Property vs pension

[TheCyclingProgrammer]

BTL is played out nothing to be made other than loooooonnnng term. If that's all avalibe why not invest in your own house and gets some benefit. Build/extend/buy.
I'm not counting on a pension to to look after me in retirement (when ever that is) spread the risk.

While their is demand for housing ownership and not enough supply I don't a long term reduction in property values. Only way to stop it is to build like crazy.

We have invested a decent chunk of money in our house - and we must have timed it right as we bought here just before the house prices started going up. Last remortgage valuation (not a desktop valuation but actual survey) was £60k over what we paid 2.5 years ago (a few EA valuations were £10-30k more than this but taken with a massive pinch of salt).

We’ve refurbished top to bottom, had the garden relandscaped and had a garden studio built. There’s nothing more to extend really, it’s about as extended as it will get short of demolishing the conservatory and having a proper full width downstairs extension (probably not worth the time or money). At a rough estimate we must have spent at least £60k (half of that on the garden and studio).

So we are about as invested in the house as we can be and plan to be here for at least the next 10 years. In fact, we don’t intend to move more than one more time because it’s not something I want to make a habit of. So I’m with you on investing in your own home.

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? Based on the last valuation we must be on about 65% LTV now.

Lots of useful stuff to think about in this thread anyway.

[Smartie]

I think I started a thread on here earlier this year about long term planning and the fact I still have no pension. I still haven't sorted anything out.

Simplest option seemed to be start a SIPP, pay in whatever I can as a company contribution and forget about it. I worked out for a half decent return, I'd need to put £20k in a year over the next 30 years to end up with a decent pension pot, enough to generate an annual income of around £20-25k or so. This, combined with the fact that once the money's in the pot, it's gone for the next 20 years (I'm nearly 35) made me hesitant.

OTOH, it occurred to me that I could very easily save up enough money in 2-3 years time to buy a property and rent it out. Maybe over time I could afford to get a few. I've never really given much thought to being a landlord and I know the government keeps trying to make it less appealing in terms of tax efficiency but the idea of investing money in property seems more appealing and is probably a fairly safe bet long term.

This is of course all dependent on me being able to get a second mortgage and it's not without its risks.

An age old debate, I'm sure, but what would you do?

When you're 45 you'll wish you had put some money into a pension ;-)

At the moment there's a decent tax break on pensions so you're not actually putting £20k in a year but £16k from the company (corp tax reduction).
If you took that £16k out you'd be paying tax on it, probably at 40% so it's more like getting £20k value for £10k input. Not bad.
Even at conservative estimates you'll get your £24k a year from that (plus £8k state pension if it's still around) plus £180k tax free cash (25% of pot)!

That's not too bad. You can also afford to make more risky investments - emerging markets, small companies etc. and perhaps beat the conservative growth estimate by a lot.

Finally, annuities have been really bad recently - around £4-5k per year per £100k in your pension. They're getting better again though. When you retire you might find that you're getting £8k per £100k and end up with over £40k a year instead of £24k.

ISA's also look pretty good though putting in cash after tax seems painful. The tax free income will mount up in the future and be very handy.

The main concern at the moment is that markets are looking a bit high and there'll inevitably be a crash in the next few years. With a 30 year horizon though you're in a great place to get started early, weather the storms and have a solid retirement income.

Alternatively, fast women and hot cars beckon, at least until you retire ;-)

[scooterscot]

AirBnB is very hands on unless you get someone to manage it for you.

Agreed - I spend 50% of my turnover employing someone to turn the place around.

[ChimpMaster]

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.

AirBnB is very hands on unless you get someone to manage it for you.

There is still money in BTL so long as you structure it correctly and buy with yield in mind rather than expectation of price growth. And BTLs do not have to be hands on; we have given a house to a private sector leasing company for slightly less than market rent but they take it for 3 or 5 years and you don't hear a peep. Simple.

[scooterscot]

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.

[poorautojobber]

BTL is played out nothing to be made other than loooooonnnng term. If that's all avalibe why not invest in your own house and gets some benefit. Build/extend/buy.
I'm not counting on a pension to to look after me in retirement (when ever that is) spread the risk.

While their is demand for housing ownership and not enough supply I don't a long term reduction in property values. Only way to stop it is to build like crazy.

[scooterscot]

Pssstt...... You're right. Look up there some place. Regional REIT, >8% dividend, tax free in an ISA. But don't tell everyone.

Pssstt.... US is about to wavier tax duty on bitcoin gains. But don't tell everyone.

[ChimpMaster]

I'm not sure how BTL can be profitable unless your just banking on the property being worth more at the point of selling it years down the line?

We rent out our first house (and have done for about the past 5 years, owned it for 10years) although I'm strongly thinking of selling it now due to the changes in the ability to offset your mortgage interest.

We bought the house in 2008 right at the peak of the housing bubble and paid £225k for it and I envisage it probably worth about that now (but I've not had a valuation). As we're in a little village in Derbyshire its not going to be worth a massive amount more I doubt even if we held onto it for another 20 years.

So the thinking/sums behind getting rid are as follows
Rental Income £700/month
Mortgage Interest £350/month
Insurance costs etc £30/month
"Profit" £320/month (less anything that needs fixing)

However with the recent changes to offsetting mortgage payments and being in the 40% tax bracket it means that now I'll be taxed approx. £ £270/month on the £700 month income leaving me with approx. £50/month "profit".

and for £50/month(best case scenario) I could do without the hassle of having to manage it if and when things fixing. TBH the tenants are pretty good but its just a hassle and a worry I could do with out. Certainly when its for such a tiny amount of return.

Has anyone else found themselves thinking/doing the same?

I think you have the section 24 tax calculations incorrect there. I work your 40% tax to be £212. But remember that it's a staggered reduction on the tax relief over the next couple of years.

Look for news in the budget this year too. There are murmurings of some allowances being given to landlords who give out longer tenancies.

[d000hg]

If you can buy a house for cash you can get 4% return from rent easily - factoring in fees and costs. If you choose more carefully then probably more like double; we bought a nice flat for £160k in Cornwall that rents for £650pcm but closer to home we could buy a house for £60k and get £400-450pcm for it.

[Fred Bloggs]

Wow - some excellent advice on here alongside the stampede of stupid money heading in the wrong direction.
Couple of episodes of any landlord nightmare programme is enough to put me off BTL and I don't care how many people you know who have 'no problems'.
I understand the temptation, property works due to leverage, you only kick over a deposit but take all the gains. Good luck to anyone doing this, I know many have done well but defo not for me or an easy life, especially now the squeeze is on and the 'accidental landlords' tell me it doesn't just go up. I don't want to fix stuff on my own house let alone a BTL.
So, want property exposure ? Chuck some at a REIT, it will kick you a dividend and never call you to fix a leaky shower tray AND you can sell in 10 seconds for a tenner. My house is a massive commitment to property, why would I commit any more ?
I would get a global shares fund/etf ISA or SIPP (incidentally, your family dont lose the lot if you carc it after 5 years, that is only if you buy an annuity), drip feed (use PCA or Value cost averaging) and forget about it.
It's a slow start but once the snowball starts rolling, you won't believe how big it gets.
Crypto - PLEASE don't commit anything more than chuck away money you can shrug off if it disappears.
Another shout for Malkiels - A randon walk down wall st, makes it all clear...
GLA

Pssstt...... You're right. Look up there some place. Regional REIT, >8% dividend, tax free in an ISA. But don't tell everyone.