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 might think you have gone through it, but all I can see is that you've contradicted yourself. I'm not responding to every single point you make because I agree with you on some of it, and there's not much debate to be had when people are all in agreement.

In your first post you did say that there was a difference between borrowing to let and buying outright to let, I know that, yet you still go on to say that my buying outright to let is exploitative, without being able to explain who it is that is exploited in this arrangement.

No young people are shafted in my arrangement, in fact two people, not including my children, are benefiting from it, and you are refusing to see that. It's no wonder you don't want to engage further, because you don't seem to have the answer as to who is being exploited despite being determind that someone is, and nor do you have any truly ethical better suggestions of what someone in my position could have done to provide for myself and my children.

If no landlords ever bought to let out and people did not move cities to rent whilst keeping their original owned place and letting it out, the question is if prices would drop and indeed if it is better if it they do.

It is more likely that if a lot of house building were done in cities with jobs (other places have lots of houses, some quite cheap and more than enough land to build on but no money) that would help first time buyers buy their first grotty starter place and work their way up. If it is a moral good to benefit your children and care for them then investing in property is fine in my book just as much as investing in reading to them or in their education is fine - it's a moral good, not a moral wrong. If you believe in Jesus and casting off all you know on the basis rich women never enter the kingdom of heaven etc then may be not and if you believe that then by all means send all your money my way.

Haven't read the entire thread, just your OP, I think you have a valid and interesting point on this matter.

I live in Mexico and as hardly anyone gets a pension, let alone a decent pension, sensible people who can afford it buy to let. And I have always known I should, at the times when I could afford it that is, but there is something about changing sides in the landlord/tenant situation that gets me.

I've just RTFT and agree with you to an extent. I think most landlords are decent, but borrow to let landlords are pushing up prices and have to get a return high enough to guarantee paying the mortgage when interest rates go up.

I'd have told her not to do it as Gideon's housing bubble is about to pop. I'd put 40% into gold which is artificially low. With the amount of QE going on gold should be trading at around $5000 per oz, but every time it hits $1300 the Fed releases millions of futures to depress the price. All this is doing is allowing China and Russia to buy gold cheap, and they are on a massive scale. I'd advise buying silver for the same reason, and I'd also tell her to consider digital currencies, especially Bitcoin and Maxcoin. The latter is Startcoin with a one ounce silver coin attached to it, so if you spend the digital money you still have silver.

Another alternative is Goldfish, gold backed digital money from The Real Asset Company, Jan Skoyles (@skoylsey on the Twitters) is a regular on tv talking about holding tangibles as a hedge against housing/banking crises, and I have a lot of time for her.

Great stuff Doctor Two. I agree - crypto currencies are a wonderful way to fight bank against the corrupted fiat crap.

And agree on silver too - they can manipulate it all they want, I'll keep stacking.

I'm personally against recommending buy to let as an investment vehicle, for both financial and ethical reasons. But you're suggesting gold and bitcoin as alternatives? WTF?

It appears you got the debate you were looking for online. You wrote upthread that it's a shame you can't be honest with your friend.

I bet she's thinking the same about you.

Shame she can't be honest without feeling like you're judging and questioning her withyour unsolicited opinions.

I've just seen this linked to and had to comment as I've got so angry!

This is purely the politics of envy, concentrate on your own life not looking to what others have with envy.

Me and my husband started our portfolio almost fourty years ago. For each and every property we have had to invest our own capital in order to purchase the properties. For the first few we had to just work hard and save hard!

We provide a service that people want to buy off us of their own free will. We pride ourselves on giving high quality property and are huge wealth creators. We employ a full time manager for the properties, an accountant and every month we have several properties that need repairs and maintenance so we spend fortunes with local tradesmen. With the annual rent increases they are mostly barely above inflation.

We had a property where a poor lady had terminal cancer, we halted the rent increases for two years even though legally we were allowed to. We even sent her an expensive hamper as we value our customers and are very compassionate.

For the first few decades we were making very little off them and its only now that most of the mortgages are paid off that we were able to retire early on a good income and guess what we pay tax on that (40%!). We are only wealthy on paper as to sell any of them off and we would be subject to capital gains.

I don't see anyone having a go at supermarket at making a profit on food yet that is much more vital to health than houses.

Pixie, I think I need to go for lunch with you! I need my own best personal financial adviser friend.

Don't all rush off to invest in gold and bitcoin on the strength of this thread though.....

Borrowing to invest is always risky but less risky with property you might hold for 40 years than with most other assets hence why lenders will lend to to you for that but might not if you said you wanted to borrow £250k to invest in bitcoin or gold.

