Looking to beat inflation? Don’t – I repeat, don’t – invest in property

With inflation rising fast and interest rates pathetically low, where can you go to make sure you get a real return on your money? Listen to the property crazies and the answer is apparently perfectly obvious: buy to let.

After a dicey few years, things are looking up. Rents are rising and there are hordes of new buy-to-let mortgages coming on to the market. Couldn’t get a mortgage on a two-bed flat in Birmingham last year? You might now.

In March 2010, there were 299 different products that let you borrow against a rental property. Now there are 463. So you should buy a house and let it out. That way, you’ll not only make money from the rental income, but over time you’ll make a killing on the capital gains too.
Sounds good, doesn’t it? Well guess what? It’s nonsense. It is true that average rents in the UK have been rising – up 0.4% in March for example – and that this, combined with falling house prices, have made property yields look rather better than they did.

The average yield in the UK is now running – depending on who you listen to – at about 5%. And if you make the right investments, we keep being told, you’ll get something in the region of 7%.

But 7% isn’t the net yield. It’s the gross yield. And if you are a small investor with, say, one or two properties, you not only won’t ever get it, but you also won’t have the faintest idea what kind of yield you will get.

Why? First up, the maintenance lottery. I got a miserable email from a journalist friend trying to sell a flat this week. His gross yield sounds just fine. But the net yield just isn’t. The boiler gave up the ghost a few weeks ago. The replacement cost was to be £3,000. Then there turned out to be seagulls in the attic (attacking gas men who came near their nests). Another £400 was added to the bill. His net yield will be negative this year.

Then think about voids and about bad tenants: according to LSL Property Services, 9.4% of all UK rent is in arrears. Yes you did read that right. One in ten landlords isn’t getting the rent they thought they would. Not only that, but tenants who don’t pay also don’t take much care of the places in which they live. So every time you manage to get them out, in order to get new tenants in, you’ll have to redecorate. Hello negative net yield.

This alone probably explains why repossessions in the buy-to-let sector tend to run at about twice the rate of those in the owner-occupier sector. Now, you won’t always be the unlucky one in ten of course. You could be in the lucky nine. But it’s still a whopping risk to have hanging over you. Particularly when your boiler could go any minute.

And it is even more of a risk when house prices are falling. It used to be that negative net yields were by-the-by. I remember getting press releases throughout the bubble pointing out that “total returns” on buy to let were 10% plus. But when you looked at the small print you found that net yields were negative, and the total return numbers were turbo-charged by capital gains. Fine for those buying and flipping. Not so good for those trying to make an income.

Either way, that doesn’t happen any more. For those who can get their 5%-odd rental yield, the Council of Mortgage Lenders has total returns at 2.6% a year “as rent rises counteract the annual fall in rental property prices”. 
So, if you want to make money out of buy-to-let now you have to assume that house prices will rise from here. There was a headline in The Times yesterday that suggested this might be possible. “Average house price at three-year high”, it said.

But as it turned out, it didn’t refer to the prices at which houses actually exchange hands. Just to the prices their owners would like them to exchange hands at. These are different things.

Which is why, according to Zoopla, more than a third of the owners with houses on the market at the moment have had to step back from their heroic instant millionaire fantasies and reduce their prices at least once. The average reduction? £18,970.

Buy-to-let investors used to refer to their properties as their pensions. My friend doesn’t refer to his as his pension any more. No. After a couple of years of trying to dump it and its hideously negative yields, he calls it an “accursed millstone.”

He isn’t alone in his sentiments. So here’s my advice. If you are thinking of getting into the buy-to-let market, don’t. Use the deposit cash to buy NS&I inflation-index-linked certificates instead.

Buy-to-let is likely to give you a zero or negative return. The NS&I deal doesn’t offer a certain return (it depends on RPI) but it is 100% certain to – at worst – be positive and to beat inflation. It really shouldn’t be a tricky choice.

