Should I invest in BTL with a 4 year time frame for my retirement

by Readers Question

14:19 PM, 8th September 2014
About 4 years ago

Should I invest in BTL with a 4 year time frame for my retirement

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Should I invest in BTL with a 4 year time frame for my retirement

We live overseas and will return to the UK on retirement in 2018.

We are cash buyers about £500k, but not yet ready to invest in our retirement home – we’ve only narrowed the area down to the SE

We are looking for an investment to park funds allocated for the 2018 house purchase. We would sell the BTL to fund the retirement home in 2018.

I thought that a BTL would be a good option since the value would obviously track house prices, so even if they go down, so would the price of our intended retirement home. However if we don’t get on the ladder and house prices are up 30% as some are predicting we would be in trouble.

We really want to be completely hands-off, we are very adverse to hassle and stress so would pay an agent to take care of everything

My rough conservative calculation would be 4% of the value as rental income, 20% of which would go in taxes, 20% to the agent and 10% in repairs and misc fees. Leaving us with a 2% yield plus capital appreciation. Does this sound reasonable?

It sounds like a lot of hassle (with is not being in the UK) but the range of alternative investments is so slim – we can net 2-3% on bonds, but that’s no help if house prices keep on increasing albeit at a slower pace as interest rates rise, whenever that may be.

Any advice would be much appreciated.

Thanks

Chrisretirement



Comments

Neil Patterson

14:24 PM, 8th September 2014
About 4 years ago

Dear Chris,

I would normally be against betting the farm on a short term property investment, but I can see your logic in hedging your risk.

However you need to factor in other cost such as purchase and sale, Stamp Duty, CGT etc.

Alan Loughlin

14:41 PM, 8th September 2014
About 4 years ago

if that were me I would give BTL a miss, and put the money in a range of high yield shares, for instance in March I put 90k in these and this is now 97k and I have had 2 lots of shares as dividends (no tax that way) so have almost 600 free shared each worth 6.30, no problems with rent not being paid, no legal costs, no hassle, and a better return than we get on out portfolio of BTL. we are selling out and doing just this, sick of being treated like criminals by local authorities, and being treated like free overdraft by tenants.

Rob

15:00 PM, 8th September 2014
About 4 years ago

If your looking at the souteast (this is where im from) i would invest along crossrail route , this will be finished 2018/2019. Maidenhead and Reading are good examples, Windsor also is having a new rail line put in to link it with crossrail. In regards to agents fee for management, 20% is way to much, you should be able to get that down to 10-12%

Ian Ringrose

15:58 PM, 8th September 2014
About 4 years ago

4 years is too short for BTL, maybe a "halifax house price index tracker" would work for you.

Alan Loughlin

16:01 PM, 8th September 2014
About 4 years ago

banco Santander pays 8% tax free and has good capital growth potential which is also tax free (using cap gain allowance)

Malcolm Hill

17:30 PM, 8th September 2014
About 4 years ago

I have used btl for short periods such as 4 years but so far I have been lucky with timing.the last time was between 2002 and 2007 got in and sold just before the crash and reinvested in long term bonds paying around 7%.Then in 2012/3 went back in and bought one bedroom flats and houses just before the boom got going. all in the S.E area. all paying around 700 plus per month with growth so far of around 20%.its all about timing getting the right property in the right area and ensuring you get good tenants.if you feel that the market will continue to rise and you will get growth while getting income then go ahead. You can dispose of tenanted properties if they are in a good area with reliable tenants.as a cash buyer like myself yoy will find you are in a good position to act quickly and negotiate strongly.

Neil Robb

19:31 PM, 14th September 2014
About 4 years ago

I think you should find you dream home buy it rent it out then there is no buying and selling and capital gains tax to pay four years is not a long time but things can you either way it is only really good because interest rates are so low but this will change soon enough.

Alan Loughlin

19:41 PM, 14th September 2014
About 4 years ago

sabe yourself a load of hassle, put the money in Banco Santander, get 8% tax free divi, and a very healthy upside on the capital.

Allan Wadsworth

8:50 AM, 15th September 2014
About 4 years ago

Event though I am from the South East and use investor funds paying 12% to 18% per annum, so should be looking to tempt you to invest with me, I must also advise against Buy to Let investing. In property 4 years is short/medium term. If you want a quick buck then fine, I and many other investors can give you good returns using property related investments but actually buying, managing and then selling within 4 years is just not worth it, and I've been doing it for 16 years!. -
There is a great company using German property investments giving guaranteed 18% per annum for 4 year investments - Search them out or ask me for more details.


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