BLT or Pension??

Ever read any of those disclaimers about past performance not being a guarantee of future returns? If this is such a one way bet why not buy (and subsidise) 100 properties and tenants You have to consider the direction of interest rates and the fact rents may not head in the same direction.

Unless the property is able to wash its own face then it cannot really be considered an investment.

So if your property has increased at 10% why should hers increase at 15 % ? They arent making land anymore. Or maybe 25% p.a.

Or make up any figure you like - it is pure guess work.

And what rate of growth is that prediction based on ?

You could, of course, put the money in a SIPP and invest in a property fund, (even a leveraged property fund).

The real question, and the real difference between the two, is:

"Is it right for my daughter to borrow money in order to invest ?"

The second question, after deciding if she has the business acumen to make sensible investment decisions is:

"What business venture should she invest in?"

Why is she considering a property portfolio instead of starting a restaurant chain, or a scrap metal dealership ?

Err... that's why 94% of this country is still farmland?

Which isnt enough to feed those sitting on the other 7% !!

Why bother to rent it out ?

The rental, per annum, will be more than 50% of the value of the property ???

Toom

Show your working. There is definitely something amiss here.

Missing decimal point, perhaps? £24.3k divided by 1.05^20 is £9160 which could well be the gross equivalent of £7500 net.

"Miss L. Toe" wrote

No problem - we've just gained 1% already (94%+7%1%), so just wait around a while longer for a bit more to be "grown"!

If we start using our rubbish for land reclamation.......

Perhaps the 94% was really 93.5% and the 7% was really 6.5%.

"Ronald Raygun" wrote

... alternatively, perhaps the 94% was really 94.5% and the 7% was really 7.5%, and we've actually already grown a whole extra 2%!

No, it was 93.5 and 6.5, and since 93+6™ and 5+5, we get

Yes, could well be.

But at the moment the OP seems to believe the 243k as stated, as is reasonably clear from the bit that I snipped. If a decimal point was was inadvertently dropped, it was dropped earlier than when typed his post. Once corrected, he might want to modify his final question.

Another interesting possibility is that the OP has, for some reason, calculated the sum of all the 'net' income over the 20 years.

___i \ / [7500 * (1.05^(i-1))] /---i=1

is only about 2% off 243k. The difference might easily be accounted for by the sort of accumulated rounding errors that tend to occur when people do this type of computation.

Only he can tell us.

Re these earlier replies, I can accept there are some users of this site who don't know too much, that's no crime, every one's got to learn, but they really should stop short of the arrogance of offering their asinine advise to others, when, by their answers they show they have a 12 year olds grasp of facts and the reality of commerce.

Probably my fault in expecting informed and knowledgeable responses from contributors to this group.

The fact is over 90% of this "small and crowded" country is full of sweet F.A, though I would concede the fraction that is developed is indeed crowded, but that's not for the want of land or the fact they're not making any more, as we already have more than enough.

The majority of farmland in this country is basically worthless because you can't do anything (useful) with it, it's worth a few grand an acre at best, it's that worthless the government has to pay out billions in subsidy each year just so farmers can act as glorified park keepers.

Hi Toom

Thanks for noticing my outrageous calculating error, I've re run the numbers and 20th year rental return @5% compound is 19k pa.

Forgetting any capital appreciation, just rental income only, compares with the same contribution as mortgage payment but instead paid into a private pension fund for the next 20 years estimated to produce a total pot of 225k giving a projected income of 8.80k.

This is product of Hargreaves Landsdown pension calculator web site. I find these figures hard to believe but my own experience over 42 years from an original 3k leveraged investment 1965 to matured 700k today has shown

As for rentals, as a callow youth I rented a 1 bed s/c flat in town centre

My calculation is based on a conservative 5% compound interest on initial capital cost and the same on rentals. According to recent Hansard Parliamentary questions to deputy PM, council rents in London are increasing @ 7.9 % pa and 6.6% across England.

This is not theory but the facts on my own completed investments. Where have I gone wrong? is the 42 year time scale too short? maybe I should give it another 50 years "just to be sure"?, maybe my pension calculation is wrong.

If you see an error in the logic, facts or calcs, an indication would help.

Other posters, maybe worried about how to feed the masses from the big lot of uk land not built on or something, try posting farmers weekly, or maybe Sir Jean Paul at the treacle mines will open a dialog with you on this facinating issue.

JW

The rental, per annum, will be more than 50% of the value of the property ???

Toom

How do you work that out? I assume you're not including mortgage interest in that calculation, but even then, typical insurance and maintenance costs are 2-3% of property value. Add in budgeting for vacant periods/problem tenants, and I think

Have you slipped a decimal point??

Anyway don't expect rentals to rise in line with house prices - they don't. In

Suggest you redo your maths, and assumptions.

Does that account for costs, eg mortgage interest, maintenance etc?

Not to mention sky high inflation in the 70's....

Or about 2.5% after inflation...

For how long have they been increasing at this rate?

The last 42 years featured high inflation, high earnings increases, and high interest rates. Conditions unlikely to be repeated over the next 42 years.

Just look at the difference in, say, stock market performance in the 50 years

You don't seem to have accounted for the costs of the investment. You seem to be assuming constant occuption of the property - something *no* sensible landlord would assume unless you have a very reliable tenant lined up who you are sure won't move. You seem to be assuming what happened over the last 40 odd years will happen over the next 40.