Iām in a bit of a predicament! But I suppose itās a good one, so Iām looking for advice.
Iāve sold my house and have pulled out a decent portion of money. Now itās what to invest that money intoā¦
I can continue with my Stocks and Shares ISA. Well diversified, fee free, no capital gains tax and can have access to the money any time any place.
But I have now found a property, 10k below market value that will yield me around 9%. Now I know thatās in the perfect ideal world, where tenants pay on time, no damages etc
I just want to know what the better all round investment model will be, Iām self employed so the ultimate goal is cash flow and passive income. Any other info needed just ask and Iāll try my best to answer.
I have no experience with this but I have family that has a rental property and the first thing that comes to mind really is before the decision if itās a good investment or not is do you want to deal with the different issues which come with having a rental property?
If it was me I would move ahead with it on the assumption that this stops being just an investment but has to be treated properly like a business (which sounds like youād be perfectly capable of doing already being self employed), and that it being the first time into this industry (considering it as a business) that there may be mistakes along the way.
If youāve put in the work and the numbers suggest thereās money to be made and you want to do it Iād go for it.
What you canāt really get through RIETs is the leverage. A small amount will get you a decently sized building. The difference is itās yours and you need to put the work in.
I donāt think the decision primarily comes down to analysis. I do think it first comes down to the simple question of do you want to manage your own properties? If the answer is yes then get educated and then do it. Why not? You only have one life, and itās not like your putting your eggs in one basket.
If the answer if no on the other hand, then it doesnāt matter if it would be a good investment or not as you donāt want to deal with having physical property and the work that comes with it.
Why have you sold your house, donāt you now need somewhere to live? You need to understand the stamp duty implications of buying a property that wonāt be your main residence. (Maybe make it your main residence for a period of time)
9% yield is very good for property. But you need to consider the chances of capital appreciation.
I managed to buy my current property below market value Han. Iāve done a small Refurb and in 2 years have made 22% on it. Instead of having all my capital tied up in one property I want to pull that out and put it to work for me. Iām currently self employed, so outwith my wage I donāt have a secondary income stream, nor do I get holiday or sick pay. Itās all circumstances, but the goal is to produce a passive cash flow to supplement my current income.
The property Iām looking at buying is only Ā£60,000 so the Second property stamp duty is Ā£2,400. And Iāll be able to buy that property 10k below market value.
But at the same time, with the money Iām pulling out I can max out my Freetrade ISA over the next two years (Ā£40,000), and not have to touch any of my own money in that time.
There is a lot to consider, the tax implications being the main one as property is difficult to hold in an ISA.
You can look at REITs or, if youāre like me, you donāt like REITs then look at a company called Grainger - essentially a build to rent property developer.
Buy to Let is certainly not as profitable as it once was and all political parties have once again targeted it as a source of potential income
I had shares in 4 properties through Property Moose, which I bought expecting to earn some income from. Last year, these were converted into shares in a company called āUK Diversified Property PLCā, which I believe represents all of Property Mooseās previous portfolio.
No income has been paid to shareholders since this happened.
They are aiming to list this company on the stock exchange, but Iām not too sure what the valuation will be.
Iāve invested in one project on reinvest24 7.45% yield and 7.3% estimated capital growth. Iām doing this as a trial to see if itās worth putting more money in
Edit: This is equity crowdfunding. The way it works is shares are ā¬1 so you actually own it as opposed to regular P2P or P2B where you own the debt obligation. Hence the capital growth
I donāt mind at all. Simply put I donāt like that REITs are obligated to pay out the majority of their income to shareholders.
Whilst I agree it is very useful for those seeking a regular and steady income. In most cases I feel that most property companies would generate higher returns on capital by retaining rather than distributing. As an example using their extensive balance sheet to acquire new properties.
I have nothing against REITs at all, I think theyāre great for those seeking income but they just donāt meet my personal requirements.
If you canāt be bothered dealing with tenants that can be outsourced ( for a %age ) to an agency. Obvious question - why is it 10k below market value?
Please consider that although many deem rent from actual properties as āpassive incomeā, unless you have an agency to fully manage the property, you will be responsible for getting tenants in and out, collecting rent, registering their deposit, sorting out repairs etc, so it can be more active than passive.
Donāt let that put you off though, just go in with your eyes open. That yield of 9% is a pretty good one.
Whyā¦in need of an upgrade, new kitchen, bathroom, and there was a shooting on the street 5 months ago so I think thereās been fear around. Iāve stayed here for 30 years and weāve never seen that before, and the family involved doesnāt live on the street. Just a complete freak incident.
Lucky you - Iāve got a couple of grand stuck in what used to be Property Moose, now UK Diversified Property. No idea if Iāll get the money back so Iāve written it off as a bad loss.
Also worth noting thats its not an all or nothing. You can have a letting agent handle the publication of the rental, and finding a renter, handle the deport etc. then hand off to you when a client is found.
