AIBU to wonder why people still love buy to let?

[Autumnalreds]

I’m not from a wealthy background/social circle but anyone I know who has a bit of spare cash or equity seems to want to go for a buy to let investment. I’m new to investing myself but pensions I’ve had invested in stocks and shares since I started my career have performed incredibly well. I’ve also recently starting investing in shares myself and it going quite well, no hassle and various options for the level of risk you want to take. Everything I know about buy to let is about the headache of it, the lack of liquidity, the tax and stamp duty changes that make it more expensive vs the unspectacular return on investment. So why are people still so keen on it? Especially those in the circles I’m in (mostly children of immigrants who don’t come from well off families).

Have I got it all wrong and it’s actually still the way to make your millions? I wouldn’t do it myself but perhaps I should refrain from giving my friends a health warning and just let them get on with it.

You've done your own risk assessment and decided it's not for you, let them do theirs.

I personally have zero appetite for being a landlord or any of the admin it entails but can see why BTL could yield decent returns if you make good choices. But I care not one jot what anyone else does with their money.

The Buy to Letters I know are all moving to Air BnB due to it being less hassle and having higher returns. I think the yield is close to stock market levels (last 12 months anyway).

I think Property appeals to people who have spare time and like having a physical asset.

Generally the people I know who have done well out of buy to let have a portfolio of properties and like having a physical asset. My Uncle reckons 20 properties is an ideal amount for his pension. The air bnbers tend to have fewer properties.

Flipping an air BnB is challenging unless you've got a really good cleaner. Even they tend to go downhill unless you are there to physically check.

I don't know anyone who loves buy-to-let, and unless you're loaded, and have money to burn, only a mug would get into this.

It's often not worth it these days unless you're a portfolio landlord with a fair amount of properties. Too much hassle and increasing (and absolutely necessary!) regulation.

I hope eventually the lure of BTL will diminish and housing stock will stop being bought by people who keep it in their portfolios for years instead of being sold to owner occupiers, but while - as PPs have said - it's seen as an attractive investment with a physical asset, which some people like, I doubt it.

Depending on where you live, house prices rise a lot faster than the stock market. We bought our flat* in London in 2001 for 110k, and it's worth more than 500k now - would you honestly have made that much money on the stock market? I don't think many people plan to live off the rental income, the people I know use the income to cover the mortgage interest and repairs.

*that we live in, not BTL

Maybe you could invest ethically? Become a rare/specialist BTL Investor that only rents to those on the waiting lists for social housing.

Many local councils and/or local housing authoritie offer very good deals to property owners - they guarantee the rent and repairs, which negates the main pitfalls of being a BTL landlord, and hand the property back in bettercondition, after a period - usually 5 years.

Because it sounds sexy .. compared to the S&S route .

Money mavens did a whole podcast on this perception

Well the Bank of England and the treasury have been putting in measures to dampen BTL investment and make it unattractive. As a nation we were putting far to much capital into property investment. Which ultimately is a pretty unproductive investment. It doesn’t create jobs or innovation.

That being said property remains a stable and largely risk free investment that doesn’t need that much knowledge or experience.

@HateIsNotGood

Maybe you could invest ethically? Become a rare/specialist BTL Investor that only rents to those on the waiting lists for social housing.

Many local councils and/or local housing authoritie offer very good deals to property owners - they guarantee the rent and repairs, which negates the main pitfalls of being a BTL landlord, and hand the property back in bettercondition, after a period - usually 5 years.

Social rents are less, wouldn’t meet the criteria a btl mortgage in many places

I suit the profile you describe (daughter of immigrant from non-well off background) and I favor property investment over stock for a variety of reasons.

1- coming from an immigrant background and growing up with next to nothing, the idea of having something tangible (other than money) under my name is important to me. It gives me a sense of security as someone who didn’t really feel like I had a home/safe space growing up.
2- if you invest in the right places at the right time the increase value of the property over the years makes investing in property probably the best return on investment and that’s without accounting for rental income which often self-finance the investment.
3- I travel a lot and move abroad a lot and so looking at investing in properties in different countries has always been very appealing to me and ultimately also make sense financially (mortgages always being cheaper than rent and short-term accommodation long-term).

I definitely think it has a lot to do with the immigrant background though and this ingrained feeling that “owning something tangible and familiar” over investing your money in something that seem uncertain like stocks which may well bring you back good returns but could also make you lose money, will rightly or wrongly always feel more risky to people who grew up counting pennies and who are therefore usually more risk-averse and often not as financially educated/knowledgeable and much less willing to risk their financial situation to therefore feel like property investment is the safes and best option.

I used to be a buy to let landlord, but have now sold my BTL property and invest in stocks and shares. OP, you are 100% right. The returns on stocks and shares are much better without the hassle. I wish that I had realised this years ago. However, I think that it takes a level of knowledge (which takes a while to pick up) to have the confidence to invest in S&S. It was scary initially and a bit of a vertical learning curve. I am now annoyed with myself that I didn't discover the stock market sooner!

Truth be told it is a hard area to make money in because of the high entry points - minimum 25% deposit, 3%+ SDLT tax, higher interest rates and much tougher vetting to get the mortgages.

Pass all that and know the geography where you buy and who you rent to and it can work out very well.

Local councils offer ‘golden hello’ bonuses or up to £3,000 for landlords to rent their property but rents are still nearly 15-20% lower than going to a private sector tenant so it’s not worth it.

With house prices continuing to rise, a growing population and the continued demand and supply problems of housing stock means BTL remains a firm favourite albeit you need to be in the 7+ range to make any decent money and well into the 15-25 range to make it a wholly prosperous number to retire on.

Thanks all, an interesting and varied set of comments!