To think the best way to invest is to buy a property?

[cultkid]

At the moment we have a 4 bedroom family house and a nice apartment up the road which we rent

The house we live in has equity in it. If we released say, 60k from it and then sold the flat and got 80k so 140 all in, is it a good idea to buy a house in the nearest student town and rent it out room by room?

I can get another mortgage for the house..
Or I could invest say 140 .. but is property the only way?

Aibu to think it's possible to make a profit by renting out property?

it definitely, 100% was if you did it in the early 00s, nothing else came close to [heavily] leveraged property investment.

i think it's probably ok now but only ok. the second home stamp duty rate is [though probably deserved] pretty nasty, means you'd need to hold onto anything you buy for a couple of years just to break even.

just how good it is depends on a number of factors, e.g.:

(a) what part of the country you live in;
(b) what tax bracket you're in;
(c) whether you're buying for cash or mosty with debt;
(d) how good you are at DIY;
(e) how diligent you are at small-scale form filling, records-keeping, etc.

I should add my husband is a gas engineer so the maintenance costs would be v low as our circle of friends are all in the trade
I'm good with the paper work having worked with a property developer in the past

BUT

It sounds like there are easier ways to make money. It would be approx 140 of our cash and then a mortgage on top for about 80

Leaning more towards buying shares in a stock trading company

Bear in mind that although every year there will be some winners, long term, most fund managers don't beat the index, and they skim some of your money off for expenses and yachts. You will only know afterwards which of them were winners, and which losers.

Unless you are a skilled hobby investor, best advice is a low-cost tracker fund. Vanguard are a good group. If you are in UK you should probably have UK 100 and/or All-share as your biggest wedge, then take a guess on Europe, Worldwide, Asia or US for the rest. If you have no strong opinions you can go for equal slices. Your guesses are probably as good or bad as anyone else's.

If you want to take an income, look for Distribution class, not Accumulation.

Because of the way the UK market works, it generally has higher dividends, hence higher income distribution, than other markets. If the other markets are reinvesting more of their profits, that need not be a worse or better thing than distributing them. Reinvested income leads to better growth.

I tend to income investments with a free or low-cost reinvestment of income option, then I can just turn on the income tap if and when I want.

Income will be taxable unless your investments are in an ISA or SIPP wrapper (both of which I recommend) though there are limits on how much you can put in per year. Again you need a low-cost manager.

And you will need a wedge of cash tucked away. You don't want to be selling investments in the depths of a trough.

Try not to use an adviser who takes a percentage of your wealth, especially if they take commission every year. You can get a fixed-rate consultation. Anything "free" will have a hidden cost. Anything "novel" or "too good to be true" may lose all your money.

I have a few family members who brought property in the hope of get rich quick, they didn't take into account all the outgoings and responsibilities. For example if you rent to students/HMO you have to be aware there could be damage and have good insurance on the house and fire and safety standards, provide equipment and so on. I think it can be a great decision if you have the money but you have done your research. A few of my family members are having problems now but that is because they didn't do the upkeep properly on the property and cut corners.

You don’t buy individual stocks and shares - unless you’re an investment professional. Buy an index tracker, as @PigletJohn suggests. Vanguard are pretty good.

Are you maxing out your tax free allowance every year? If not, get a stocks and shares ISA.

I agree, stocks and shares isa, with the index funds.

Just to talk about the maintenance costs of property - even with lots of people in trades on call you'd still be surprised how much it is. From my tax returns I can keep a very good track of what I spend. It averages £3000 per year per house. For the last couple of years it's been around £5000 per year per house (but that's because there have been a lot of new kitchens, bathrooms, boilers, damp courses etc etc) - but all those things (except the damp courses) come round at least every ten years and sometimes more frequently if you have bad tenants. You really do need to factor that sort of cost in to any viability calculations.

As long as you buy a property in an area well known for good rental yields (e.g rusholme in Manchester) and the capital appreciation is good - property investment is one of the safest and oldest investment industries in Britain.

I wouldn't buy a rental property at the moment until it was absolutely clear what the legislation on no fault eviction was going to be.

The government have published a consultation on getting rid of the s21 notice which would make it very very difficult to get rid of tenants. If this becomes law, it will be very difficult to obtain a BTL mortgage and will hugely weigh in favour of large corporate landlords.

cultkid

^
But I'm worried about stocks and shares my dad worked for a spread betting company and he was very good at it but he did tell me that it's a risky way to make money ^

Jesus Christ. But leveraging yourself up to invest in a single BTL is not risky??

Spread betting is not at all like investing in a stocks and shares ISA, particularly if you go for something like a global index tracker in the latter or a low volatility multi asset fund . Please don’t invest in anything until you have taken some proper financial advice.

to underline @kingsassassin 's point further. If the abolition of Section 21 goes ahead, as in Scotland, it will be very difficult and very risky to run HMOs. The thing about HMOs is that it relies on strangers being able to rub along together more or less amicably, while sharing kitchen, bathrooms etc. It's very often the case that one person will make themselves hated by the other tenants for a myriad of different possible reasons. If it becomes impossible to evict such difficult tenants (as the threshold for antisocial behaviour is likely to be much higher than 'he doesn't do the washing up and is loud and everyone else hates him') then you will find that your other tenants will end up leaving, and so will any replacements. I don't see how it will be possible to continue to run HMOs with such constraints.

And then of course if you rent to students you may find that one doesn't want to move out at the end of the year and you won't be able to evict them, so it will be difficult to take on a new batch of students as they tend to want to move as part of a group, although having a 'joint and several' contract should make that easier.

I have a friend with a student HMO and he has had endless trouble, and if you don't manage to find tenants at the right time then you are stuck with an empty house until the next academic year, which has happened to him, he has also had a lot of damage. It's certainly not something to go into lightly.