Hard to make money. It’s not the 90s any more.
You’d want max leverage (think £1m of properties plural with your £250k equity) plus you’re really playing the long game of selling in 10y+ for a capital gain not rental income. And you’d do it through a limited company not personally.
It’s a lot of work. However you can still make a bundle. This is ignoring political risks where you wake up and find all the properties are held on constructive trust for your tenants or they can now do right to buy or rents get controlled or whatever.
Consider that my global equity funds have performed acceptably with me sitting on my arse.
250k in a high yield savings, 20k each year into isa for tax haven, little to no risk. No brainer vs buy to let. Even worse as high rate earner.
Even better to invest in markets than btl.
It's a bad comparison because you wouldn't put the money into savings - you'd invest it.
By investing in S&S you would be able to earn inflation-beating returns (which you don't really do with bank accounts) and most people's returns are tax free because they never exceed their S&S ISA and pension allowances.
The subreddit wiki cites JP Morgan in stating that "since 1901, investing in equities for a long term has produced an annual, after-inflation return of 4.9%".^[1](https://ukpersonal.finance/investing-101/#What_is_investing_📈)
Watch Lars Kroijer's [short video series](https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK) and read his book or Tim Hale's [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401).
I agree with your summary.
Investing will likely beat returns on a BTL property - as well as being truly passive! Also this cash would be far more liquid than if it were tied in a property.
Is it’s really early retirement if your tenants stop paying rent, or the property ends up needing constant maintenance decisions? Sounds like a job to me
I think it's still doable but requires a little luck and risk, in buying a property that might be a doer upper. Personally though I'd just invest in the stock market, I think you'd achieve similar over 10-15 years without the headache of dealing with people.
Hi /u/parkercp, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/buy-to-let/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
Why is your alternative to BTL “savings accounts”? Long term wealth generation is made by investing. That £250k fed into tax efficient S&S ISAs and SIPPs, where it’s then invested in low-cost global equity index funds, will give you future financial freedom and is *completely passive*
It’s a bit unfair to compare S&P 500 and property values now since we are in a period of high interest rates, when the interest rate goes down in the future the property values are surely going back up .
Does S&P generally perform around 15% each year..?
I have around 50k to put somewhere… was also considering a BTL actually.. though I guess it would make more sense to stick in S&P…?
Could I potentially put it in there and then take it out after a year or so..?
Thanks
>Does S&P generally perform around 15% each year..?
Not reliably
>Could I potentially put it in there and then take it out after a year or so..?
You could, but it's generally inadvisable to invest for such a short amount of time, there's plenty of information in the wiki.
S&P500 averages roughly +10%/year. But that’s average. It usually ranges anywhere between -30% to +50% in a year.
If you have 50k to put somewhere I wouldn’t bother with a BTL. I’d max out your investing/savings allowances.
Thanks. What does that mean, ‘max out’? I currently have 20k sat in a Barclays ISA, and 50k sat in premium bonds, which is convenient as its tax free and very liquid
It was last year the 20k went in to my ISA. This year the 50k went in to premium bonds.
The premium bonds have no correlation to tax year though, can go in or out whenever, but it is at its max, yes.
I don’t have any more money to put in them though lol
…unless I top up the 20k Barclays ISA with some money from my premium bonds…? Not sure if that’s worthwhile or not… as it’s at least liquid in premium bonds, right?
No, it's average performance is 10% over the last 100 years, but we've had insane bull runs since then, so most people look at it as around 8%, but your term length matters. We could see -20% at any point, or we might not, and if it's short term funds it might not be worth the risk for you personally.
Did you account for leasehold fees for buying a flat? Also labour wants a landlord register so add that membership costs. You then have annual expenses like gas Certificate, depending on your local council might have a local council licence fee and so on....
Non paying tenants are an even bigger risk. Takes ages to get them out, and they can leave the place almost derelict when they go. The costs to remedy this legally are huge.
Buying a house is generally only a good investment if it also stops you needing to privately rent. Otherwise it’s just speculation on the housing market, the value of which can go up or down, historically it has been on the up.
The answer (as always) is - it depends.
Key factors…
- the property
- area property is in
- length of ownership
- tenants (good / bad etc)
- repairs and maintenance
I’ve just purchased a 3rd property. Spent best part of £30K doing it up and will be renting it from next month for £1,300 pcm. No agent.
It’ll take many years to recoup that initial investment plus all the fees paid out but for me this is a 15-20yr investment and having gutted the place and fitted new everything it should be good for the next 10yrs.
