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.

You don't have to like it, but we do and we look after our tenants, act well within the law etc. Nothing unethical about that.

That's entirely a matter of opinion. According to many people's moral codes, it's highly unethical.

If it isn't your friend buying up the property, a rich foreigner will.

I agree with your stance op and don't think it's wrong to speak your mind. But it's also fairly predictable that your friend might be offended at being told she is unethical and unwise. It's not really a question of whether you were within your rights it's whether your views are important enough to you that you'd rather express them even if they're not well received than keep the peace - that's a personal decision. I guess you'll just have to smooth things over and avoid the topic in future if you want to keep the friendship. If she can't handle having a friend with different views then personally I'd take the view that that's her problem.

How many times do we need to mention housing benefit paid to working people subsequently going to private landlords as being a direct transfer of tax payer state/state borrowing before it registers?

what's your proposed solution to this then pixie?

Offering services that people want that aren't exploitive, in direct receipt of state subsidy or involve borrowing money from a bank.

I do exactly that as a buy (not borrow) to let landlord. If that's your criteria, then plenty of BTL landlords fit it perfectly.

How can that realisation not change your very strong opinion even slightly?

If it's all about ethics, how is it more ethical to sell something that is possibly a needless luxury instead of working in a low paid public sector job, doing work that society very much needs people to do, and then subsidising that by allowing someone who earns a good wage to live in your property instead of by claiming benefits?

Offering services that people want that aren't exploitive, in direct receipt of state subsidy or involve borrowing money from a bank.

Are you saying that people on housing benefit should not be able to rent in the private sector?

I'm saying that removing housing benefit would remove the subsidy to landlords. what do you think would happen to rents and the properties without the subsidy which sets a floor on them. Add in working tax credit etc too as a corporate subsidy. And remove the facility of borrowing to let. I said in the op that buying outright is another ball game. Still deeply unpleasant in a country with housing problems, but less so.

Instill think its exploitive though ptolemy. There is now a generation priced out. The only way they can afford to buy is throught ridiculous schemes like help to buy, or divisive trash like right to buy. Or take on massive mortgages at historically low interest rates. Leveraging your capital in this manner is exploiting your position. imho.

What a bizarre thread. OP, YABVU. Unpleasant, rude, and a bit odd. Your friend has made a financial decision that you wouldn't make, and so you 'upset' her? Nothing has gone wrong, no-one has been hurt and her money will be fine or it won't but it is very much in the normal range of usual run-of-the-mill investment options. Certainly no cause for her to expect to be blindsided by you.

'it's a shame that I can't be honest about things'

How old are you?? All relationships involve holding your tongue at some point.

She's not investing in dodgy goldmines, or funding Nigerian princes after she receiving an unsolicited email. She's absolutely doing what lots of investment managers would consider normal.

You are angry about private landlords, but your anger is disproportionate and you owe your friend an apology. You can choose to 'lose respect' for her, but before you do that you should take a hard look at your own interaction with your friends.

If you do have the money you say you do (with enough left over a lambo! Fancy!), you didn't make it through your own investments. If you had done, you would have a fuller understanding of the importance of a diverse portfolio and the role that property (commercial or private) plays in that.

ok, so if you don't like housing benefit going to private landlords; let's not allow anyone with state support to rent privately. Let's have enough state provided housing for them all.

now, who bought all that housing?

the bile is being spat in the wrong direction. What IS wrong is that workers are so low-paid that they need state support. How do we fix that? By paying more for things.

As always, it seems easy to make assumptions about other posters.

Every penny is mine. Every penny came from my own decisions. And not a single one involved 'investing' in residential property. So believe it or not, some investors are capable of avoiding people farming their or their friends kids.

1000s of people don't want to rent privately, but in vast areas of the country their only alternative is to live in a cardboard box.

This is why it's exploitative.

OP, your emphasis on 'residential' implies you might have invested in non-residential properties - is that the case? Are you 'farming' businesses?!

Indirectly maybe, with respect to to commercial property investments held effectively held within some funds. But I don't directly go out and buy commercial places and hike the rent.

I will apologise to my friend, but attempting to convince me that it isn't an abhorrent decision isn't going to work.

Ehnn, there is still noting whatsoever accidental about your choice. I'm not questioning your ethics or your decency as a landlord, I'm questioning your stance that your position is accidental when quite clearly, it's not.