  • Nick

    Regarding the £3,000 boiler.

    1) The cost of the boiler can be offset against tax on the rental income.

    2) The value of a property with a brand new boiler is probably £2-3k higher than one with a ten year old boiler.

  • Nick

    A £15,000 maximum investment in the (excellent) NS&I index-linked certificates is hardly a suitable alternative for a buy-to-let investor looking to buy a £200,000+ flat.

  • L N Stewart


    1) Fine

    2) That £2-3K value increase is not realisable in cash unless you actually sell the house.

  • L N Stewart


    On your second point, plenty of people during the last property boom bought £200,000 flats with less than £15,000 of their own money, so the analogy is more appropriate than you might think.

  • Alex

    It really doesn’t work like that Nick, spending £4k on a new kitchen or £3k on a new boiler doesn’t magically add that to the sale price you can achieve. If you like to think that it does, fine…..you will be in for a nasty surprise though when it comes time to sell. It would be lovely if your logic were true. There’d be no risk at all in doing up a house to sell on.

    FWIW I still think BTL is actually a good investment long term. It’s not free money though.

    As for inflation, I think it’s about to fall sharply, my feeling is that the depression that central banks have been fighting since 2007 is coming, a bit like death and taxes, it’s inevitable that all bubbles burst.

  • DG Craig

    The difference with BTL property which is rarely mentioned is the effect of gearing. The 15k invested in the bond at say 5% makes £750 per annum whereas as a 30% deposit on a 50k house, you might get £1500 per annum at a 3% net yield. Of course, gearing works the other way too and you can lose more, but as they keep telling us, investments can go down as well as up.

    It all relates to timing, and anyone investing in property should view it as a long term investment. I think it remains a reasonable addition to a pension plan along with ISAs and pension plans themselves.

  • Bob

    What about people wanting to buy a home to live in?

  • Robert Glass

    Ha, … anyone offering odds on how many comments will be on this thread lol

  • Alex

    I sympathise with them Bob. Although it’s worth listening when people talk about being terrified when they took out a £15,000 mortgage 40 years ago. Alot of the increase in house prices has just been inflation, and it’s always been hard to make that first step into property ownership. You just have to get on with it.

    BTL might not be perfect but compared to buying shares in Marconi, Rok, LTSB, etc…..it’s not so bad either.

  • Nick

    @ Alex

    Kitchens and bathrooms in flats have to be replaced every 15 years. Interiors have to be redecorated every 5 years. Boilers need replaced every 10 years.

    Therefore the age of boiler, kitchen, bathroom and state of decor are all factors in determining whether a property selling for £210,000 rather than £195,000.

  • Dislexic Landlord

    This Auther reminds me of my father

    He worked all his life in a shop always keeping things safe

    Never Borrow
    always pay cash

    He always looked on the bad side of life

    IM 53 years of age and retired from my 9 till 5 job at 40

    I have a fantastic life I live my life as I want to every day

    and all because I have faith in my ability to look forward and see what can be achived not what cant

    I hopefully will live for a lot more years but when I do leave this earth I will leave my son and his children very well off indeed

    thats what I call a good investment

    National Saveing Bonds god if thats the best you can do im not suprised you write for a newspaper

    Open you eyes

  • Roger

    Dislexic Rigsby
    Read the article, Merryn’s talking about options and choices now not the past.

  • Young Buck

    @Dislexic Landlord

    That just sums up the attitude of so many of the older generation. “I’ve been really clever by troughing in a huge credit boom and essentially taking the asset growth of the generation behind me. They should also thank me for passing down my cheaply gained wealth (-40%) and inflated asset prices”.

    Cheers guys. We’re all really grateful with how you’ve left things…I hope we end up doing such a great job (once we open our eyes). But perhaps we’ll try and make our money the really old fashioned way. Earning it.

  • Alex

    Nick they may be factors but you will generally only see a fractional increase due to things like a newish boiler. You won’t simply see £3k added to the sale price just because you’ve just spent £3k.

