Embarking in property investment from 2024. Do you still think it's still worth it?

[the0ni0nking]

I've not opted for short term lets simply because in my mind that would involve a further level of management which I'm not really prepared to do.

While it may well be more lucrative, I suspect it involves more effort (from the LL perspective) or more fees paid to an agent to keep the property clean/tidy etc after each use etc.

Although having said that, my property in Spain is exactly like that (3 bed house rented out in full) but used as a holiday let throughout the months of July-Sept and during that period probably earns more than it would generate as a long term rental because of the fees it can demand. With that though comes the requirement for cleaning, laundry, increased levels of re-decoration/maintenance and invariably need to replace things as holiday makers seem to be less considerate than longer term tenants! But it has been profitable over the 8 years or so I've owned it even taking account of 2020 when there wasn't a single rental - and when I say profitable I know this because my Euro balance has grown reasonably well over that period.

UK property, whether local to me or not, all I want is long term tenants - low churn etc. I'd keep a tenant on below market rent if I knew they looked after the place and were likely to stay their for a while (normally that's achieved by them paying market rent at the start and then me not increasing it by as much as I can over time rather than offering a lower rent in the first place).

The one thing I'd probably do differently is structure my property through a ltd company - and while I do monitor the local auction house to me, it's unlikely I would expand my portfolio further when the actions of the Conservative government - and without doubt the Labour government in due course are looking to squeeze private landlords further - especially given that lovely Angela now no longer owns a 2nd property.......

[Citybrave]

Certainly a lot to consider so far and I'm very grateful to have heard all of your views! Very valuable to have gained some real and balanced insights, opposed to the arguably over-optimistic viewpoint property investment books have when explaining strategies.

As Mike pointed out it does seem the everyone has their own niche that they make work for them.

Obtaining planning permission for change of uses is definitely something I will look into further Charlotte. Although without having expertise in planning, would you say it's a fairly risky strategy?

Also buying tenanted/rent controlled tenanted properties looks like it also could be a potentially profitable niche, so thank you for that suggestion. However, and I have only had time to look at this very briefly so far, it seems that the investment firm Mountview mentioned by SalvorHardin, which specialises in this niche, has struggled in the last few years. Whether that's beholden to the strategy itself, or the concurrent interest rate rises, or something else, I don't know.

Answering your question Gerry557, I honestly haven't thought that far ahead yet. My initial thought was not to constrain myself to a locality (I'm in Australia now and will be back in £London next year) and therefore would lean towards using an agency. However, my next steps are to play around with some financial models to see what impact that would have. I do appreciate agencies can take out a relatively large chunk of annual profit, especially when there are changes of tenants.

Interesting point Monabri about mixed use units, something to also research further.

As GoSeigen pointed out, the current opportunity cost of investing in say vanilla BTL does seems to be high. However, I wondered if I should be considering inflation when making these sorts of comparisons? I'm not sure if this is correct way of thinking about this...assume for simplicity mortgage rates were fixed throughout an interest only mortgage and you are able to increase rent by the inflation rate each year. When you convert those payments into PV terms each year, wouldn't that mean when adjusted for inflation, your yield is increasing? Or is this not something worth factoring in?

Investing abroad could also be something to consider. I assume this was easier and had less tax implication before Brexit?

MyNameisUrl, thanks for linking your previous post. A very useful post and discussion, so cheers for that. I am a fan of the show too if that is what your name is referenced to!

As I was imagining future investing to be using letting agencies, as The0nio0nking points out, wouldn't that largely inhibit the ability to go down a short-term letting strategy?

& Mike 4, absolutely no idea where I'm leaning towards yet! I guess I still got a lot more research to do!

Thank you all for your replies, they have been invaluable.

[Gerry557]

Just out of interest why aren't you just investing you cash.

No deposit, no mortgages, no maintenance, no tenants, good or bad.

Investments can be buy and forget and you can sell instantly a slice if needed. Where as with btl as you can't sell just a bedroom.

Obviously you can't leverage, well not as simply and you might have much larger amounts of cash to use up than you might be able to stick in an ISA.

What draws you to btl

[Citybrave]

I guess my interest in both the built environment and economics draws me to property investing

[Lootman]

1. owning property is like having kids -- they're expensive and require lots of looking after -- and 2. the average yield on property had dropped below gilt yield (>5%) and I'd much rather own gilts and watch the coupons roll in than have to do DIY or manage tenants. It also said something about the state of the capital markets as demonstrated shortly afterwards in 2008=9.