Well, it seems all the borrow-to-let LL's mortgages will come home to roost when the interest rate eventually goes up. And if there is a deflationary situation, the mortgage debt will increase in real terms. Property is not without its risks.

OP, you have got this waaaaaayyyy out of proportion. There is a housing crisis but that isn't a result of your friend's decision or people like her.

It's a result of no CGT on residential property and so everyone understanding about property value, focusing on it, general increase of population, etc. I don't know how you are making the link with 'farming children' (what does that even mean?).

The way you choose to invest and the decisions you take are no more or less moral than your average person going to an investment manager and him saying Investment Trust/Bank Acct/Property/Venture Capital. The way you describe bank accounts makes me KNOW that you don't actually know about handling a portfolio appropriately.

I think you are angry, and I am sure that this will be born of some personal experience of private landlords. But the world needs private landlords. Not everyone wants to buy a property for the eight months they'll be living somewhere - or even the ten years.

'Abhorrent decision' is overstating the position more than a little. You need to take hold of yourself. Your friend is normal and fine and in no way to be cast into moral darkness by her buy-to-let!

OP quite a few people have said YABU. If you are so sure you're not, then why did you ask?

How many times do we need to mention housing benefit paid to working people subsequently going to private landlords as being a direct transfer of tax payer state/state borrowing before it registers?

Even if you mention it daily for the rest of your life, that won't actually make it true.

Housing benefit (like all benefits) is by definition a subsidy to the recipient. It can't also be a subsidy to the landlord, that's double-counting.

If you want to argue that prices are pushed up by housing benefit, you need to prove that they are at least double what they would otherwise be, before you can round to whoever is getting the highest share and make the wild generalisation that all of it is a subsidy for the landlord. (Post a link to some research showing how big the effect is, if you want the idea of housing benefit as a landlord subsidy to be taken seriously.)

If the government gives substantial numbers of people money to live on, as they do, and those people decide to spend some of it on somewhere to live, then that is always going to have some effect on prices. It is a hell of a long way from "some effect" to the bulk of the money being a subsidy to landlords. The most practical alternative to putting up with "some effect" is to abolish the benefits system, which I guess you wouldn't be in favour of.

'The way you describe bank accounts makes me KNOW that you don't actually know about handling a portfolio appropriately. '

Even someone as dogmatic as me finds the arrogance in that statement absolutely breathtaking.

I said I was being unreasonable about upsetting my friend within the first few posts. The rest of the thread is a discussion on the points with people who have chosen to engage and offer their opinions.

Actually I don't know a single landlord who takes anyone who has any kind of housing benefit!! There are so many tenants in London who will pay who aren't on benefits you don't need to take the risk with housing benefit claimants. There was that Kent landlord with 500+ properties who is trying to sell the portfolio and had taken HB claimants and now regrets it as they are more trouble than they are worth!

It is a silly landlord who chooses to have as tenants housing benefits claimants rather than two good earners on high pay.

I would certainly support abolition of housing benefits and tax credits. They are market distortions.

Taxing landlords on their income profits and capital gains are not distortions nor is allowing banks and anyone else to lend money on the basis interest is charged.

Amazing thread that landlords who on the whole do not make much profit and often don't even make a capital gain are some kind of baddies!

I said I would abolish the entire benefits system In this very thread (other then genuine cases like disabilities etc.). The rest just distorts everything and we end up here.

Not allowing tax relief for landlords on mortgage interest payments, and perhaps a higher rate of tax on rental income would be more practical and actionable interventions than removing borrowing to let or housing benefit. The increase in tax revenue should be spent on housebuilding, which is the longer term solution to this problem.
Also how could you practically trace the source of someone's funds? Your friend can release equity from her own home and turn up with a suitcase of cash to buy another home. Likewise foreign investors can do they same. You can legislate over UK banks lending rules but not worldwide.

OP, there's a lack of financial savvy and sophistication to your posts that does make it clear that you aren't necessarily as involved with investment management as you suggest. That's not arrogance that evidential.

Owning property, residential or otherwise is a valid investment decision. It is not some Rackman-esque crime or even morally dodgy. It is meeting a vital part of the housing needs of the UK.

I said I would abolish the entire benefits system In this very thread

Sorry I missed that. Usually it's hard-of-thinking lefties* who argue private landlords are the spawn of the devil, so you seem to be an unusual case.

• as if there's any other kind.