Investment property plan

[welshhibbyParticipant 86]

Hi Guys,

In the last year I’ve started to earn some proper money for the first time in my life (I’m 42). I’ve been saving pretty hard and have just over 30,000 banked in the last 12 months. Seriously looking at buying an apartment back in the UK perhaps in 4 to 5 years for cash if I continue to save.
I’d buy here in Ireland but property here is over priced and poor quality (there’s another bubble developing also).
My question is buying a property for an investment more stress than it’s worth ? You know the deal with bad renters and tax etc. I’d love to hear your thoughts on living frugal and save money hard and fast too.

Thanks

Welshhibby

[Anonymous 42]

I’m abandoning real estate like the plague, the only good properties in my opinion are businesses, they have no legal right to withhold the rent and torture you in housing court.
Single family residence for yourself to enjoy the definition of HOME, and perhaps a business property for investment.

Anything residential can quickly spiral out of your control and into the abyss of housing court, tens of thousands of residential properties lay in ruins in my country for a rational good reason, all these dilapidated rentals are falling to ruins from excessive government intervention.

Government intervention has had a backlash of utter destruction across these lands, we’re at the point they can only do bad, only further exacerbate the destruction with more rules and regulations.

[Buller100Participant 2189]

In the uk in the right areas it’s a very good idea, I started 25 years ago and am retired, rents increase property increases.

There are some very low mortgage rates about at the moment.

[Mac7fParticipant 0]

Welshhibby, that sounds a good plan for generating passive income and (ultimately) an appreciating asset.

If you’re not in the UK, you’re free to buy somewhere requiring only modest purchase outlay but while gaining a respectable rental income yield. I chose my location specifically to get best value for money for my present home and for adding affordable BTL’s later. There’s a huge price disparity between south/central England and much of the rest of the mainland, yet net rental yields can be good if you choose carefully.

I’m at the point of buying my first BTL 2-bed flat in Central belt of Scotland. At 60 I’m rather older than you, so I’ve some urgency to build that passive income (as a credible alternative to Pension Annuities – that currently offer a very poor outlook). I’ve a 40% deposit with a small, short-duration mortgage. I’m going with a Letting Agency for the first tenancy period, as I’m new to the process and here in Scotland, there is a very exacting legal framework. The key to all this for me, is to buy a decent property in an up-and-coming locale and to take great care in choosing tenants. I’m targeting the young professional/s. The Rental income will cover 60% of the mortgage and while I’m earning well, I’ll easily cover the balance and overpay each year while continuing to save.

How to live frugal while saving hard and fast?! Well, I’ve been doing this since D-day in early 2012. It has been tough at times, as living alone (with the sole income) has been a revelation – mostly positive! I’m extremely mean with myself in day-to-day expenditure, though I have the ‘bigger picture’ as my point of focus for motivation. I’m saving hard and spending very little. No live TV but only Internet access and radio. My weekly shopping totals below £30. I paid off the mortgage on my house 4 years early by doing this and just saving hard. It’s a great feeling to get those Deeds in your hand!

I’m planning to work for up to 3 more (good earning) years, by which time I’ll have cleared the BTL mortgage. At that point I take my private pensions as cash, shoulder the Income Tax hit and then simply buy a second BTL Flat outright. At that point I will have sufficient passive income for financial independence. With hindsight (if only!) I’d have done this some years earlier.

You’ve got the right kind of vision at a much younger age and you’re on a great earnings and savings trajectory. All things being equal, you’ve every prospect of building a portfolio to see you through to financial independence, long before you retire. All power to you.

~ Mac

[BeerParticipant 11832]

I’d stay away from real estate…but its really a decision that varies by each person’s circumstances. Reasons why.

1. If I got into real estate I’d want to self manage to increase my profit margins, but I don’t plan on living in the area I’m in now my whole life and don’t want to be tied down here with rentals, have to pay a property manager, or try to manage them from out of state.

2. I live in a crappy liberal state with high taxes and a high cost of living that hasn’t had much of a recovery since the housing market crash/great recession. Even if I was going to stay here my whole life, I don’t want to invest in a stagnant area.

3. I make a pretty decent wage at work and I work rotating shifts. I don’t want time invested in rental properties to force me to pass up on overtime or dealing with tenants or issues that arise to mess up my sleep pattern.

4. I really don’t see the return being any better or less risky than just picking up dividend paying stock and holding them long term. Just for example, the condo I live in now cost me about 350 to own between taxes and condo fees, and I could rent it out for 800. In a good month I’d be +450, in a bad month I’d be -350. Now hypothetical situation…you get a s~~~ty tenant…like one of my neighbors has just gotten stiffed for 2 months rent and is still in the eviction process…he’ll probably lose 4 months rent by the time its over…then he’ll probably lose another month rent while he looks for a new tenant…so he made 3150 for 7 months of renting it out and had 5 months where he was 1750 in the hole for a net gain of 1400 on the year on a 50k property. Plus he has legal fees associated with the eviction, probably going to miss a day of work in court, may have some damages after she finally leaves, and will have to waste a day cleaning and stuff to get ready for the next tenant, plus just the extra stress and bulls~~~ of dealing with the situation…all in all he’ll lose money on the year.

I’d look at it different though if my situation was different. If I lived in an area that I thought had a better long term outlook I’d view real estate as a better investment. If I didn’t have so many random opportunities, sometimes short notice, to pick up overtime that pays quite well at my job, I wouldn’t mind putting a bit of time into real estate. If I didn’t want to move when I retired or didn’t mind using a property manager, I’d view it as a better investment. I don’t think its a bad investment…its definitely better than money sitting in low interest savings accounts, but for where I’m at right now I’d rather just keep putting money in the market and collecting dividends.

[AragornParticipant 277]

I wouldn’t do real estate. Apart from what´s being already said by the others, it´s usually illiquid compared to other alternatives, you are not diversified unless you are really super rich, you are dependent on the tenant, his income, the area, the economy, the laws and regulations in your country, you can´t move your real – estate to another place if needed for whatever reason, you pay a lot upfront for agents, taxes, the government can tax you to death, etc.etc.etc.

So unless you have the time, money, know how, contacts and nerves I would not do it.

I would rather invest in 5-10 solid stocks paying a decent dividend yield if that´s what I would be looking for. But that´s just what works for me. Everyone is different.

If you change the rules on what controls you, you will change the rules on what you can control

[Buller100Participant 2189]

Aragorn wrote:

I wouldn’t do real estate. Apart from what´s being already said by the others, it´s usually illiquid compared to other alternatives, you are not diversified unless you are really super rich, you are dependent on the tenant, his income, the area, the economy, the laws and regulations in your country, you can´t move your real – estate to another place if needed for whatever reason, you pay a lot upfront for agents, taxes, the government can tax you to death, etc.etc.etc.

So unless you have the time, money, know how, contacts and nerves I would not do it.

I would rather invest in 5-10 solid stocks paying a decent dividend yield if that´s what I would be looking for. But that´s just what works for me. Everyone is different.

I can see the logic , however in the UK banks will lend you money so you are making money off their money.

Saving and investing is great all the profit is yours, but using banks money to finance rentals is good for many reasons.

The debt is eroded by inflation –
The debt is paid by tenants –
The debt is tax efficient –
Profit is made on the loan – debt at 2.5% net rent income 4%

The UK is very small a £40,000 invested 20 years ago has delivered £300,000 thats capital increase and rent equalling £13000 a year return.

But I see the States and other countries are not the same.

[Author]

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