Is it Better to Invest in Property or the Stock Market?
Vložit
- čas přidán 19. 06. 2024
- Should we invest in the stock market or in the property market? This is not a simple question, but in this video, we will look at the pros and cons of both types of investment and also their historic returns and risk to see which has performed the best.
📰 Sign up for our FREE weekly market roundup to get news and views about what's going on in the stock market and wider economy pensioncraft.com/market-roundup/
✔️ If you want to learn more about investing, become a pensioncraft.com member. To find what we offer and how you can join our friendly community click here www.pensioncraft.com/investor...
The Link to “The Rate of Return on Everything, 1870-2015” paper is here academic.oup.com/qje/article/...
What Else PensionCraft Offers:
💡 Book a coaching session with Ramin so he can answer your questions in a one-to-one video call via Zoom: pensioncraft.com/power-hour/
📖 Understand investment in more depth with my online courses pensioncraft.com/courses-we-o...
❓ Join PensionCraft on CZcams and you’ll be supporting me to make more content and I will answer your questions and respond to your comments on CZcams as a priority czcams.com/users/pensioncraft...
🎧Check out our free weekly podcast "Many Happy Returns" on your podcast provider of choice or here many-happy-returns.captivate....
Timestamps
00:00 Introduction
00:24 What Kind of Property?
00:50 Pros and Cons
10:44 Which gives you the best return on investment?
17:14 Conclusion
I Use The Following Data Sources To Help Me Create My Videos
(These links provide new users with a special offer and may also provide me with a small commission)
✔️ Stockopedia - New users of Stockopedia get a special 25% discount on any annual plan if they use this link stk.pe/pensioncraft
✔️ Koyfin - New users of Koyfin get 15% off when signing up through this special link koyfin.com/?via=pensioncraft
✔️ Sharepad - sharescope.co.uk/pensioncraftsp 2nd month free for monthly subscribers & Additional free 13th month for annual subscribers
✔️Cbonds - provides you with a high quality and comprehensive source of bond market data and up to 50% off their private investors’ dedicated plans when you use this link bit.ly/47nekIM
Where Else You Can Find Me
🌐 Website - pensioncraft.com/
📱 Twitter - / pensioncraft
👨 Facebook - / pensioncraft
🔗 LinkedIn - / pensioncraft
Take A Look At Some Of My Other Videos & Playlists
📹 Investment Strategies playlist • Investment Strategies
📹 Income Investing playlist • Income Investing
📹 Investing With Vanguard playlist • Investing with Vanguard
📹 Portfolio Building Blocks playlist • Portfolio Building Blocks
DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
If you need financial advice, Unbiased, the UK’s leading online directory of financial advisers, can connect you to an Independent financial advisor for free. Additionally if you use our link to register with Unbiased, your first consultation with a financial adviser is free. imp.i337888.net/c/4012142/193... (This link provides you with a special offer and we will also earn a small commission)
📰 Sign up for our FREE weekly market roundup to get news and views about what's going on in the stock market and wider economy pensioncraft.com/market-roundup/
Mr Vanguard's roof never leaks.
🤣🤣🤣
It might do but we’ve already paid for it with our relatively minuscule fees 😅
Purchase price …75k…
Renovation 10k
Refinance 105k
House was effectively 7k.
Returns £400 a month…
This is the worst deal I have done out of the twenty properties I own.
Some I have refinanced out with money left, can you do that with vanguard?
Property is that good they are pumping money into it!
HAHAHA ! , Jack bogle the man of construction hahaha
You Vanguard fund worth 300K also doesn't generate $24,000 per year of cash flow every year while appreciating 5% year after year. I own both Equities and property when the market is down that single property is still generating income. The property itself originally purchased for 60K with only 5% down, the tenants paid my mortgage year after year
Hi Ramin. I just stumbled on your channel. I put in 20k into various assets last year and flipped into six figures within a few months and still going. I’ve always been an advocate of investing because it has been rather rewarding. I hope to attain financial freedom soon. One more thing, great content brother.
You can’t overlook the fact that it’s paramount not to get greedy but to remain invested through careful study, if not you can lose it all.
How did you know what to invest in and which assets did you pick?
My colleagues had a good laugh at me when I told them I started my journey into stocks, REITs, and some cryptocurrency with $20k capital and how I accumulated over 6 figures within a span of 7 months. They never believed me until I pulled out my P&L.
