Buy v Rent

[sappatz]

uk pensions

uk state pensions are a scam !!
according to some studies (gartner and others), the british governement will be bankrupt by 2030 if it continues paying the same pensions as now !

[mcquiggd]

That will never happen. Mass immigration will save us.

[bobhope]

Shoeshine boy

Eleven years ago, when I bought my first house, nobody was interested in property. Interest rates were ~6%. Gross yields in the South-East were ~12%. In hindsight, it was a no brainer. Fast forward to 2004 and now everybody I met was telling me what a good investment BTLs were, now that prices had more than doubled. Now the repo rate is ~4.5% and gross yields are 3-4% maximum. It's yet again a no brainer, but in the other direction. When my sister-in-law, hairdresser, distant cousin, etc. announced they were buying investment properties, I took that as my cue to exit. Everyone knows the quote by Joe Kennedy when he sold his stocks weeks before the 1929 stock market crash after receiving stock tips from the boy that was shining his shoes:

"When the shoeshine boy starts giving you stock tips, it's time to get out of the market."

[Lockhouse]

Rents

I'm still charging the same rent that I did 5 years ago (NE London). My property has gone up 40% in value. You could now no longer buy the same property with less than a 60% deposit and break even! I wasn't that well geared 5 years ago - I covered my costs and then a little bit more, but you'd have to be absolutely mad to enter the BTL market now.

IMHO the best investment a 40% taxpayer can make is to pay capital off their own mortgage, sell up and leave the country.

[lilelvis2000]

What I would like to know is how you can live in your house and use the equity you have in it? Are you guys talking reverse mortgage? or are you talking about taking a loan secured against your property? both bad ideas in either account.

[DimPrawn]

You can release the equity easily using a mortgage such as the One Account. I even have a Visa card with a £250K spending limit if I want to spend it that way.

Means I can "borrow" against the equity in the house for investments, make a pot of cash and them put the money back and keep the profits.

Which was nice. Has paid for two other properties and a villa abroad over the years.

[Helios]

While you rent u r homeless. Technically.

When you have a deed for your own land, you own your own land.

Bricks and Mortar are not worth the paper they are written on. Imagine if GB got owned by Germany in the 1940's, Adolf would have been training his dogs in westminster and the queen would have been cleaning the toilets in the house of lards.

I am going to camp at the tower of london and after 16 years or whatever it is, will claim it as my home as an occupier. Let the bastards depute my claim then. LOL

[ASB]

I'm still charging the same rent that I did 5 years ago (NE London). My property has gone up 40% in value. You could now no longer buy the same property with less than a 60% deposit and break even! I wasn't that well geared 5 years ago - I covered my costs and then a little bit more, but you'd have to be absolutely mad to enter the BTL market now.

The same circumstances might also make you mad to stay in it. (I've kept in it with one property). This yields < 3.5% on it's current value. This is about 2.85% after all agent costs etc. Unfortunatley the overall cost of the debt is about 3.3%.

The effect of this is that I am contributing about 75 pcm to the interest on the mortgage, the tenant the rest. Thus currently the only return is the capital growth (or lack of!).

This property has debt of 110k on 200k, so I'm also losing the opportunity value of 90k. Even in a deposit account this would yield about 3.2k after tax. Thus considerably increasing my landlords subsisdy.

Over the 8 years I've had the property it's done well enoguh. Capital appreciation of about 110k, some of which was used (hence the comparatively high mortgage) to purchase another property which was sold yielding a short term 22%.

Just at the moment though it is certainly not paying its way. It will probably be sold next April, too many CGT problems to do it earlier.

IMHO the best investment a 40% taxpayer can make is to pay capital off their own mortgage

Paying capital off your mortgage as a 40% taxpayer gives a guaranteed return of about 10% for most people. Or to put it another way the asset you hold should be generating at least 10% to be worth holding the debt for.

I know a few people who have mortgages on their main residence and also BTL's. Holding on to the secondary properties in a flat market is crazy (ok it's possibly worth doing it for a while).