Updating post from Reddit.
I'm a younger landlord (M31) and have one property with a good amount of equity. I also have a pot of money that I've been saving.
I am torn between paying off debt or expanding my portfolio. Of course I will be doing my own research, but I'd be interested to know what small time landlords are doing now, and / or planning on doing in the next few years.
When I was your age, 35 years ago, I expanded my property portfolio. But that was then. If I were your age today I would certainly not consider property until I had maxed out my pension and ISA allowances and even then I’d be very cautious. The BTL party is most definitely over, both prices and rents are at the maximum affordable levels, prices are already falling in real terms. Taxation and regulation are becoming more onerous and gross returns are little more than you could get on a risk free deposit. And these trends are set to continue for the forseeable future.
Do you have any thoughts on capital appreciation as something worth banking on still? I believe the notion of property doubles every 10 years is competely done and was only true upto around the GFC (I think?).
Part of me thinks whatever I pay in tax and charges is simply all I’ll recoup once I come to sell if that happens in 15 years rather than this year, and even then there will likely be a hefty CGT.
I don’t expect property values to increase in real terms in the forseeable future, by which I mean the next 10 years. After that it’s anyone’s guess but the last 30 years have been exceptional and are unlikely to be repeated for many decades, if ever. Interest rates between 2008 and 2022 were the lowest for more than 300 years.
Thanks
That's just your running perception based on where you have been and where we are now, whereas in real terms property will continue to rise over decade long periods until the day inflation is irradiated and we no longer have debt. Nothing is ever too expensive in an inflationary world, that's the whole point, prices go up, earnings go up, people spend proportionately the same amount but of a larger income pot, debt gets diminished by inflation and we repeat. Unless the rules of the game change we will continue on as planned. The previous housing crash lasted less than 5 years and back then everyone said the party is over, we will never see property price appreciation again, 5 years later and we were ahead of pre crash levels, now we are approaching double in most key areas if not more.
>Do you have any thoughts on capital appreciation as something worth banking on still?
It's not worth banking on. Source: Property I bought almost 20 years ago is valued exactly the same today and shows no sign of appreciation any time soon.
Caveat: This is not financial advice. I'm not suggesting all properties everywhere are valued the same as 20 years ago. The question was "is appreciation something worth banking on", and the answer is no, appreciation is not guaranteed.
When we look at Canada in some regions, property values are insane with proportionate rents. 2-bed flats can reach over a million dollars Canadian. People need to take out 70 year mortgages for their grandchildren to finish paying off because property prices are so high.
I think that this argument that because the bottom of the market is starting to leave people behind that this means that prices increases won't happen any more isn't true. It didn't happen in London. It's not happening in Canada or Australian cities.
I think if you buy the right property, then there is capacity for prices to go up. But I question whether the tax systems mean that I would capitalise on that at all.
Prices in London have been static for a couple of years now. Many, especially flats, have fallen in nominal terms. I don’t think I’d bet on ever-increasing mortgage terms pushing prices up, especially since there are better investment options available.
Prices haven't been doing too much anywhere because of high interest rates. And there was an exodus from London during and post-covid. In the preceeding years, prices still went past the point where those on minimum wage or with higher living costs from children could afford to buy any more. It didn't stop prices going past that point.
Interest rates are not high, they are normal. That is the key point here, people think that interest rates are going to drop back to 1 or 2% but they are not, interest rates of sub 2% are very very unusual historically and we are not likely to see them again. The base rate has only been below 2% for 14 of the 331 years since the Bank of England was founded in 1694 and those 14 years were 2008-22. The chances of this happening again are negligible.
Australia has a very different tax system when it comes to property. There’s no higher rates of stamp duty for buying multiple properties. Landlords can negatively gear to reduce their overall income tax position which is a real boon for higher rate tax payers and it means you benefit from the rental yield being poor. You can reduce your CGT by 50% by simply hanging on to the property for 12+ months and there’s no IHT in Australia.
Not to mention that tenants’ rights across the states and territories are nothing like those in Scotland, Wales or as proposed in the Renters’ Rights Bill.
Over a third of Australia’s suburbs are now less expensive to rent in than buy and that trajectory is set to continue. People’s salaries are not increasing at the same rate as house prices and there comes a point when there’s only so much rent people can pay.
I would probably look at commercial property and have it in a pension scheme. Maybe maxing out bonds and ISA stocks. Landlords are just getting bent over for tax. If you’re looking at doing it as a LTD and getting more than 3 then probably worth it. If you’re employed and just a side hustle I wouldn’t bother.
Yep - similar age to you give or take a few years. Aim for roughly 1 a year... Have 1 going through at the moment and looking at another 1.
I'm not too worried about the new renters bill coming through, will likely just help increase rents tbh
Are you putting a substantial amount of money in from other sources? I would be very lucky to have 25k per year to save for these things so buying one property per year would mean I'd be taking on a lot of debt. I also, personally, don't like the idea of having a high debt to equity ratio, both from a personal risk tolerance basis and my ability to do right by my tenants.
it all depends where, what, how. but mainly WHERE
31, you can manage with some hassle along the way. but let the oldies comment it's a dead market...
I've expanded and moved into Ltd (bar one that is just going to be ridiculous to move cost wise).
It's going to be a rough few years for tenants
the issue here is not buying through ltd in first instance
I didn't on some. Bit the bullet. Thankfully it hasn't cost much at all. Apart from one I rebuilt from scratch. If it wasn't housing vulnerable people, I'd sell it
Out of interest, is it much better in a ltd company Vs personal name?