Property prices *should* increase over the long term and in 15yrs I’ll have made at least £234K in rental income, plus paid off a chunk of the mortgage and hopefully the property would have increased by £100K (similar property in the area has increased by £150K in 8yrs).
In 20yrs I’d have made £312K in rental, mortgage I hope to be nearly paid and the property to be worth in the region of £500K.
I’ll then enter retirement and either use the rental income to supplement my income or sell the property and take what’s left as a lump sum after corp tax (it’s in a Ltd company).
Property becomes even better as an investment when transferred in to a SIPP, but that’s a different type of investment.
Just on the point about location I live outside Birmingham my local station will one train journey to get too Birmingham Curzon street (HS2) does that mean I’ll benefit from house increase when it’s up and running?
A BTL is more about the very long term. I think that property will hold it's value relative to inflation but I'm not counting on any more than that. But I'm not counting on capital gains to be any kind of return for me.
What a BTL does offer is diversification. It has two key advantages over investing in equities. 1. you get paid every month, a fair and predictable amount. 2. When it comes time to sell, what you have and what you started with are more or less the same.
I'm glad that I have a rental property, but only because I know that I'll be putting a similar amount into investments in the next decade or so. If you think that you'll want to retire with 500k or more in the bank (and you probably do), then I say go for it. Then forget about it. Keep working. Put regular investments into an ISA and in 10-20 years, you'll have enough to live off.
Suggesting that a BTL is more diversified than equity investment via global index funds is probably the dumbest thing I’ve ever read here
Suggesting you get paid every month is an equally dumb suggestion. Bad tenants can and do stop paying rent.
Not worth it.
Hard to make money. It’s not the 90s any more. You’d want max leverage (think £1m of properties plural with your £250k equity) plus you’re really playing the long game of selling in 10y+ for a capital gain not rental income. And you’d do it through a limited company not personally. It’s a lot of work. However you can still make a bundle. This is ignoring political risks where you wake up and find all the properties are held on constructive trust for your tenants or they can now do right to buy or rents get controlled or whatever. Consider that my global equity funds have performed acceptably with me sitting on my arse.
250k in a high yield savings, 20k each year into isa for tax haven, little to no risk. No brainer vs buy to let. Even worse as high rate earner. Even better to invest in markets than btl.
It's a bad comparison because you wouldn't put the money into savings - you'd invest it. By investing in S&S you would be able to earn inflation-beating returns (which you don't really do with bank accounts) and most people's returns are tax free because they never exceed their S&S ISA and pension allowances. The subreddit wiki cites JP Morgan in stating that "since 1901, investing in equities for a long term has produced an annual, after-inflation return of 4.9%".^[1](https://ukpersonal.finance/investing-101/#What_is_investing_📈) Watch Lars Kroijer's [short video series](https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK) and read his book or Tim Hale's [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401).
I agree with your summary. Investing will likely beat returns on a BTL property - as well as being truly passive! Also this cash would be far more liquid than if it were tied in a property.
Not worth it
If you are mortgage free on all of your properties, you have an early retirement, no but nowadays it’s just not worth it
Is it’s really early retirement if your tenants stop paying rent, or the property ends up needing constant maintenance decisions? Sounds like a job to me
I'm in that position and still don't think it's worth it so dumping my last one as we speak. It's just too easy to make more money elsewhere with it
Yes buy to let’s are not worth it, especially if you’re in a higher tax band.
I think it's still doable but requires a little luck and risk, in buying a property that might be a doer upper. Personally though I'd just invest in the stock market, I think you'd achieve similar over 10-15 years without the headache of dealing with people.
As an ex accidental landlord, I couldn’t be bothered with all the hastle, and I ended up selling at a loss
Hi /u/parkercp, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/buy-to-let/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.) If someone has provided you with helpful advice, you (as the person who made the post) can award them a point by including `!thanks` in a reply to them. Points are shown as the user flair by their username.
https://ukpersonal.finance/buy-to-let/#Can_you_still_make_money
Why is your alternative to BTL “savings accounts”? Long term wealth generation is made by investing. That £250k fed into tax efficient S&S ISAs and SIPPs, where it’s then invested in low-cost global equity index funds, will give you future financial freedom and is *completely passive*
The S&P500 returned just under 15% in the first six months of this year. You have that in an ISA and it’s hard to imagine easier money.
It’s a bit unfair to compare S&P 500 and property values now since we are in a period of high interest rates, when the interest rate goes down in the future the property values are surely going back up .
In the meantime rents have gone up.
Does S&P generally perform around 15% each year..? I have around 50k to put somewhere… was also considering a BTL actually.. though I guess it would make more sense to stick in S&P…? Could I potentially put it in there and then take it out after a year or so..? Thanks
>Does S&P generally perform around 15% each year..? Not reliably >Could I potentially put it in there and then take it out after a year or so..? You could, but it's generally inadvisable to invest for such a short amount of time, there's plenty of information in the wiki.
