Property vs pension

[scooterscot]

Would say... although folks call it a 'holiday let', my experience would say this is 40-50% of the business. Being in the city we get many repeat customers. Such as for the Rugby, the finance quarter folks visiting from London, Weddings and funerals, the Festival of course (worth 3 months in one that month), but September is usually better as a US mum will book out the entire place for their siblings freshers week / the first month of uni etc. Point is, location is more important than focusing on purpose, i.e. holiday let. I'd go multi purpose every time.

Agree about pricing, keep it low, don't get greedy. It is better to have turnover than too many voids in the calendar.

[scooterscot]

Good points there.

And totally agree about not paying off the mortgage ever. What's the point if it's cheap enough?

Reminds me of the time I questioned my IFA, what's the point of this Accident, Sickness and Unemployment Insurance? I never use it!

I'd say paying off all debt is a good thing regardless of its cost.

[Gomez]

If you must have BTL, my recommendation is airbnb or similar. The benefits are the property stays in top notch condition year round, so if you need to sell quickly it looks good. Returns are 2-3 fold on short assured tenancy (or so they seem to be with my Edinburgh place). And finally, you can use the property at a time of your choosing.

Totally agree with this. Even better than BTL is holiday let if you are in area of the country where it is decent to do this. I have holiday let a place this year for the first time. Got punters in through AirBnB and HomeAway network. Surpassed my initial projections by some way. The demand is huge if you price right. Breaks in the UK are booming and will do for some time. As you say also, you get total control of the property and its always tidy. Lots of additional tax advantages with holiday let that you can't get with BTL. Quite a bit of work mind cleaning every week and managing all the bookings!

[sasguru]

That is a really interesting idea.

Apologies for my daft question, but presumably to Air B&B it when you're not there, a local agent can be used for keys\cleaning and you'd manage booking online?

Haven't done it yet, looking to do so, careful research is needed.
But yes that would be the idea.
I think there are agents who manage the whole process including booking.

[gables]

Yes, it's always worth putting 5-10% into high risk investments.
What I do is mentally set my expectations to lose that money, then anything else is a bonus - and sometimes the performance is spectacular.

One idea that hasn't been discussed is foreign BTL.
Having divested of BTLs in the Uk, I'm looking to do that i.e. buy a property in Europe. The idea is to get a property in an in-demand area, Air B&B it to make it a cash cow + you can also use it as a holiday home. I like investments that kill a few birds with one stone and this provides: income stream, free holiday accomodation and capital growth, if you choose wisely.
Portugal for example has no inheritance tax.

That is a really interesting idea.

Apologies for my daft question, but presumably to Air B&B it when you're not there, a local agent can be used for keys\cleaning and you'd manage booking online?

[WTFH]

It's probably a good idea for many because it imposes discipline and they can just get used to the bigger payments.
Personally, it is a bad idea for me when I can use the capital elsewhere to get many times my mortgage rate in returns. You need to see your house as just one of your investments and take a global view of every asset and liability.
The downside is you end up with a massive asset you can't easily liquidate part of, hence all the equity release schemes which always look a bad deal to me but many have no choice because they insisted on paying off the mortgage.
That's before we get to IHT which, even with the increased allowance for housing will likely be swallowed up.
I couldn't care less if I owe half the house to a bank when I croak, they can take their chunk out. The money I have saved not paying into that will be kicking out dividends in a SIPP or ISA.

I'm guessing from this you don't have a partner or dependents (or haven't seen high interest rates or spent a long time on the bench).
With others in your life, it's useful to have your finances in such a way that they will not suffer should something happen to you, but if all your money is locked away in long term investments and they can't easily access them (or it goes to probate), then their family home may well be repossessed.

[sasguru]

Good points there.

I was always brought up with the mindset that "debt is bad" so my aim was always to pay off mortgages. I did this back around 2007/8 but the stupid thing was that interest rates crashed soon after so I would have been better off keeping a mortgage and paying the paltry 0.5% rate I would have been on.

So anyway we kept the property unencumbered and then a couple of years ago released 40% equity, which I used to pay off more expensive BTL loans. Money better spent in my books.