There is nothing more morally wrong about borrowing 75% of the purchase price to buy a buy to let (the only way my daughter could buy her first place by the way) and taking your 25% and putting it in an ISA or robbing the poor by perniciously avoiding tax by using pension tax relief.

groovyrose - I'm sorry that you feel angered by this thread, but please understand what you were doing 40 years ago was happening in a substantially different time and the circumstances were very different. Housebuilding was happening on a scale far greater relative to today, people on one modest income could afford a family home and there wasn't the proliferation of media brainwashing that happens today convincing people that residential property is an asset, rather than a home.

Today, where I work I know couples who are both high earners who can barely afford a starter home. They have substantial savings and are in their early to mid thirties. They should be looking to start a family, not pledge a high proportion of their future incomes (which have completely stagnated now) to borrow for a 1 or 2 bed flat.

This is a section of society that is becoming completely disenfranchised - and I'm talking about people who in relative terms to the past, are really, really well off in comparison to the rest of their peers - for whom the situation is even more distressing.

So please, please - consider it not as an attack on what you did years ago, but an uncomfortable truth of the reality of today's housing market. By continuing this trend, where people who lived in a time of fantasy pensions and economics can effectively bully and abuse their positions, we're setting up a disaster.

I feel you are directly your anger in the wrong direction.

It is not just British people seeing houses as an investment and asset. Rich foreigners see London/uk properties as a very attractive asset: safe, appreciating and CHEAP. Yes, you heard it Cheap, in relative terms London properties are cheap globally. Have you seen what you can get for the same price in Shanghai, Singapore, Tokyo, Hong Kong , Dubai or Abu Dhabi. Your friend and other btl which you are attacking are not going to push back the tide of foreign buyers in London, only the government. But this doesn't even register on any of their manifestos or even on their radar as any kind of concern. IMO The truly immoral people in this are the international estate agents marketing London/ uk properties to ten global super rich for the return of fat fees.

The worst that can happen to a house is that it burns down uninsured, and even then the land it's on is left. Houses can't vanish in a puff of numbers, unlike company shares, bank deposits, bonds, unit trusts, and just about any financial investment one can mention, whether secured against assets or unsecured.

The last few years ought to have made that really very clear.

When I consider my own finances (and I am probably bang in the middle of people generally), I note that I have little money to invest. However, I could quite easily go to my bank, borrow against the equity in my own house, and buy a rental. The only alternative is that I borrow to buy shares. But for reasons given above, that is riskier, and the bank might not accept them as security for the loan anyway.

BTL is the only investment option for an awful lot of people. And if they charge a fair rent, they are utterly blameless.

Furthermore, individuals' responsibility for high house prices goes no further than how they exercise their vote. Only the Government can solve it. They could do so by reintroducing rent controls, regulating what and how banks can use real property as security, or by building social housing and renting out at cost (which would undercut private landlords and reduce the value of property as an income earning asset). All these things were done in the past.

www.theguardian.com/society/2014/dec/26/londoners-miss-out-as-foreign-investors-buy-up-home-sites

Yeah blue42, gold as currency. Who'd a thunk it? :o Nobody's ever used gold as a unit of cost before ever in the history of the world ever... As for Bitcoin, well, at least it's democratic and representative of the free market, unlike fiat money and, despite me backing it, gold. Mathematics, like real gold, is unimpeachable. Even the Gidiot recognises that digital currencies are inevitable, though he reckons they should be controlled centrally and be based on fiat. Then again he's a towel folder...

Gold is nice and shiny. But you don't even get the benefit of that, as long as you are sensible and keep it in the safety deposit box at the bank.

That has to be one of the most poorly reasoned, non sensical arguments I've ever read. Presumably you set it out as you do because you think it validates it and makes up for your lack of credible argument and evidence. But seriously - you think credit is something terribly unusual in business? How on earth do you think businesses expand? Do you even know what a fixed charge or a debenture is? And why on earth do you assume buy to let investors base their decisions on capital appreciation instead of yield or even covering their outlay? In fact, so.e might to quite happy to to run at a slight loss or break even - as most businesses do in the first few tears.

I'm afraid id be telling you to take a running jump, preferably via a bit I basic education in finance and investment and relevant business experience.

Thanks for the response DoctorTwo, but you appear to have confused the thread as being about currency rather than about investment.