  • Richard Drakes

    I would be pleased to offer on the author’s friend’s flat if it’s still for sale.
    BTL is working just fine for me, thanks to being properly educated on the subject.

  • GPR

    Better than NS&I if you’ve got a south facing roof is PV panels. Inflation proof, tax free return, guaranteed for 25 years. As for BTL, whilst there remains young people wanting to buy a home then BTL should be heavily taxed to deter. Houses should be to live in and enjoyed, not some sort of one-way bet with high-returns ultimately subsidised by the tax payer when it all goes pear-shaped.

  • Property Bull

    Now Merryn does sometimes have some valid points, however she seems to take such a broadbrush approach to property and fail to really look at the property at more micro level.

    Good Property, whether commercial or resi in primary areas is shifting and selling at very strong prices. There is demand and this is particularly relevant to London and prime northern cities. However it’s true those secondary assets are suffering, investors don’t want to take a chance on these assets where demand is uncertain to say the least given stringent public sector cuts.

    I would give more credit to Merryn if she provided some distinction for property from Bradford to Buckinghamshire…this is her fatal flaw in her analysis.

    London development pipeline is hotting up, and there is a shortage of grade A office space which will push up rents.

  • Dom

    @ dislexic landlord

    Man, I would love to have more of your father’s type in this country !

  • Dom

    @ disclexic guy

    I bet you would love to have your father as a tenant !

  • P Hamilton

    Personally I think B2L is a social evil, but I can think of no other investment which attracts so much support from the government.

    Government policy is that house prices will only ever go up – anything which is a threat to prices is fought vigorously, this includes supporting B2L.

    • They inject £22bn into the rental market in the form of housing benefit, well over half going to private landlords
    • housing benefit pushes rents up and creates huge demand from the benefits class
    • open-door immigration policy with no real regulation on the number of occupants per dwelling – pushes up rents
    • zero security for tenants (law favours landlords and their lenders who would not lend if they were unable to evict and repossess)
    • blind eye turned to CGT and ICT evasion
    • in a country awash with regulation and red tape landlords are still free to let substandard homes.

  • wdbeast

    It really does not matter how you do the maths regarding boilers, decor or yeilds, it all comes down to the expected price movement of the prime investment, the property.

    Property prices are only going in one direction, down, and probably by 20-30% over the next 3 -4 years.

    So that would be a £40k-£60k loss off a £200k investment, or more realistically all of your capital investment.

    That is why NSI would be a better place to put your deposit!

  • Tom Archer

    Why is this nation so masochistic about property?

    We have a slight shortage of residential property, an unemployment problem, and ample vacant land that has been trashed by previous development.

    Creating an adequate supply of homes while creating plenty of jobs and making better use of derelict land should be an absolute no-brainer.

    The money currently spent feathering the nests of the Rigsbys through housing benefit could be so much better spent building a third of a million nice new family homes every year..

  • Ellen

    So many think talking up property will keep house prices inflated. Low interest rates are the only thing thats doing that. In the end, people can’t spend money they haven’t got, even if there has been huge population growth and thats what will happen once rates start to rise. We need to get prices where supply and demand curves meet. Not inflated prices and surplus housing stock.

    On NS&I. Applied for mine yesterday. Great way to get solvency into the country and engage the banks in their own game. Its long past time they worked for the money they got.

  • Mark

    An interesting debate.I hate to be sensible but remember what Buffet says on investing- 1. Buy what you understand, and 2.On gearing- those that understand it don’t use it and those that don’t understand it shouldn’t use it!!
    On balance property is expensive and heavily taxed with most people overexposed due to their own home being their biggest asset.Sensible investors get rich slowly with diverse portfolios,low gearing and lots of patience!!!

  • yield master

    5% you must be joking!

    That yield should be reserved for a 25 year FRI blue chip retail unit let to a national chain (not likely to fold) chain, nNot some DHSS doser in a flat in Manchester.

