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.

Feckeggblue
please don't treat other people here as idiots.
Quite often they make complex decisions for darn good reasons.

If I have a fantastic 300k pension pot, I will get a great pension. When I die, the pension pot will go to the insurance companies.

If I invest the 300k elsewhere, my pension will depend upon the return. When I die, my pot will go to the children

The bTL situation is all quite silly. It shouldn't be something that 1 person with one spare house should be encouraged to do. It might look like easy money but actually it is quite difficult to do it properly and also make money (hence why I'm not a LL) especially if your massively increasing your own debt.

It is a shame some if the big institutional investors don't particular invest in residential property as in Germany. They would have the economies of scale and expertise to properly manage the lets and sell bonds in the scheme to people who would otherwise be looking at bTL.

Also just a nod to funding circle etc as more ethical investments with a better return than through banks.

I'm not treating you like an idiot. I'm responding to the OP. I don't even remember your posts

And besides I know many BTL for pension landlords who don't realise that

'If I have a fantastic 300k pension pot, I will get a great pension. When I die, the pension pot will go to the insurance companies.'

300k is bugger all in a pension pot with these annuity rates, but the rest is not true.

You haven't been forced to take an annuity for years in a personal pension- drawdown was always on the table. The new rules are even better - In the new rules, anything within that wrapper can be left tax free if you die before 75 - and are not included for Inheritance tax. After 75, the fund can be left for inheritors to use as an income producing fund themselves, drawing down as they wish at marginal tax rate.

This is the point. So many people just think property, when there are so many other ways.

I'm sounding like a pension evangelist now, I know. Sorry.

that's progress.
pensions are out of the window
all we have to deal with now is your dogmatic approach

As we've stated before on this thread, renting out a property these days is still very likely to mean relying on the taxpayer, at least eventually or at some point, one way or another.

Either through housing benefit on working people, or because owner occupiers now have to take insane schemes like help to buy, which are subsidised through tax receipts to compete for the few houses left on the market that are not being bid up through borrowed money.

I would dispute that bTL is really maximising the return in your pension pot amicissma! After fees, tax and maintenance I understand there are a lot of people hoping for capital gains. While this may happen if you can wait, equities are pretty comparable and need s lot less hassle.

The mere use of the word dogmatic in the context of my statement coming from you is the height of irony :-)

Unless she asked your advice as an IFA, it's none of your business how your friend invests her money.

You disapprove of what your friend is doing fair enough. But whether or not you have the right to questions her moral values. She is doing absolutely nothing illegal. Fair enough to point out the risks and things to be careful about. But this sniffy judgement of people when the OP would probably do exactly the same given half a chance. that's what annoys me. Sorry if I've misjudged you OP. But I've heard socialist types going on about being anti private school and lo and behold when the time comes it's private school.

I was reading one of the many bits of paper kicking around investment. One 'ethical' investment manager excludes all pharmacological companies.

because vaccines and medicine are a bad thing, aren't they? Smallpox was eliminated by magic, wasn't it?

as I've said, ethics is (are?) where you find it (them?).

ps peke that German idea sounds great, all for that.

and only the dumb can possibly believe it is easy money. Unfortunately many are dumb and believe the property programmes. There have been many on here who have had their rental property investment bite them back seriously, and they can also be found on landlordzone and propertytribes. Where other landlords have no sympathy for the incompetent or ill-informed.

the MN bile-spitters won't see that, though.

poster Viviennemary

Haha. Trust me, if I wanted to do the same thing, I could. Many times over. For cash. And still have enough for a lambo. And a ferrari. Yet I haven't.

If you read the whole thread, you should surmise I am not personally struggling.

And as for private school, no issues there. Investing in your children's education isn't a problem for me. I wouldn't, purely because I think school's are primarily a social environment, and children learn more about the world from experiences, family and friends.

People, regardless of wealth can have their own moral code. It's true. As specialsubject says, ethics are where you find them.

As I've said on the thread, I don't think landlord's themselves are bastards. I do think lots of people are misinformed or haven't considered other options. No anti-landlord bile from me. When I say it's people farming, it's perhaps done without looking at society as a whole.

And as I've also said, there are questions around my own investment choices too that have been pointed out, quite rightly.

It's probably been pointed out, but I'll say it anyway...

I cannot afford to buy a property. Someone buying a house to rent it out isn't taking it away from me - it's making accessible to me. True, I don't have the same security as those that own their own houses, but I cannot afford to buy. If I want to live in a nice house in a nice area I have to rent.

The friend was inviting OP's opinion by sharing her plans. .
I agree with OP's points about Borrow-to-let being unwise investments, it's exactly why we haven't pursued it ourselves. (I don't agree about the 'farming' people comments, though).

Have to let other people make their own decisions.

RainbowFlutterby

It sounds like you would buy if you could, and prices were sensible.

Your ability to buy has been compromised, at least partially (though there are plenty of other factors too) buy the removal of housing stock from the market place out of the sphere of owner occupancy into the hands of private landlords. And, as prices are set at the margin by quite a few people who borrow as much money as they can lay their hands on, without a lot of thought other than 'Must get on the ladder' or 'it's my pension innit', you have been compromised.

I rent too. I'm happy enough in my position with the flexibility to use my completely liquid surplus capital on other investments, and letting the landlord take any downside risk on the 'housing wealth' they have accrued. And if you want flexibility - superb. But I genuinely feel people in your position would likely be better served by a fairer model where society didn't see residential housing as the golden goose investment. Simple as that.

Thanks for using the phrase 'borrow-to-let' btw ragged. Let's help get that in common use!

I'm sure a fairer model would serve me better, but life's not like that and right here, right now I want my son in a decent school with his friends. My son's schooling won't wait a generation or two for the model to sort itself out. So I rent. Your Utopia helps me not one jot.

Yep, I guess it doesn't help. I mean, god forbid anyone even trying to make a point about societal issues. Better to just accept it is what it is I suppose. Let future generations deal with the stored up problems.

Landlords who buy to let can be just as unethical as those who borrow to let. I don't get the big distinction. Sure the borrowers take more financial risk so that might lead them to making more unscrupulous decisions. Or it might not. It's a question, in either case, of landlords being aware of their social responsibilities. No reason why OPs friend cannot become an ethical landlord.

As I said - Utopia. You don't seem to understand that my alternative to your ideal is homelessness. And forgive me for being so self-centred as to want a roof over my head and my son in a decent school. ''Cause you know - future generations and all that.