I own both gold and a little bitcoin. I keep them as insurance against fiat currency debasement. I wouldn't recommend either of them as investments, and I don't think anybody sane would do so either, let alone 40%. You openly agree that the gold price is manipulated - what's to stop it being driven to $500 instead of the $5000 that you so confidently assert? Has that even crossed your mind? Were you in bitcoin when it took a 50% dive last year? Do you really think it's a safe place for amateur investors to put their money?

As stated, I am also against buy to let as an investment, but then I don't arrogantly and off-handedly suggest alternatives that make me look like some uninformed, ranting survivalist loon.

Are you sure you're on the right forum?

I do also think that both morally and ethically, there is a real growing unadressed concern about giving too much publicity and credence to the views of poorly informed cranks who have enough time on their hands to try and manipulate the media for their own attempted self-aggrandisement.

The buy to let market is causing alot of misery in london. Its the reason we left. We were about to buy our first home and buy to letter came in days from exchange and pay over what we offered. We then had to see our flat offered for silly money into the rental market.

Buy to let takes so many properties off the market and forces the prices up i know of families stuck in one bed flats as they cant afford to move into 2 bed. Each property that comes into market is going to buy to letter as they know the estate agents and get called first. One estate agent asked us for £50 so we could be on the priority list re new properties. As a buy to letter £50 per agent is a business expense for joe public buying one flat or house is silly. The whole buy to let market just brings misery. Yanbu but tbh id keep my thoughrs to myself re this nasty so called investment. Houses are homes not investments!

A far fairer and more effective way of tackling property inequity than addressing buy to let financing would be increasing inheritance tax. That would also tackle rising prices across the board and not unfairly penalise people on what they choose to do with earned income which has already been taxed.

But socialists often tend to go quiet at that point, presumably because they are hoping to benefit one day from a nice unearned windfall, simply due to accident of birth...

We tried for a long while in the UK to prevent private land lords. Rent Act rents set at say £10 a year (I know someone who has a rent act controlled tenancy on somewhere like Bond St who has lived in it for about 50 years) and someone else with a Kensington House (!) no those fixed rents from the time when post War Governments in the UK chose to destroy the rental market to try to address the issues those who find it hard to buy and hard to afford to rent have. It just did not work. Nor has council housing worked for most people as there is so much more demand than supply. Even 40 years ago and more there were never enough council homes.

Also we forget these are largely City problems. Lots of parts of the country such as where I am from in the NE have not had huge price increases. My parents' old house has gone up 12% over the last 10 years or something like that. Yes an increase but not vast. My own house has not gone up anything like Central London house prices have and the price is dropping (which is fine by me as I want to live in it for the next 40 years).

I do not support last year's mortgage criteria - they have made it much much harder for many people to qualify for mortgages and the banks are imposing very tough criteria. It has become easier to get a buy to let home (as the rent plus your salary is used) and the imposed restrictive centralised lending criteria do not apply which apply to ordinary home owners than to buying to live in. It is one reason my child bought a buy to let and let it for 2 years to buy in her mid 20s in London when her salary was not high enough to buy to live in.

Anyway it is all lot better than my poor grandfather in 1901 living in a boarding house in Newcastle with 26 other young men in bunk beds in one house!

The OP said Saving Accounts are alternative investment to Borrow To Let. That is of course true, however someone has to pay those interest and a portion of the interest received is likely to come from the Borrow to Let loans which comes from the rents received.

Hardly a clean hand really.

Good Lord! I own a small number of bitcoins (bought when they were £10 a coin) and they are a bit of fun, no more! It is the most manipulated market I have ever followed and I follow a lot.

Bitcoin is also the preferred currency for trade on the darknet, so interesting to see it touted as an ethical alternative to borrow to let, when it's used for trading in drugs, weapons, child porn, identity theft, stolen credit cards and even contract killings. Obviously those trades will always use one currency or another but it's a point worth making in relation to the OPs ethics concerns of this thread.

Another point of interest is just how closely linked to the drug trade the success of bitcoin seems to be. In the trial of Ross Ulbright, the alleged kingpin of the Silk Road site, the defence attorney tried very hard to put the blame onto Marc Karpeles, the former CEO of the now defunct MtGox exchange, alleging that he was actually the driving force behind the Silk Road site, and used it to dramatically inflate the value of bitcoin in order to boost his own personal digital wealth. To lend this story some credibility, it turns out that the Department of Homeland Security agent in charge of the undercover operation into Silk Road originally focussed his investigation on Karpeles for this very reason, but was forced to back off by his superiors.

Either way, any currency that is so closely linked to illegal trades is going to be volatile.