I've looked at moving into ltd company / buying new properties in ltd, but the numbers don't seem to make it worth it long term
The killer is tax. As a Ltd there is a lot more you can claim, even down to the mileage if you drive to a property to carry out work.
Likewise if you are a tax payer at 40% to 50% it's an absolute no brainer. The one building left in my personal name I built myself (a small block of under 10 flats), half my money, half bank money. I have to either sell it or raise the rents by 40% just to break even next year. What makes it worse, if I sell it I know the companies who would but it would all evict or alsp do huge rent rises as well. I'm currently just floating out from profits as I built it to house people with issues and I feel honour bound
Why rough for tenants? As in rents going to shoot up massively?
Supply and demand, and we are a small island with a growing population. Your average couple looking for a starter flat or a family looking for a home are competing not against each other now but against councils and serco and the like looking for housing stock. I think it’s less of a huge rent cost problem itself, more that there won’t be as many places to rent.
Multiple reasons.
There isn't as big of an overlap between renters and people looking to buy as people believe. A lot of people don't want to buy, don't have credit to buy, etc. Therefore when a landlord sells it either takes a property out of the rental pool. Meaning there is more competition for less. Or if they sell to a larger investment company it gives a worse tenant experience.
For those landlords keeping property, they are increasing prices to reflect tax changes, risk profiles, etc. Some insurance (non payer eviction and lost rent cover) require much more stringent checks than before. It's one reason why so many people are being asked for guarantors now.
And where does this filter down. To the tenant.
Personal example, I built a small block of under 10 flats before I set up my company. So personal name. Half funded by me, half by finance. It has recovered people with issues, people who are recently divorced and in some cases left abuse, retired pensioners who are paying 60% of the usual cost for a flat like that. As of next year, even though I built it (so I took no housing off anyone whobeas looking to buy, and I maintain it fully) I have to either sell it or increase the rent by an average 45% just to hit even. And the even more frustrating part, given new "tenant" protections, the finance company, who owns less than half of it, will no longer let me take any chances on people with credit issues or lower income.
I'm not saying oh no the poor landlords. But I am saying policy makers are clueless on impacts.
The solution to both the buying and renal crisis: national and strategic house building over the sustained long term
Personally I am expanding, but carefully. There are good buying opportunities and yields. The key is managing your risk. I’m in process of outsourcing my management to a professional. I don’t have the time or resources I need to cover myself to the level I think is needed with RRB. I think a lot of self managers will get caught out by the cash grab. But maybe councils will be reasonable with the new powers..,,😂
I have the same sort of question age 34. Been maxing ISA index funds last 3 years and adding around 20k to pension per year I’ll hit max cap on pension of life time limit tax easy by age 60.
I also have some savings on side with wife and considering 1 more in her name as she’s still a 20% tax rate payer.
I keep thinking could I buy a commerical unit rent to howdens or something but I have no idea how that even works and I think it looks more risky with commerical to get a tenant?
My other option is remortgage my btl clear my resident mortgage. Have 1 btl max isa and pension and spend the rest lol
If you have a BTL already and you are well into Index funds then you should be able to do a side by side comparison. Should be easy to calculate return on investment in property vs the market.
I did this as someone with 4 BTLs between London and NW and an existing index fund and it came out fairly evenly, even when including capital appreciation. So I’m moving out of property and into market fully.
Similar situation as you. Learning as I build my folio. But my target is much slower, so £1m portfolio in c.15 years. So i am prioritising ISA and left over savings accumulate to save equity/upfront for BTL. Targeting £120-£150K (1-2beds for now flats but maybe houses in future). So very vanilla strategy - rent to working professionals strategy. Targeting city centre, after doing some macro and on-ground research on which places might do okay. London and SE over budget for now, but interestingly first BTL is in Basingstoke. Agreed compliance costs going-up. But rental yield is decent and if over-heads kept in check money starts building, albeit it is slow to begin. My core theme remains, (1) rents and house prices follow inflation long term and after 10 years there is some inflation in Uk and it will remain sticky around 2-3%; (2) as mortgage rates normalise around 3.5%, there will be a natural price pop (prices have been stagnant for 2-3 yrs now); (3) Demand/Supply - UK still remains a favourable place for people to come and try to have a better shot at life, London is a powehouse and my hope is it remains that ways and people don’t ruin it. It is a beautiful cross-cultural place, where people have freedom to express themselves. As long as you pick locations well, UK property should remain in demand and will passively build wealth. There will come life changing years, but you need to invest now to ride the wave in those years. 7-8% gross yield; 2-3% net-yield, gives you 8-10% ROE thanks to leverage + 2-3% average increase in house prices; should in 5-10Years create a solid investment. Need to remain in the game for that long but.
I have 3 going through at the moment.
25 behind me.
Age 39
Im comitted down this road will take rough with the smooth.
A good deal is always a good deal.
I did a large development recently Apts /New builds £1,800,000 Was super exposed to a huge risk financially. Im glad to be back to normal BTL properties tbh 🤣.
North west based
I’ve downsized my portfolio. I’m in London and prefer nice quality properties but those have poor returns. I have also been put off by taxation and worried about more regulation. The stock market is a lot less hassle.
I’m at 10. About £2m portfolio with 900k equity
Still expanding but doing other stocks etc.
Trying to diversify now though into other investments and not just property
I’m at 10 also, 5 in my own name, 5 Ltd. What sort of other investments are you looking at currently?