to have upset a friend over her investment decision

[pixienott]

I've a always had a real problem with borrow to let. I've a problem with buying properties to rent outright too in a time when housing is so badly mis-allocated, but I think if it's your own funds, then you make your choice.

But borrowing money to do it is much worse because (in my opinion)

#1 It's a leveraged investment which is regarded as a highly risky and sophisticated strategy only to be used by people who fully understand the risks (i.e. not an unshakeable belief in 'property always goes up'). Most people wouldn't dream of doing with other asset types.

#2 It's just totally questionable in a world of near infinite investment vehicles to pick one so intrinsically tied to people's lives, and to do it by borrowing money and bidding against potential owner occupiers doesn't seem right.

#3 (this one might have been a bit too much - see below) the money is credit money created by a bank - i.e. conjured out of thin air on a promise it will be returned by the fruits of some poor person who may never be able to own their own.

#4 I don't even think it's a good investment financially - most people are relying on capital appreciation, the yields where we would be are very low and the rents are dictated by salaries/housing benefit (aka landlord benefit!).

So a friend of mine is (planning on) doing the former. We'd gone out for a chat and we were discussing pensions. She says her and her DH are going to release some equity and look at putting it down on an investment property. I explained the above, and said that she could look at a self invested pension instead - which wouldn't necessarily have such ethical points but she was adamant that this was the way she wanted to go, and wasn't happy with me questioning it.

I feel bad, but it is how I feel. Was I wrong to bring it up? I just feel so strongly about this.

Unsolicited opinions rarely go down well ime!

I don't think YABU. It always amazes me how buy to let has taken off and how many amature landlords there are out there. Often with no real appreciation of the obligations they have towards their tenants.
Also as an advice worker (mostly welfare rights but have done some debt counselling as well), the only really intractable, completely fucked up debt situations I've seen have been wannabe buy to let tycoons. Seriously- almost anything else can be smoothed over or dealt with- but not that.
As they say, theres no such thing as easy money.

It's really up to her - sounds like you have been a bit forceful with your views.

She might be a lovely landlord!

That is absolutely fair enough snog. We were chatting though, and are good friends so I did want to be honest. It wasn't that I was deliberately setting out to upset her. It's an emotive topic for me though, and yeah, maybe I should have just said 'Hope it works well for you'.

^this

Unless you have specific expertise in this area and she asked for your professional opinion, then I think you should have kept your thoughts to yourself.

I wouldnt be happy if someone questions my investment decisons and calls them unethical.

Fair enough. Difficult to keep a lid on this particular topic, as it's a button pusher but yeah - I was being unreasonable.

Unreasonable, sorry.

Thanks - it's a shame that I can't be honest about things - I was actually trying to steer her away from what I think may be a mistake for her as well (outside of the ethics, as someone who like investment diversity it seems to me to be too many (borrowed) eggs in the property basket), but everyone should make their own choices,

As a landlord myself, I wouldn't mind you saying this. Better than having a face like a cat's arse because you disapprove and not saying anything. At least she had a chance to argue with you about it.

I'm an accidental landlord - my house was in negative equity after buying at the height of the market and I couldn't afford to sell. I am now hoping it will create a pension pot but I don't think I'm being unethical!

Well I think you're right and maybe she will stew on what you said and re think.

Haha I wish she had argued with me about it! There was no discussion. Instead she just said that it's their choice to do so (which is fine). A healthier dialogue would have been nice, instead of just agreeing to disagree (sort of) immediately.

Looking back, it was too much of a diatribe on my part.

Depending on where you live, it can be a very good investment.

A relative of mine bought one for £70,000, put down £21,000 of own money and borrowed £49,000 at 3.5% or thereabouts. Mortgage payment £170 ish, rent after costs etc £400.

Effectively they are making £230 a month on a £21000 investment.

Whether it is ethical is a different matter.

Well, I'm happy to argue on here about the rights and wrongs of it as I see it with people who disagree with my stance on the ethics if you like, but if not - that's fine too!

I have been left 200k in a will. We have no pension at all.

We were hoping to invest this money in a holiday let somewhere close to Scarborough, not to make much money, but just to keep its value.

Does that make us money grabbing villians?

Is your need to have an opinion on it more important than your friendship?
I find those who use 'it's a button pusher' are usually the type to have a bit of a gob on them but dress it up as just having a strong personality.

Perhaps not the wisest thing to do, but I can see why you did.

I had a friend, friend A, who owned a house and her husband a flat which they had bought when splitting up. They owned their own home outright as her DH had an inheritance from him parents which paid off their mortgage.

She sold both properties, which had been sublet to council tenants and moaned about the damage they had done, and how much hassle she'd had from the council to get them to compensate her. Both properties sold quickly and she and her dh have spent the money on new cars, holidays, and toys for their children, so didn't have a urgent need for it.

Our other friend, friend B, has just been given notice on her privately rented house. She and her dh do not have a good credit rating, so despite the fact that they have always paid their rent in full and on time, the letting agent are refusing to consider them for similar properties. She is now facing a decision on renting a flat, where she cannot have her children from a previous relationship overnight during contact time as there won't be space, or declaring herself homeless and hoping after an unknown length of time in temporary accommodation she might be offered a flat with some security of tenancy.

It is hard to appreciate a person choosing to invest in property when you see the real cost it can have in human misery not to have a secure home for longer than six months at a time. As you say, doing so with borrowed money could mean your friend never realises a profit, is forced to sell and costs a family their home because she hasn't done her research.

YANBU. I would not respect a friend who chose to become a LL.

Shame more people don't speak out against it really.

I wouldn't argue with someone who'd just launched a diatribe either. By saying nothing I would hope you'd shut up more quickly.
And there was clearly never going to be a reasonable discussion.

A relative was talked out of putting a nest egg into a property and into an investment - things changed, whole lot got wiped out. If she'd followed her heart and put it into a property, it would now be worth about 3x the amount of the original stake, plus she'd have had rent from it, minus any associated costs - which I can't see being big enough to wipe out her rent, let alone costs. Even if the property market hadn't been good over time, she'd still have had something left - as it is, nothing. Obviously I've over simplified to be brief but it's something that's caused her a lot of heartache and problems.

So depending on your friend's dealings with investments, properties and so on - she might feel exactly the opposite to the way that you do about using her lump sum to put into investments and not property. I don't think it's as simple as you make out, sorry.

partialderivative - Well, there are a multitude of other ways to invest 200k other than in a holiday let property for a pension. But if you are buying one outright with that, good luck to you. poster

Coffeethrowtrampbitch - yep. The misery it's causing (i see it first hand with other friends and family) is severely underestimated.

Unless she asked for your opinion on the ethics and sense of her decision, I think it probably would have been better to say something like "hope it works out- have you had financial advice?" if she said no, maybe suggest it's something to think about.

Generally speaking, telling someone they are behaving in an immoral/unethical manner (in what sounds quite a forceful way, especially as you say it emotive for you) doesn't go down well. Is it possible that she took offence as you weren't too tactful?

'And there was clearly never going to be a reasonable discussion.'

With all due respect, that's a reach.