And totally agree about not paying off the mortgage ever. What's the point if it's cheap enough? Right now I have fixed it for 5 years on an offset mortgage and if rates stay low I'll do it again when it's up for renewal.

But you've got to have something else to invest that chunk of money in, something low/medium risk. In my view/experience it would be another property where the rent pays off the loan over time. Clearly others prefer equities/markets while others go in for the big risk items like cryptos. If you have sufficient funds I would go for a BTL, some equity/market funds and a small % in cryptos or other high risk investments. Something like a 70/25/5% split.

Yes, it's always worth putting 5-10% into high risk investments.
What I do is mentally set my expectations to lose that money, then anything else is a bonus - and sometimes the performance is spectacular.

One idea that hasn't been discussed is foreign BTL.
Having divested of BTLs in the Uk, I'm looking to do that i.e. buy a property in Europe. The idea is to get a property in an in-demand area, Air B&B it to make it a cash cow + you can also use it as a holiday home. I like investments that kill a few birds with one stone and this provides: income stream, free holiday accomodation and capital growth, if you choose wisely.
Portugal for example has no inheritance tax.

[ChimpMaster]

It's probably a good idea for many because it imposes discipline and they can just get used to the bigger payments.
Personally, it is a bad idea for me when I can use the capital elsewhere to get many times my mortgage rate in returns. You need to see your house as just one of your investments and take a global view of every asset and liability.
The downside is you end up with a massive asset you can't easily liquidate part of, hence all the equity release schemes which always look a bad deal to me but many have no choice because they insisted on paying off the mortgage.
That's before we get to IHT which, even with the increased allowance for housing will likely be swallowed up.
I couldn't care less if I owe half the house to a bank when I croak, they can take their chunk out. The money I have saved not paying into that will be kicking out dividends in a SIPP or ISA.

Good points there.

I was always brought up with the mindset that "debt is bad" so my aim was always to pay off mortgages. I did this back around 2007/8 but the stupid thing was that interest rates crashed soon after so I would have been better off keeping a mortgage and paying the paltry 0.5% rate I would have been on.

So anyway we kept the property unencumbered and then a couple of years ago released 40% equity, which I used to pay off more expensive BTL loans. Money better spent in my books.

And totally agree about not paying off the mortgage ever. What's the point if it's cheap enough? Right now I have fixed it for 5 years on an offset mortgage and if rates stay low I'll do it again when it's up for renewal.

But you've got to have something else to invest that chunk of money in, something low/medium risk. In my view/experience it would be another property where the rent pays off the loan over time. Clearly others prefer equities/markets while others go in for the big risk items like cryptos. If you have sufficient funds I would go for a BTL, some equity/market funds and a small % in cryptos or other high risk investments. Something like a 70/25/5% split.

[lukemg]

I think it's worth considering. You may not be in a position to overpay (at all or as much) in the future and after the end of the fixed rate term the rate you go onto may cost more in interest than you'd overpay now.

Try some of those overpayment calculators to see how much difference it makes to the overall cost of the mortgage if overpaying now as opposed to later on or not at all, with various possible interest rates along the way.

It's probably a good idea for many because it imposes discipline and they can just get used to the bigger payments.
Personally, it is a bad idea for me when I can use the capital elsewhere to get many times my mortgage rate in returns. You need to see your house as just one of your investments and take a global view of every asset and liability.
The downside is you end up with a massive asset you can't easily liquidate part of, hence all the equity release schemes which always look a bad deal to me but many have no choice because they insisted on paying off the mortgage.
That's before we get to IHT which, even with the increased allowance for housing will likely be swallowed up.
I couldn't care less if I owe half the house to a bank when I croak, they can take their chunk out. The money I have saved not paying into that will be kicking out dividends in a SIPP or ISA.

[Hobosapien]

We can afford to overpay our mortgage but is there really much point when you’re on a fixed rate of about 1.6% for the next 3 years?

I think it's worth considering. You may not be in a position to overpay (at all or as much) in the future and after the end of the fixed rate term the rate you go onto may cost more in interest than you'd overpay now.

Try some of those overpayment calculators to see how much difference it makes to the overall cost of the mortgage if overpaying now as opposed to later on or not at all, with various possible interest rates along the way.