Hi all Could someone give me an opinion on a situation occurring. My daughter DOB 1967 is contemplating a BTL costing 160K producing currently 7500pa. net of expenses. In first few years mortgage will initially require 4000 pa contribution from her pocket to make up shortfall between rent income/mortgage repayment until rentals increase to equal (and eventually surpass) mortgage repayments , this initial contribution she does not like overly. I calculated the 160k purchase price will have increased to 424,527 over 20 years @ 5% pa (my own property in similar area has done 10% pa for the last 28years, 47k to 650K). Rental, should they maintain a similarly conservative 5% will be produce 243K pa at year 20. To put this in context for her with say a personal pension, according to the Hargreaves Landsdown pension calculator, 4800 pa pension contribution would produce a pension pot in 20 years (she will be sixty) of 225,898.00, Less than 1years projected rental return on this BTL is this a no brainer? any advice would be useful for her.

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.

BLT or Pension??

W

whitely525 19 years ago

If that is true net, it is not to bad by todays standards.

But you could currently get 5.75% (gross) on a savings account.

1) It basically depends if you think property prices are still set to rise, even by smaller amounts is not to bad because the main risk is a forced sale. 2) While yields on BTL look derisory, the big risk is low interest rates. In this case you would get derisory returns on savings, while property would likely steam on ahead. 3) people like bricks and mortar, tangible things. Don't know why, they just do. Maybe they fear a run on the banks or something.

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tim..... 19 years ago

Yep,

Back in the days when you could get 12% yields, I made about 4 K pa after expenses on 80K of investment. I had demanding, akward tenants and for the hours I put in I could have worked overtime at work for the same money.

It was only because I made a great capital gain that it was worthwhile.

I would touch being a landlord at 4% yields with a s***ty bargepole

tim

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tim..... 19 years ago

I take it these users are yourself?

ISTM that you have had some reasonable replies and it just shows your lack of experience in these matters if you can't see that, IMHO.

tim

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tim..... 19 years ago

That pension pot is a pessimistic estimate. Your estimated rental is an optimistic figure. Rents have not gone up 5% pa compound in the last 8 years. I would be suprised if they have gone up 1% pa.

tim

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Virgils Ghost 19 years ago

He asks questions and then disagrees with honest answers he doesn't like. Which begs the question, why bother asking in the first place?

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vilemerchant 19 years ago

When the great economic collapse happens savings won't be worth anything, but if you've paid off a house you at least have somewhere to live :P

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Jonathan Bryce 19 years ago

You won't get anything like 5% rental increase per year. Round my way, rents haven't really gone up at all in the past ten years.

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John Boyle 19 years ago

In message , Ronald Raygun writes

Ah! Yes! The Arable Percentage Rate Quotation Rules!

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Jonathan Bryce 19 years ago

More than enough. A lot of the land is set-aside so isn't producing anything. But it could.

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Jim Ley 19 years ago

Round Kingston Upon Thames, I saw the same flat I once rented advertised for the same as I rented it 6 years ago - It hadn't been improved since then, and the market was pretty soft with offers well below the advertised rate being taken up, so I reckon on that one flat it's probably dropped over 5% in the 6 years.

Jim.

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Tim 19 years ago

"vilemerchant" wrote

Yeh, it'll just be big guns that are worth something when the state of anarchy starts...

"vilemerchant" wrote

Nope - it'll be the next guy with the bigger gun, who will get to live in your house!

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Daytona 19 years ago

Well, f*ck me. I thought I'd heard everything until I read about that.

Daytona

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Tom Anderson 19 years ago

Ah, but very shortly after that, it'll be the ammunition that's valuable!

tom

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JohnW 19 years ago

I don't have the interest in correcting you in all your mis-informed generalisations and reality proves to me you do not have a handle on what your talking about. But just 3 quick points. 1 Check Hansard, Dep PM quotes council rents rising annually for London culminating at 2012 at 12.5% increase.

2 Sons flat purchased 2003 @99k selling today 166k, thats good old 10% compound again (surprise surprise) I thought you said history had stopped repeating itself in modern times. 3 Suggest you talk to Scottish Widows/ Hargreaves Landsdown, the pension figures I quoted are theirs (underselling yet!!). Having asked for an opinion I find myself having to educate the advisors, Now I really must get on.

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Andy Pandy 19 years ago

Well get on with your investment then. You clearly don't need advice.

So buy a council house in London then, and sell it in 2012.

Yes, I'm sorry, you're quite right, over 4 years prices rose 10% so obviously that proves that they'll carry on rising at that rate for the next 40.

They generally use figures they are told to use by the FSA. But don't let that worry you.

Yes, you've really educated us! Thanks! I'll go out and cash in my pension tomorrow and buy 10 BTL properties!

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Tim 19 years ago

"Andy Pandy" wrote

He'll probably find at the end of the 40 years, that he *did* "need" advice... :-(

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BLT or Pension??

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