    If you aren’t getting the 15 to 20%+ you could have got in 1996, your aren’t getting a good deal end of

  • TomJefs

    I’ve invested in IWDP ETF for a number of years and will continue to do so, partly due to its international diversification. It has been a solid performer both in terms of capital gains and income. So property in some areas has its merits.

  • Michael

    I agree that this is not the time to buy any BTL property, especially for middle class 9 to 5 average Joe. Totally disagree on the NSI option as it is only for moderate amount and does not really protect from inflation (as the real inflation is ALWAYS higher than the laughable “manipulated” official data released by the various Gov Bodies). The real solution is the opposite offered by the Blogger: have as little as possible in “nominal” assets: i.e. pieces of paper that reads “£1,000” or “£100,000” and invest in a good mixture of “real” and tangible income producing assets (including, depending on one’s net worth 1 or more BTL properties) , maintaining purchasing power, possibly even beating inflation. In the long term (15 plus years) if the chunk (50 to 80%) of one’s portfolio is invested in dividend growers world dominators and all dividend is continually reinvested that’s achievable (with NSI products no way, it’s a naive illusion).

  • The Postman

    I am a 61 year old baby boomer I think buy to let is immoral, why should one section of society be allowed to feed off another section of society armed with a bankers loan,making money for doing nothing, it’s just plain wrong, I hope the younger generation sweeps away this greed as they gain power replacing my generation eventually, then perhaps humanity can live in a fairer world

  • Matt

    I know that BTL only generates crummy yields at the moment. 5-10% once you’ve factored in capital drops, expenses, hastle and tax isn’t really worth getting out of bed for as a short term investment. But surely that’s not the whole story?

    After a 25yrs or so then the tenant will have paid for that house and it is then the Landlords to do as they want with it. So after 25 yrs the landlord has a free house?

    With that in mind who cares whether the value of that house is twice, or half what the purchase price was. It’s still a free house?

    Am I missing something?

  • Alex

    @Mark “On balance property is expensive and heavily taxed” …..heavily taxed????? It’s capital gains tax free if you live in it for 6 months before selling it, and you can offset all sorts of costs against your rental income. Property is if anything hugely undertaxed.

    @Matt…….no your not missing anything. Provided your rent covers the mortgage and expenses after 25 years you get the entire asset paid off by somebody else. So frankly who cares whether the running yield over that period is 4% 0r 5%….the point is when you retire some nice stranger sticks £1000 a month into your bank account as rent on a property with no mortgage, or you can sell it an use the £250,000 lump sum to move to Panama and drink rum all day.

    It might seem imoral Postman, buy most things in life are.

  • Bob

    Ah, so this article is just about buy to lets.

    OK to buy a home now though?

  • Andy

    @Matt – You seem to have totally ignored the small issue of Capital Gains Tax which would need to be paid on the sale of a house that is not your main residence. You would end up paying 28% of the majority of the difference betweem sale price & the original purchase price.

    IMHO, this is the main problem with BTL investment as you can’t spread the sale of the asset to take maximum advantage of your annual Capital Gains allowances.

  • DC88

    @ Matt

    I think you are not counting the potential for your deposit to make money.

    If you buy a 200k house with a 50k deposit and after 25 years you sell it for the same price, you make 150k.

    If you invest the 50k in shares and make a 6% compound return over 25 years, you make 164k (214-50k).

    It is unlikely that the house would sell for the same price after 25 years and you should make some income as rents rise. So it usually works well but the big risk is that high interest rates force you to sell into a falling market.

  • Inflation ate my hamster

    Merryn, you ask on Twitter for examples of London inflation. How about Oyster ‘fine’ for not touching out going up 8% to £6.50 to raise more that the £56.9 million last year

  • Alex

    @Andy…..ummm so you make it your main residence for the statutory period required, then sell it and pay no capital gains.

