.Property and stocks offer both income and growth. The FTSE 100, for example, currently yields a healthy 4.01%. If you had invested £20,000 in the FTSE All Share 10 years ago you would have more than doubled your money to £41,100, according to Fidelity International.
Property has also done well too, just not well enough to make it worth the extra effort. The national average rental yield is just 4.4%, which falls to 3.16% in London, Your Move calculates. Rental growth has stalled, up just 0.97% in the last year, according to Landbay.
Learn Change and Adapt ?????
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So in 10 years it took £20k to be worth £41,100 in the FTSE, but it doesn't say if dividends were reinvested. I'm guessing they were.
In 13 years I turned £40k into over £1m through BTL and a few quick flips. Thats not equity, thats sold up and cashed out, all tax paid.
Stocks and shares is lazy investing, but its better than nothing.
Property and BTL are completely different beasts in my eyes, there's so many different ways you can add value, refinance, find a bargain, split things up, etc.
Whoever wrote the article is clearly a hands off investor, which BTL isn't.
I went to a financial seminar once when the IFA showed the assembled crowd graphs where the stocks and shares upward trajectory line beat the BTL line
I was sat at the back - My hand kept popping up to ask questions
I said well I`ve made at least 4 times what your graph shows doing BTL
The room asked me how .....and I told them .
The IFA slunk off into a corner a beaten man
Jonathan Clarke. http://www.buytoletmk.com
You have to laugh at such a heavily weighted article with such throw-away statistics:
"Property and stocks offer both income and growth. The FTSE 100, for example, currently yields a healthy 4.01%. If you had invested £20,000 in the FTSE All Share 10 years ago you would have more than doubled your money to £41,100, according to Fidelity International."> Not sure when 4.01% has ever been considered healthy? And that's currently as well!
"Property has also done well too, just not well enough to make it worth the extra effort. The national average rental yield is just 4.4%, which falls to 3.16% in London, Your Move calculates. Rental growth has stalled, up just 0.97% in the last year, according to Landbay."> What, no 10 year figure to be able to compare the two? Boo!
I think you have to remember with isa it’s not in any way the same as BTL
the returns are tax free so if it grows at 4% to a high rate tax payer it’s worth 5.6%
also your risk is low compared to BTL especially if your leveraged
I use them today and I have returned higher rates that this says
the great thing is you can get in and out quickly and the investment choice is huge
Tax free is great but can be a bit of a red herring sometimes
I would rather make 20 % - 40% in BTL and be taxed 20% corporation tax on it....
......than get an ISA @ 5.6% tax free
I jacked in all my ISA `s when i discovered this
The great thing with BTL you can in and out quick at an auction and the investment choice is huge
I think you should check out some of the funds I am useing
try this for a sample
Lindsell train uk equity
lindsell train global
it my suppriise you to see the growth achieved over a long time JC and it’s all tax free infact is a pension and get 40% uplift from day one
with out a lot of work
6 months 10%
1 year 13%
three years 51%
5 years 80%
10 years 332%
this is not a fluke it’s 10 years of good investment
Understand you can do much better than 5.6% and you have done well
My fear is any isolated fund/ share can drop 40% overnight so I don`t want to take that risk
That wont happen in property though
And the 40% uplift day one you mention is not a physical uplift - its just relief so not cash in your hand
There is work to set up a BTL agreed but its not exactly slave labour. Its quite fun I find
But then an LA could take over just like your broker does for a % so income and growth becomes passive
So I respect your choices but I`m afraid I wont be checking out Lindsell Train UK equity tbh
I get my kicks checking out a 3 bed last week and offered
PP 210K Refurb 12K End value maybe 260K .
So if it was 75% LTV thats about a 60% gross ROI before fees/ costs etc in 4 weeks after completion
You see you miss a very important issue JC
lets say Property dropped by 40% would you sell
I don’t think you would you would hold and maybe buy more property at a lower price
fund investment is the same an investor who saw a fall would buy into the market
things always recover
and if your savvy you buy when it’s falling
nothing is lost unless you sell
I never sell property and I never sell funds
there one in the same thing
you use JC law because you know over 20 years Property will rise
well the stock market is the same
But they are not the same really are they
Property dropping by 40% overnight is unprecedented .
Shares however can be wiped out overnight .
Your money is locked in . You cant do anything with it. It just a dormant investment
One must compare like with like
Shares have major limitations over BTL
1. You cannot leverage . A bank wont lend you 75K to buy a 100K share
2. You cannot refurb . You cannot add a kitchen to a certificate and make it look any prettier
3. You cannot extract equity growth and buy more shares but keep the original value built in
This is why BTL beats funds
Yes over 20 years if you dont sell and just buy they will both rise I agree but so what
Its meaningless really and doesnt go to the heart of the differences between the two investments
The share certificate does sod all in that 20 years. Its bone idle
The BTL property works hard for its living in that 20 years and as a result brings home far more cash
Because BTL is so flexible you can buy 20 fold more in that 20 years
Therefore assuming the base value of both rises the same you can still make 10 times as much
If you have 100K you can only buy 100K of shares but you can buy 400K of property
Then repeat and buy maybe 400K more in 5- 10 years so you have 800K
You still only have 100K of shares . If you buy more you have to find funding outside
And if you say dividends I will simply say rental income
But your original 100K share investment is motionless ,cryogenically frozen for that 20 years
But you know all this DL already . You play devils advocate .
I am preaching to the converted - someone who has already made her fortune in property
But you unfortunately are currently a disillusioned convertee so you I guess just want reassurance that despite Osborne property has survived and will thrive
I am that voice of reassurance. Don`t be fearful DL the storm will pass and the sun will still rise :-)
What is wrong with my sample deal that would lead someone not to buy it ?
If we are to compare two products we owe it to ourselves to draw true comparisons
Don`t play down the benefits of property over shares to fit your choices you make today
You are wise enough to know the full pros and cons of both
Both can be good but property is many times better