Is anyone considering investing in property with a mind to letting at the moment? Covid19 makes for a great deal of uncertainty. Return on investment looks like 4.6%, but there are government bonds offering 8% if you are willing to tie up for 5 years. Decisions....
We have a couple of properties we are letting. How did you work out your return? Based purely on rental income? I give you one of mine as a example. Bought 12 years ago for 140K. Let ever since for 650 a month. I use 10 years for the purpose of the calculations. So gross I come was 73K. We payed cash so no cost other than maintenance which is roughly 500 or so for us. So 68K over 10 years before tax. In the meantime the property value went up from 140 to 200. That's another 60k profit had we sold after 10years. So that's 12800 pre tax return per year on average which is roughly 9.1 percent return on investment. The added advantage for me is that in the meantime I have options. I can continue to let it, I can sell it or I can live in it.
For me property, had I known at the time I'd have bought property in Stoke on Trent for the same money I could have bought 2 2up2down houses and rented those out doubling my rental return. A lot depends on the area and property you're looking to invest in. I don't like locking money away at least with property you can decide to liquidate your asset should the need arise. I used a letting agent for my first 3 tenants they took all the hassle out for a cut, but they insured the property and did all the vetting of the tenants. A few people I've met over the years have let themselves and had problem tenants. Mine wasn't a deliberate buy to let, I already owned my property and my SigOth decided it was better to live in her house than mine. Good luck if you do decide to let.
You should offset this profit against the return you could get from the money in the bank, plus an allowance for estate agency fees, stamp duty and solicitors’ buying and selling fees to have a feel for how much profit you are actually making.
I put my extra cash into pension funds, it's better than giving it to the tax man @ 40%, I've invested it in some equity funds that have returned 15% p.a. over the last few years. Yes I know you can't access it in a hurry but I think its a better long term investment that property.
No stamp duty for purchases up to £500,000 at the moment. Her indoors has one of those ISA matching things, so it will be her first purchase. We will be living in it for quite a while why our main home is remodelled.
P2P at 6% pa over five years, can have monthly capital repayment, capital and interest or just interest payed into your bank account monthly, or reinvest any monthly repayments, I have all repayments reinvested and when the time comes I will start to draw down as repayments are made, if I want an early withdrawal it will cost 1% of the amount requested. This is my ISA so no tax or costs involved.
I think the stamp duty at 0% up to £500k is only on primary residence. For 2nd home or buy to let you'll still be paying something, though not as much as before/after the 'holiday'.
Yes, the 3% higher rate premium is still payable on second and subsequent homes. https://www.gov.uk/stamp-duty-land-tax/residential-property-rates