What to do with 15 000 pounds

You can with a loan. I've been offered a 6.6% APR loan off my bank which I can use for anything I want.

Even Jeremy accepts there is a risk. Saying "can't go wrong with property" is, quite frankly, complete bollox.

"Andy Pandy" wrote

They'll lend you a 6-figure sum (X00,000), will they?

"john boyle" wrote

No they won't (or at least they're very unlikely to be) -- investing 25,000 in property A (price 100,000 & using a 75% mortgage), is most likely to give a different return to investing 25,000 (ie the same amount) in property B (price 250,000 & using a 90% mortgage).

"john boyle" wrote

... but it *is* relevant to the amount actually being *invested* in the house (see above).

The leveraging will increase the return if it is positive, and make it more negative if the return is negative.

BUT - the point being made was that, over a sufficiently long period of time, property prices tend to go upwards. So if you invest in property with a LTV 90%, OK you may sometimes lose out badly when prices fall, but **over the longer term** (when prices are much more likely to have risen - eg 15 years plus), your leveraging will most likely be in your favour - and might give a return better than that on equities over the same term??

"john boyle" wrote

No, I'm asking if you can borrow money to buy shares by using the shares as security -- like you can borrow money to buy a house by using the house as security...?

"Andy Pandy" wrote

Ah, but which of the following two scenarios would make you richer now :-

(1) Buying the smallholding in 1957 for a 250 deposit and 4,750 mortgage and paying interest on the mortgage loan; or

(2) Buying 250 worth of shares in 1957, plus more shares each year equivalent to the interest you'd be paying on the mortgage in (1) above;

...??

And much more risky of course.

- so long as the rental income from tenants covers the

Which these days, with rental yields around 5-6% typically, is far from guaranteed. I guess there are still niches which can provide higher returns, but you need to know what you are doing. Unlike perhaps 6 years ago when rental yields were around 10%.

Yes, but the risks are massively greater. With a non leveraged investment you can't lose more than you invested.

That's the hard part these days.

Can you live in £5,000 worth of shares, bring up a family, grow and sell produce, run a B&B?

MM

In message , Tim writes

I take your point, those graphs dont exist from the likes of Nationwide or Halifax who provide the house price indices. You should be able to deduce it yourself. I use a spreadsheet myself.

Right! I apologies for my previous reply where I thought you were talking about domestic mortgages.

Yes you can. It used to be relatively common for a bank to take a charge over share certificates, the charge being either an equitable one or a legal charge which, as you say, would be by giving a mortgage over them. It would be more restricting than it appears because for a legal mortgage the bank would ask the borrower to sign a memorandum of deposit and would transfer the shares into the name of its nominee company, thereby restricting your ability to trade.

Of course, the amount the bank would lend against a share portfolio would be very low. I am not sure what they would go to these days but generally no more than 50% was a rule of thumb unless the client was undoubted.

I have advanced 80% of the purchase price of new issues when the cheque had to be presented and paid in advance of the declaration of allotment but we made sure the bank could sell the actual shares on day of issue if necessary.

These days you wont get this kind of service in the High Street where it was once commonplace. Now that people expect credit interest and free banking etc., banks cant afford to have qualified and trained staff in branches. You would need to go the 'private banking' section of your bank or a 'Private Bank'. These banks will lend to high net worth customers against their total assets.

Stockbrokers will also lend against a deposit of shares.

yes, you can use derivatives to this effect.

As far as I understand it the general yield on propery at the moment is about 4% - 5%. The yield on Lloyds TSB shares is about 7%. So, if you buy

Taking the above literally, then (2) would have made you massively more rich than (1). Given that historically (certainly over the last 30 years) house price inflation has been approximately equal to mortgage interest rates, and the additional costs of property (maintenance, insurance etc) are about 2-3%, then (1) is unlikely to have made you any more money than if you had put the same money into a savings account. (2) would have made you a fortune.

However, the flaw in the question is that no account is taken of either rent received (if let) or rent saved (if lived in) by (1). Accounting for this, then (1) is likely to have won if lived in, or if rented out with good tenants and high occupancy.

But if you compare

(1) Buying a property to live in for 5,000, 250 deposit, rest on mortgage.

with

(2) Buying a property for 2,500 to live in, 125 deposit, and putting the extra

then (2) would have made you massively richer. And this is a key mistake many people seem to make - buying a bigger/more expensive house than they need "because it's a good investment".

Don't know. I do know that I could remortgage my house and raise a six figure sum which I could use to buy shares.

But the OP has merely £15,000. What kind of dividends from that would Lloyds TSB shares bring in for paying the rent? You might have enough to rent a chicken coop!

MM

The easiest way to gear up on shares is probably to use a spreadbetting company,

Er, yes, and what kind of property could you buy for 15,000?

Of course you could get a mortgage, but then you have to pay mortgage interest, maintenance etc. If instead you used this money to pay rent, plus your dividends, in today's market where rental yield and mortgage interest rates are similar, and property pricing falling, you could be much better off renting. In the short term at least.

They never said. I wish they'd told us they were doing this.

It would explain a lot. It means that the banks *really* don't do the core business of banking any more.

I.E. Borrowing money, and lending it out into the local community at a rate that gives them a reasonable real margin.

So, F**k Mr Jones the Butcher. F**ked from about 1972 -ish by my observations.

As if *shares* represented any security.

DG

go cry me a river sunshine

what?

they've been the best bet for the last 100 years bar none

In message , Derek * writes

Never mind then.

Ah, the dreaded short-termist approach that has been so detrimental to Britain. It's why we have practically no industry left.

MM