  • Mark

    @Alex- my understanding of CGT is that changing your nomination to your BTL only entitles you to the last 3 years of gains and not the 22 before!!!! With the new CGT rules there is no index linking of gains so that after 25 years there is a big CGT bill even if houses only go up with inflation. As for other taxes: stamp duty, vat on solicitors/surveyors/agents fees, rental income if you ever make a running yield etc. Reits are a safer bet when cheaper.

  • Postman Pat

    @the postman – that will never happen. Too many years of free handouts and expecting (and getting) something for nothing and with no sign of it stopping. Sounds like you’re still living in the 1960’s.

    My rented house was starting to cost me money – cutting into my ‘earnings’. With a boiler about to be replaced and a host of other small remedial jobs in the cupboard, selling was by far the best option.

    I knocked off a bit and sold to a willing buyer. I am glad I did. BTL is not the brown envelope it’s cracked up to be and looking at the market now unless you’ve got plenty of spare wonga it’s not an ‘investment’ path I would choose!

    BTL is fraught with problems and the potential of problem tenants who are massively over-protected by the nanny state, were and became the biggest flies in my BTL ointment.

    Better off out of it.

  • Mervyn

    The comments here are rather sad as they all refer to Profit, Greed, Gain, Money etc. Very very sad. B2L is justified on doing a service to those who want to rent, or protect my savings for my pension, or earn a nice yield with low CGTax.

    B2L is a social evil, a social genocide of the younger generations, our children. Born out of greed and a manipulated system with now very low interest rates to support the bad Assets of banks, an unfair taxation system to support a housing ponzi scheme. That disenfranchise the very wealth of our nation, the younger generations.

    1,500,000 homes taken out of supply by B2L 50%+ are 1st time buyer homes.
    750,000 homes lay empty as sleeping assets or property local authorities cant afford to repair bring into supply(figs Shelter)

    Kill off B2L sooner this country will be a more responsible, socially enriched environemnt with more disposable income available not being wasted on over valued housing. BoE want you to spend!

  • Mervyn

    Instead of talking about Profit, Greed, Consumerism illnesses, thinka bout the appalling consequences of the Evils of B2L and the damage it has done to this countries future AND the causal factors of the global economic crisis – Property Speculation, B2L, manipulated housing ponzi schemes for get rich quick, pensions fears.

    Mortgage Bonds were created to drive the Ponzi scheme and Govts signed up and supported the financial industry to perpetuate it. Then BANG it all fell down impacting millions upon millions and still not sorted out for the next 10yrs to come.

    The cause, Property Speculation and B2L social evils.

    If you feel a better social conscience is necessary for a better society to live in then address the 1st 3 points in Maslows hierarchy of needs, not profit driven by unbridled greed.

    The excuse it is done to provide Rental property is a nonesense it is done for GREED/PROFIT.

    Property assets hopefully will fall and with it the illness of B2L.

  • mary

    Comment 37. I agree entirely. The market is swamped with BTL.
    The law is totally prejudiced towards the tenant, and if they are on
    benefits they are likely to be in arrears. No good having the
    money paid to the landlord direct – if the tenant moonlights (even
    if you knew absolutely nothing) the local authority will seek to
    get the rent back from the landlord. The booms and busts since
    the 1970s have meant that investment in property is a matter of
    timing – as with the stock market, but the worse thing about it is
    it is illiquid. And all the gain is not in one year, whereas you can
    drip feed your gains with stocks. And you can take out ISAs
    and not be liable to gains on them. Of course, it is all risky.
    There is no such thing as a free lunch.
    But even worse than property here is the Holiday home abroad.

  • North

    There is nothing evil about BTL. The properties I rent are all in good condition and a fair rent is paid. The tenants do not want to buy their own house as they move on after a few years and are not planning to live long term in the area. The profits from BTL are widely exaggerated. The true evil in this world is blatant consumer avarice. The need to buy the latest electronic gadget, or the new shiny car. People living beyond there means using credit cards and other loans are the people who caused the recession. If consumers didn’t want to borrow money then the banks wouldn’t be in the position they are today, rich and shored up by the state.

