Buy to let or stocks & shares, WWYD?

[tricerotopsrule]

I’m weighing up the pros and cons of each option. Is buy to let a thing of the past now? There’s a flat that’s come up that looks good as an investment as my DCs could live in it while they are at uni but I’m wondering if investing the money in stocks and shares would be better and I could help them a bit from the returns from that?

What is buy to let like now?? I’ve not done it before but hear it’s more of a headache now?

Another point of course is that unless you have suddenly come into say a large lottery win then you end up with all your money in one property so it either works well - or doesnt!

Just spread it out amongst savings accounts. A very easy 5% with no stress or work or understanding legislation or risk.

Do the Rebel Finance School course.

Where to start? Off the top of my head:
extra 2% tax on property income
If you are a higher rate tax payer (as so many now are due to stealth taxes via personal allowance freezes) then you can’t offset all your finance costs, so you are paying increased tax on “profits” which aren’t accurate

Increased compliance costs - EICR every 5 years (to higher standard than normal houses), installation of mains interlinked smoke and CO alarms, plans for all rentals to meet EPC C as a minimum. We have paid on average £1500 per property for alarms and EICR.

Renters Reform means that you can’t use s21 as no fault evictions, so to get rid of difficult tenants you have to go through expensive and prolonged eviction proceedings, proving fault. This doesn’t serve the tenant or landlord.

The sheer raft of legislation and compliance means it is even for the most careful of landlords to miss something which can result in fines from councils or being brought by the tenant to a rent repayment tribunal

A Global index fund any day.

@NigellaAwesome 😱 none of that sounds fun whatsoever. I can see why landlords are selling up!

You can put £60k into a pension every year. Saves income tax at your marginal rate, more if you do it via salary sacrifice.

BTL as an individual means not being able to deduct the mortgage expenses for tax purposes, and will mean paying an extra 2% income tax.on your profits from April 2026.

Rental yields are much lower these days. There are also rent caps in some areas plus all the rrgulations mentioned above so only do it if you are happy to break even /for long term capital appreciation

Each year, whichever is lower of your annual earnings from employment/self employment or £60k.

The PP advising a simple savings account is forgetting that savings account very rarely pay interest rates above inflation. Over any significant period of time your capital eroded.

True but it has enormous up-sides. Risk free and zero stress. The risk of losing money on the stock market is high. It's gambling after all, no matter how well informed you are. The stress of being a landlord typically just isn't worth it. You are rolling the dice on your money and mental well being.

OP, Go on the FIRE forums on Reddit

The members talk about investment strategies and they're not trying to sell anything

Broadly speaking low cost ETF (Trackers) and some.bonds are the way to go but you need to be in for the long term, 5 years plus.

We have all our money in cash ISA’s, savings bonds and premium bonds. I wish I had put more money in pensions, but we’ve only come into money after inheritance, we are in our 60’s so need the interest to live on now, but maxing our ISA’s and having several bonds spread out throughout the year is definitely doing well for us. Premium bonds are hit and miss, but thanks to an average good win, these are also not doing too bad, interest wise.

Depending on where the flat is have you also considered short term let/air bnb? Putting money in pension I good however you can get your hands on that money gain built age 55 (and they are looking at extending this).

I agree with other re BTL, although again if in a student area could you let to them?

We have BTLs but we rent to people we (luckily) know, having had one nightmare experience early on. That seems to help keep the chaos to a minimum. It’s worth it if you have a child who will live it in long term, but I’d never buy a flat.

In your case, go S&S.

There's a risk of losing capital in stocks (not a high risk in the long term if you stick to broad global trackers). There's an absolute certainty of losing capital over the long term in a savings account.

I’ve found BTL easy peasy, but it might just be because I have great tenants, they’ve only contacted me once in 12 months. Shares on the other hand - I keep reading about the AI bubble and a big crash coming 😬

Well I personally would invest it directly myself, but I do this for a living. My advice to most people would be to open a stocks and shares ISA/SIPP with a sensible provider like Vanguard and invest it in one of their off-the-shelf low/medium/high risk portfolios depending on my time horizon and risk appetite.

@Jeronnemo investing is not gambling. After your job, it’s the second most powerful tool you have for building long term wealth.

Agree. Or easier still buy the lowest cost broad based ETF that you can find and forget about it for 10 years.

OP
Check out JLCollins Blog - The Simple Path to Wealth

Or just Reddit any FIRE forum in the region you're based. They'll talk about property versus shares on there. It's been posted about many times.

If you want more info Motleyfool.co.uk have some good articles as well.

Probably you should check out Moneysavingexpert.com as well for advice.

Stocks and shares very much are gambling. Posh gambling but gambling none the less. I'm not sure how anyone can frame it any differently. I'm not against it. I've done it myself but you have to be prepared for the risk.

The way to deal with the risk is to buy ETF/tracker funds representing the top 400 or 500 global companies and hold for at least 5-10 years. Don't buy and sell individual shares.

Do you have any examples of these type of tracker funds?

I'm not in the UK (mainland Europe) but where I live there are funds like :

SPDR MSCI World UCITS ETF
iShares Core MSCI World UCITS ETF
Vanguard FTSE All-World UCITS ETF

The core principle is that they have low cost structures, look for under 0.5% (0.12% is possible).

These are available through brokerage accounts and you can buy small amounts and keep buying more (beware transaction costs)

Time spent IN the market is more important than Timing. Think long term. Don't look at the fluctuations.

Check out Reddit, Motley Fool etc for more impartial info.

You do need to be disciplined. In order to get the benefit of compounding over a long period of time you must not be tempted to cash in a few shares for any reason. Doing nothing is harder than it sounds for most people.

You'll find all the doom and gloom needed to put you off BTL reading this site. I got out of BTL after 20 years. Do not regret it a bit. Invested mainly in tracker ETFs in ISAs now.
www.property118.com/sell-now-or-risk-fines-bans-and-bankruptcy/

Thanks for all the comments, they’ve been really helpful. Between these and doing some of my own reading today I’ve been well and truly put off BTL!!! I’m going to put the money in S&S and use it to help the DC’s in future for a house deposit or something. I also don’t want them
to feel obliged to live somewhere during uni that I’ve bought if they actually really want to live in another area, with a bigger group of pals, study in another city etc.

BTL sound like an utter nightmare!