I know that learning the ins and outs of the stock market isn't for everyone, and that's why personally, Jonas Herman, a certified fiduciary oversees my investments.
@@Willycheng590 While it may sound enticing, it is important to understand that stocks, like a fine wine or a Monet, has no standardized value. You look all good on the outside, while you wait till almost death to enjoy your wealth which presents an enormous economic(uncertainty) risk.
@@Willycheng590 Do not forget that when it comes to the stock market, prices can be erratic, rising and declining quickly, often in relation to companies' policies, which individual investors do not influence.
Property is far too much of a hassle for me. I'm sticking to broad market index funds plus a few ETFs which I can auto-DCA and forget.
Depends what level of residential property you buy tbh. I have a portfolio of new/ish good looking properties in better than average areas that cover a higher income earner audience and get little to no problems, and with thr capital appreciation included with the net income, I can make a return of at least 25% each property.
I'd always say both is best
I'm of the same opinion. Plus the general public (Mainly young leftys) hate landlords.
There's too many cons to property.
- CGT.
- Stamp Duty.
- Solicitor Fees.
- Estate Agent Fees.
- Properties can sit empty.
- Require maintenance and repairs.
- Evictions and bad tenants.
- Lack of liquidity.
- Forms part of your estate for IHT purposes, unlike pensions.
- Insurance.
- Can keep you in one location. Due to not wanting to be a long distance landlord.
If I ever do it I'd do it through a limited company so my children can become the director one day. I'd just use the profits to fund a pension and pay for other benefits like pensions, life assurance, private medical insurance and even child private education.
The effort gap is so huge there's no contest.
@Solihul886 25%
No way.
@@ArchNipperExactly, it's a huge headache in India.
Finding a buyer and all the documentation and dealing with buyers, the real-estate agent... All that is so frustrating
Will here all you need to do is just a few clicks
Liquidity plays a big part. You can literally get rid of your funds within seconds. Imagine having to find a buyer and and lawyers and so many hidden fees if you wanna sell your property.
And dealing with estate agents! Torture
And then see the deal fall through just to put you back to square one
This is a bad thing for the majority of people though.
It is absolutely disgusting.
Like I just can't explain the headache,
BTL is for people who don't understand the stock market.
I'm invested in both, the stock market is more liquid and less hassle than dealing with property.
Same here... property is definitely more hassle but it's good to diversify assets, and people will always need a place to live.
@@stevegeekPeople will also always need companies to work for.
@@stevegeek There will always be rental homes or lease properties....
My Vanguard boiler never breaks down and the roof never leaks.
Another negative for btls are increased legislation and a general sentiment that landlords are the source of all evil. The level of hassle is high
Yes new EICR and local councils now require licensing which is costly
Why do you think that’s happened?
But if you stay, you reap the Financial rewards of that as more landlords leave and the supply and demand stretches further. Goes both ways
There is one feature that makes or breaks above all the factors you mention, you are unable to sell a portion of a house (a room) if you need to cash in for whatever reason, I can always sell 5% or 10% of my portfolio within my ISA and after 2 working days the money is on the bank, it takes me a minute. Maybe the alternative is to extend the B2L mortgage (if you find the bank and the cost of the transaction it is not too high.... takes a lot effort / time / money)
RoA - Return on Arse, love it Ramin !
I’m 50% invested in property and 50% invested in Vanguard VWRP global index fund. I helps me sleep better
And to think I went and saw a financial advisor from unbiased just this end of March. Granted, it was only an assessment, but I should've just waited instead hahahaha. appreciate the video Ramin
how did it go? I have a call set up, but so far my impression - at least speaking to HL was that they do less than I do! They basically said their offer is "investing in funds" - they exclude all other assets - gilts, corporate bonds, gold, property, etc.
@@aldoromano-be8su It was almost the same as the vid, property is illiquid and less tax efficient compared to investing in an ISA. less headache as well if you get a bad tenant.
it'd be nice to hedge and have both, but I can only properly go for one for now and probably pivot if needed.
I'm just getting into BTL alongside my stocks (SIPP and ISA) and agree with all the points raised here. Another pro for property is that as a retired person, buying and renovating a house has certainly given plenty to do...no chance of getting bored in retirement!