  • wondering

    As I understand it , for the majority of the last few centuries most people have rented their homes in some form or other. Owning your own home has never been universal, so there have always had to be landlords providing accommodation ( some have been sharks but not all), from my own experience and conversation I know there are people who will never own their own home and dont want to.
    B2L owners are also providing a service. Not every B2L landlord wants to rip people off, just generate a small income from their assets.
    As mentioned by someone above, Warren Buffet says” stick to what you know”, I don’t know any of the other financial stuff you mention but i do know property. Its definitely not a get rich quick option. But id you know this then its an acceptable way to use your assets.

  • Zodaz42

    9.2% rent arrears sounds terrible:
    LHA ALWAYS pay rent one month in arrears, so anyone on housing benefit will automatically pay in arrears. This is still safe money but distorts the picture.

    “Arrears” can be anything from a day to anything. If the majority of the arrears is a week or less, then the bald statement 9.2% of rents are in arrears, distorts the picture. Accurate analysis and less rhetoric please!

  • PhilipCarer

    97 years ago Rent Control was invented. It got worse in 1939 and survived until the 1950s. With all the attitudes of tenants and the problems which they think they have, it is not impossible for political pressure to bring back something similar. Don’t think it could never happen – it just might.

  • Shaggy

    I’m not sure house prices will fall, look at all that money printing – this must come out in the wash sometime. We are heading for massive inflation, the question should be – is property the best inflation hedge?

  • Rob

    Merryn is right. I have been doing btl for yrs. The only way it pays is to get into it when prices are rising, get out before the peak. Otherwise, you have to deduct 1/3 from gross yields to cover maint, voids, insurance, management, etc. You then arrive at a net yield of about 4%, but long term borrowing is above 4%, so it is a negative return. Even if you hold for say 25 years, you have to remember the initial input from yourself. If this initial 25% deposit, plus purchasing costs, was invested elsewhere for 25 years, it is possible to get dividends and growth which exceeds 10% p.a. and when compounded, particulalry in a tax free zone like a pension, far exceeds the return on a btl.

  • bob

    There’s nothing evil about BTL. Ihave rented 13 places up and down the UK all from private landlords over the last 10 years before recently buying a place. This flexibility allowed me the mobility to build up work experience and aquire university qualifications over the last ten years which (besides now allowing me to command a high salary) provided a great deal of flexibility and experiences to boot. For the “youth” with aspirations outside their home town, BTL works just fine. Sure I stayed in some flea-pits but with a few months notice I can pack a van and move to a new place, leaving the landlord with the hassels of finding a new tenant. Property as an investment? I couldn’t care less. Personally I’ll stick to the stock market.

  • Hilary

    No mention in the article of gross yield being subject to TAX. I am sure many landlords are unaware they should be declaring rental income for tax purposes, just as the TV programmes encouraging small-time property developers do not mention CAPITAL GAINS TAX liability.

  • Matthew

    My houses are now mainly with a good agent, with whom I have had no problems at all, Two others I tried were fairly useless, but thankfully, I now have no problems.The houses are increasing in value, slowly but surely, whereas shares are plummeting, so property has been a good investment for me up until now, and it is providing houses for people on benefits, who are unable to purchase their own houses.

  • Matthew

    I forgot to mention that a decent letting agency will ensure that the house is comprehensively covered by insurance for every possible event, so therefore no extra cost should be incurred by the landlord.