Investing in property is nothing like buying and holding gilts. Indeed they are almost opposites since buying gilts implies a negative view of the economy whilst buying property is an indicator that you see the economy as growing.

The big problem with fixed income investing is right there in the phrase - your income is fixed. If you get 10K a year in coupons in 2004 then it is still 10K a year in 2024. On the other hand rents will typically double to triple every 20 years, as will the underlying capital value. So whilst your rental yield might still be 5%, and that gilt still yields 5%, the capital values go up with property and decline in real terms with gilts.

So property investment is done with the idea that prices, demand, rents and capital values will increase in the future as they have done in the past. Plus buying properties comes with inbuilt leverage and (some) tax benefits.

But yes property requires maintenance and not everyone is good at that. But longer-term property will always beat something that gives you only a fixed return and cannot match inflation. If you want a more appropriate alternative to property, and that you can do from an armchair, then equities are the obvious choice. But again, harder to leverage.

[Gerry557]

1. owning property is like having kids -- they're expensive and require lots of looking after -- and 2. the average yield on property had dropped below gilt yield (>5%) and I'd much rather own gilts and watch the coupons roll in than have to do DIY or manage tenants. It also said something about the state of the capital markets as demonstrated shortly afterwards in 2008=9.

So property investment is done with the idea that prices, demand, rents and capital values will increase in the future as they have done in the past. Plus buying properties comes with inbuilt leverage and (some) tax benefits.

The "some tax benefits" its getting less and less as time moves on. Im not even sure what they are now. It looked like you were being taxed on revenue instead of profit as mortgage interest has been messed with and changes depending on if you are a normal or higher rate tax payer. Although I suspect that is why so many are looking at doing things through a company

[Lootman]

So property investment is done with the idea that prices, demand, rents and capital values will increase in the future as they have done in the past. Plus buying properties comes with inbuilt leverage and (some) tax benefits.

The "some tax benefits" its getting less and less as time moves on. Im not even sure what they are now. It looked like you were being taxed on revenue instead of profit as mortgage interest has been messed with and changes depending on if you are a normal or higher rate tax payer. Although I suspect that is why so many are looking at doing things through a company

Yes, it has been getting worse, especially the part about not allowing a LL to offset mortgage interest against rents. You can still deduct some costs of course. Most of my BTL business was done in the golden age of BTLs: the 1980s and 1990s. I would not enter that business now but then I am old. My sons are still keen on it but of course they can take a long-term view. And on a long-term view it will be profitable for them, especially as they focus on prime areas, HMOs and shorter-term lets.

[flyer61]

This a big subject! My daughter has been asking me similar questions.

Personally I would concentrate on your OWN property first before getting into the landlord game. Given your age why not buy a three bed place and get two friends to live with you and pay your mortgage. Or use your skills and contacts to renovate your OWN properties. Just remember in property you make your money the day you buy the property.......

I started out in pseudo HMO's, oh for the days of 20% yields on purchase! Now specialise in regulated tenanted property. Have had some fabulous results (best 4 times purchase price in 5 years) however you have to be prepared for the long haul. It is amazing how people who have enjoyed cradle to the grave welfare live longer thank those who have toiled. Maybe we should all just lie down and suck on the states teet. Come July 4 I fear we will be headed to a much bigger state, which is not good for those who want to get on in the world ie people like yourself. Socialism equals envy. I was brought up in a state controlled economy (NZ), it improved dramatically come massive reform in the late 80's. Ironically by a Labour chancellor, we can live in hope. In my eyes Britain is in need of real reform eg health away from state provision. I'm ranting now....

Politicians in the UK have a real problem with people and their ownership of more than one property. It is one of the many mistakes the Tories have made, they should have stuck to their bread and butter. Labour will do LL's no favours at all.

Ventured into Commercial in 2017........probably not my finest hour!

At the end of the day if you have ago good luck!

[Mike4]

So property investment is done with the idea that prices, demand, rents and capital values will increase in the future as they have done in the past.

And this observation takes you STRAIGHT into the politics of it all. Rampant immigration suits landlords just fine as it raises demand for accommodation, leading to both rents and capital values beating inflation. Or has done for as long as I can remember. Watch what governments DO rather than what they SAY. All the huffing and puffing about limiting immigration has not been matched by action so far.

On the other hand there is endless temptation for politicians to tinker with property and rental markets so consider this and think through your views on what the future might hold in terms of government interference.