RE: Buying at 174.523 Jan 2020 09:22
Lamtree "You would have been better buying a house and renting it out,,I know we've been down that route,,but come on.your money could be making you money."
Buying a BTL is usually a good long-term investment, but it is involves a bit more "hands-on" involvement than purchasing shares in a company. In 2008 I bought a bank repo flat in London to let out. Once we got the keys it had to be fully decorated and prepared for a new tenant. This involved finding a painter, buying a dishwasher etc and arranging to advertise the place to find a suitable tenant. The initial gross yield was around 6.5% but mortgage and maintenance payments bring the net yield to under half of that. The big advantage of BTL is leveraging your money - I put down a £50K deposit and borrowed £120K from the bank at their base rate +0.69%. The initial mortgage payments were expensive, but the BoE base rate soon hit 0.5% making the interest rate on the borrowing well under 2% for the last decade. Rents haven't increased that much since 2008 - initially £875PCM and now £1222PCM. I ask lower than average rents to encourage tenants to stay long-term and the 1st tenant stayed over 8 years (gave me warning that he was planning to retire and move to France). 2nd tenant has signed his 3rd 12 month AST and initially told me he planned to stay there "for about 5 years". Interestingly when the London house prices were flying a few years ago, the value of the flat was increasing each month by more than the rent received! At the peak a few years ago it was worth around £320K but now it has dropped way below £300K again. I found the initial tenant myself and dealt with any problems that came up as I was living about 55 miles from it. Looking after the place is more difficult now when I live 6000 miles from it, so I use a managing agent to deal with any problems. I still met the 2nd tenant in person and showed him round the flat, because as I was back in the UK to celebrate my parent's 50th wedding anniversary. It also turned into a working holiday and I only had about 10 days to arrange for the flat to be repainted and the tiles re-grouted.