  • AM

    We have been privately renting a 2 bedroomed property in North Yorkshire, but my husband aged 60 has been made redundant and my project for the local authority comes to an end next month. Our rent is £550 per month and we have been informed that housing benefit will only pay a maximum now of £401 per month (under the new rules). We have given our landlord 2 options
    1. reduce the rent to an affordable level
    2. issue us with a termination notice making us homeless
    Like many others we have never claimed benefits before, find that a combination of spiraling costs and lower income have eroded our savings. Whichever way we turn we are heavily penalised. Round here investors bought up vast swathes of properties either as BTL or second/third homes pricing locals out of the market- they thought they were being clever and the reality is they were- prices are stratospheric way in excess of national averages. So goodbye North Yorkshire was lovely while it lasted.

  • Paul Tilling

    Try buying a tiny flat in a mansion block in a super lux location in London. Good returns, no boiler problems, redecorate in one day and if the property market tries to sink the Russians and Chinese will be there to buy it!
    Location, location, location. Sounds familiar?

  • Property Investor

    Most of the 50+ BTL properties I have bought were sitting on the market unwanted for 6 or 12 or months. I invest time and money to fix roofs, heating etc to make them safe and comfortable. So, it’s a bit rich for anyone to say BTL is a social evil. Not all BTL is the same. There is good, long term investing, making things better. That is not the same as greedy specualtion. Without investors like me, more buildings would be vacant, unsafe and/or deteriorating.
    Having said that, I think further price falls of 20-30% are likely. Sadly, even in Buckinghamshire I am afraid.
    It’s possible I am wrong in my predictions (always a first time).

  • carol42

    I became an accidental landlady when the sale of my property collapsed in 2007. After six months I had to let it and all I can say is after 2 years NEVER AGAIN. I paid tax on the income and it has cost me about £4,000 to put the house back into saleable condition. The dirt and damage was incredible. I have now put it back on the market at a lot less than I originally sold it for. The tenant totally neglected the property, damaged my central heating system and left all sorts of rubbish, as it had been my and my late husband’s home for 12 years I was heartbroken to see the state it was left in and it has taken me six months to refurbish and repair and I doubt I made any money in the end. What is the point of letting a nice family home when tenants can treat it like that, it was a nightmare , I will never let again even though I am having to pay full council tax, most unfair.

  • Andy S

    North has hit the nail on the head, consumer greed is the problem in society, people chasing and borrowing money to buy goods they can’t afford ! As for b2l buy at the bottom of the housing market where people on min wage and social benefits can afford to rent as they are a safety net . ie if social is £401 that equates to over 9% gross on a £50000 house and on that figure there will be capital growth in the long run !

  • Mark

    BTL Social Evil? I am a tenant and a landlord. The flat I rent is a better property than I can afford, in the area I live. It allows me flexibility to move to a larger place as my children get older.

    I would never own the property I live in as I think that is a social evil.

    As for being a Landlord – I just bought rough cheap places which were unmortgageable. I worked hard doing the labouring etc sleeping away from home on floors with no heating etc. I made the properties mortgageable hence putting them back into circulation and I maintain them in a decent condition. Most of my tenants are on DSS or low paying jobs with bad credit ratings i.e. they would not pass a credit reference check so how would they get a Mortgage??

  • Kawasakifreak

    The housing market will always need social housing.
    Whether that’s provided by the public or private sector doesn’t matter that much – both are subsidised by the tax payer in one form or another.

  • Gofer

    Three grand for a boiler. The plumbers must love B2L as much as anyone.

    British Gas get away with it and all the the others must be cashing in. A boiler for a small house costs about £600. If there are no problems you need some pipe fittings a new flue and maybe a days work. £1K is surely closer to a reasonable price. A good boiler also used to last nearer 20 years than 10. Rip Off Britain alive and kicking.

    And in the B2L situation its the taxpayer who pays, thanks for reminding us Nick.