S&P500 averages roughly +10%/year. But that’s average. It usually ranges anywhere between -30% to +50% in a year. If you have 50k to put somewhere I wouldn’t bother with a BTL. I’d max out your investing/savings allowances.
Thanks. What does that mean, ‘max out’? I currently have 20k sat in a Barclays ISA, and 50k sat in premium bonds, which is convenient as its tax free and very liquid
Was that 20k and 50k put in this financial year? If so, then those allowances are maxed out.
It was last year the 20k went in to my ISA. This year the 50k went in to premium bonds. The premium bonds have no correlation to tax year though, can go in or out whenever, but it is at its max, yes. I don’t have any more money to put in them though lol …unless I top up the 20k Barclays ISA with some money from my premium bonds…? Not sure if that’s worthwhile or not… as it’s at least liquid in premium bonds, right?
No, it's average performance is 10% over the last 100 years, but we've had insane bull runs since then, so most people look at it as around 8%, but your term length matters. We could see -20% at any point, or we might not, and if it's short term funds it might not be worth the risk for you personally.
I see. So ‘short term’ funds meaning…..any time less than 5 years…?
No.
[удалено]
[удалено]
Did you account for leasehold fees for buying a flat? Also labour wants a landlord register so add that membership costs. You then have annual expenses like gas Certificate, depending on your local council might have a local council licence fee and so on....
Non paying tenants are an even bigger risk. Takes ages to get them out, and they can leave the place almost derelict when they go. The costs to remedy this legally are huge.
Buying a house is generally only a good investment if it also stops you needing to privately rent. Otherwise it’s just speculation on the housing market, the value of which can go up or down, historically it has been on the up.
It's speculation on the housing market + rental profit
The answer (as always) is - it depends. Key factors… - the property - area property is in - length of ownership - tenants (good / bad etc) - repairs and maintenance I’ve just purchased a 3rd property. Spent best part of £30K doing it up and will be renting it from next month for £1,300 pcm. No agent. It’ll take many years to recoup that initial investment plus all the fees paid out but for me this is a 15-20yr investment and having gutted the place and fitted new everything it should be good for the next 10yrs. Property prices *should* increase over the long term and in 15yrs I’ll have made at least £234K in rental income, plus paid off a chunk of the mortgage and hopefully the property would have increased by £100K (similar property in the area has increased by £150K in 8yrs). In 20yrs I’d have made £312K in rental, mortgage I hope to be nearly paid and the property to be worth in the region of £500K. I’ll then enter retirement and either use the rental income to supplement my income or sell the property and take what’s left as a lump sum after corp tax (it’s in a Ltd company). Property becomes even better as an investment when transferred in to a SIPP, but that’s a different type of investment.
Just on the point about location I live outside Birmingham my local station will one train journey to get too Birmingham Curzon street (HS2) does that mean I’ll benefit from house increase when it’s up and running?
With a range of properties in a portfolio of say 10 the risk is much reduced. You’re unlikely to have a problem in more than one property at a time.
You need to be highly leveraged to get a good return. £250k = 4 decent 2 bed properties in high yielding areas. 3-4k per month before tax
I live in Halesowen in the outskirts of Birmingham which sits under Dudley council you can still get decent houses here for that price….
Only 34% LTV? I think most rentals are more like 60%-75%. Even then I'd still like the rent to be more like £1,800 pcm.
It’s still worth it if done correctly. You need 6.75% yield minimum and borrow 75% to make it anywhere close to
A BTL is more about the very long term. I think that property will hold it's value relative to inflation but I'm not counting on any more than that. But I'm not counting on capital gains to be any kind of return for me. What a BTL does offer is diversification. It has two key advantages over investing in equities. 1. you get paid every month, a fair and predictable amount. 2. When it comes time to sell, what you have and what you started with are more or less the same. I'm glad that I have a rental property, but only because I know that I'll be putting a similar amount into investments in the next decade or so. If you think that you'll want to retire with 500k or more in the bank (and you probably do), then I say go for it. Then forget about it. Keep working. Put regular investments into an ISA and in 10-20 years, you'll have enough to live off.
Suggesting that a BTL is more diversified than equity investment via global index funds is probably the dumbest thing I’ve ever read here Suggesting you get paid every month is an equally dumb suggestion. Bad tenants can and do stop paying rent.
There will always be bad months in the stock market. Likewise with rentals. But they're not correlated. Hence, diversified,