  • Margaret

    Wow, what commentaries!
    Every investment has it’s up and downs; good and horror stories. I agree that greed and fear are prevalent in any investment and decision making. “Consumer greed is the ultimate problem” reading these commentaries. Certainly, the marketing companies didn’t dream of the profits they’d be making?
    What are the necessities in life to be happy? Food, shelter, clothing,etc… Or are they, BLT’s, shares, brand names, cappuccinos, etc?
    Yes, we do need income. Yes, we do need to save. yes we do need to invest for retirement. BUT, think about it, if we all spent just on necessities and did not keep up with the Joneses how much happier and longer would we all live.
    Everyone prefers a different cup of tea and I for one like realestate. It was always considered a long term investment (10yrs or so) so why is this article comparing it to short term investment? Sorry Merryn, I disagree with you on this one…..

  • Paul (huge profit over last 2 years)

    I remember Merryn on tv about 2 years ago saying house prices were only going one way, she was right they went one way, but they went north not south. At the time prices were down 20%+. Yet over the next year not only did they increase 20%+ but they regained their peak prices. Sadly this is not across the whole of the UK but in good quality desirable areas within Surrey. The message, don’t generalise too much and don’t trust the BoE not to reduce rates to irresponsible levels to maintain the status quo, in the shot term that is. PS Although Merryn wasn’t spot on then chances are she might be now; with a nudge rom increasing interest rates…

  • cresswell

    Merryn, I have just done a back of the envelope calculation on my BLT in Richmond Surrey and can confirm that rent compared to investment interest after capital gains would be much the same. However, as it seems impossible that house prices are going to hold this would be a time to exit stage left. Lenders are asking for 25% deposits on domestic mortgages because they think prices are definately on the downward path. The housing market would do the UK a great service if it were to correct by 25%. in the downwards direction. Our so called prosperity, as we manufacture very little, is based on a “house of cards” ready to tumble. So I think it’s past high time to flogg it an run. I’m going now before it’s too late!

  • cresswell

    Merryn, I have just done a back of the envelope calculation on my BLT in Richmond Surrey and can confirm that rent compared to investment interest after capital gains would be much the same. However, as it seems impossible that house prices are going to hold this would be a time to exit stage left. Lenders are asking for 25% deposits on domestic mortgages because they think prices are definately on the downward path. The housing market would do the UK a great service if it were to correct by 25%. in the downwards direction. Our so called prosperity, as we manufacture very little, is based on a “house of cards” ready to tumble. So I think it’s past high time to flogg it an run. I’m going now before it’s too late!

  • stock tips

    Thanks so much for this! I haven’t been this moved by a blog for a long time! You’ve got it, whatever that means in blogging. Anyway, You are definitely someone that has something to say that people need to hear. Keep up the good work. Keep on inspiring the people!
    Stock Tips

  • AndyC

    The article states some people consider BTL as their “pension” & then says how in the past couple of years her friend has lost money. It’s not even relevant.
    If BTL is to be used as a pension, then by it’s very nature it should be considered a LONG TERM investment & frankly most stock-based pensions have made large losses in the past few years also.
    Since the 1940’s UK property prices have increased by approx. 8% pa. It is important to consider Capital appreciation & rental return. With today’s low yields, this still equates to 12-13% pa.
    A mortgage used when investing, makes RoI higher. Assume a £100k property with £25k deposit & £75k mortgage @ 5%. Interest would cost £3,750, leaving a ‘profit’ (asset appreciation and rent) of £9,250 – from £25k cash – so a 37% profit.
    Operating costs can be high, but use landlord insurance policies and British Gas Homecare (£18/month) which covers; plumbing, boiler, electrics etc.
    Property IS a reliable LONG TERM investment.

  • Harry Martz

    I’ve been doing rentals in the US for 27 years and it’s not easy money. One bad tenant, one problem you didn’t see before you bought, can wipe out a year or three of profits. One tenant moved out of a house in January owing 2 months rent, shutting off the heat and freezing water pipes I had just replaced. They moved from Pennsylvania to Florida, the debtors’ state. I could go on at length about others. You never get 100% return of value for improvements. 50-85% at best, If you don’t do a lot of the work yourself the contractors will be the ones who make out. Buy a REIT instead and let someone else ruin their back and turn gray.


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