In the UK a second property is liable for capital gains tax. Yes you can off set some property costs, but it’s still a big chunk of money and the government seem to be reducing capital gains allowance to almost nothing.
Yes good point. Although I think the days of massive capital gains are over. I think we will get stagnation and maybe a mild decline.
Also a lot of people don't count costs such as mortgage interest payments and finance arrangement costs when they sell these buy to lets as part of their returns. If you get a new mortgage every 3-5 years and own the property for 20 years these costs add up.
And of course, capital gains tax is calculated on the nominal gain, not the real gain, reducing real capital losses further
I would hold both stocks and residential property. Leverage is the trump card with holding property. Also you can add value by improving or extending property. Its more work though.
Thanks for the great video, Ramin! I ventured into buy-to-let early because it seemed like a popular way to make money. I didn't know anyone with a stockbroker or fully understand stocks back then. Now, with mobile apps simplifying stock investments, I've been tempted to diversify. It's nice to invest smaller amounts rather than wait for a property deal. Overall, I'm happy with my decision since owning properties and earning rent provide security. I agree with you-having real estate to rely on helps me worry less about equity fluctuations. While we tend to stick to what we know, it's good to step out of our comfort zones and learn, especially when we're young and have time to recover from mistakes.
A great video - again. :)
Anyone thinking about going into property / renting needs to look at the local market. National figures are not very useful.
For my London flat I get about 4% after overheads and before inflation is subtracted.
The government has been increasing regulations too and this looks likely to continue. So, there can be big surprise bills. Insulation and new electrical standards are current examples.
I am now selling my flat. It just does not have the yield in the current market conditions.
Thank you for sharing @kevinu.k.7042 and thank you for support us on CZcams! Ramin
I'm roughly 50/50 between financial and BTL net assets which works well for me. The BTL gives me a steady income so that I don't have to keep on drawing down from my equities. I use an agency (10% commission) to reduce the hassle of maintaining the properties. If you look after your properties well the costs are high (24% of gross rent n my case). The rental income has gone up faster than inflation but I do worry about interest rates and inflation coming down over the next 3 years.
Simple argument, Stocks can be placed to maintain long term growth potential unlike Housing and provide a platform for other companies. I know someone who has made more than $270,000 seamlessly from NVDA But I'll also take any other recommendations you make.
I've been thinking about this very topic recently. Great video - thanks!
Glad you enjoyed it @TastySanchez
Great video! Thank you
The reason why I started investing in property was for this very reason. My pension was invested (in the 80’s/90’s) in Equities and that period was very volatile. Exchange rate mechanism equities prices and pension funds going bust. It wasn’t a good time. Having something I could touch and feel was important to me.
I hold both - and it has made me feel more secure and able to not worry about the long term!
Provided much info I didn't know before but perhaps 3 possible omissions 1) didn't mention leveraged equity products e.g. leveraged ETFs which can multiply 2/3x an indexes gains 2) the increasing legal/compliance burden of owning property 3) can lose all your money in equity whilst property/land will always retain some value
Not in a index fund
If you buy a property with RAAC or unsafe cladding, or some other future hazard but unknown at time of purchase, it's pretty close to zero.
I find it very hard to come up with an even hypothetical case where someone loses all their money in a stock. You can always sell at a loss and regain some of your investment
One important differentiation is the ability to utilize leverage... If you're looking to take advantage of an economic boom-bust cycle, properties give you the chance to pocket more profit... I know trading is not the idea for this channel... just thought it is worth putting it out there
Leverage works both ways can you explain why it would be bad
You can leverage stocks too, though buying stocks on margin carries margin call risks and volatility of stocks can be a problem. You can still end with negative equity with property.
You can buy Investment Trusts which leverage to increase their profits 🤷🏻
Thanks for the video Ramin.
There’s definitely a case for both equity and buy-to-let.
If buy-to-let is your job then that’s fine, but if it’s a side hustle, like it is for me, then it is a very active way of making “passive” income.
Dealing with tenants, updating decor etc, those Saturday night calls about the boiler. Stressful and hard work. The differences in return do not warrant this amount of effort.
I’m currently selling my buy-to-let to invest in my pension and ISA, because I like sitting on my arse and not paying tax!
The home that you live in does generate a kind of rental income, the rent that you are not paying by living there. When that is taken into account, its returns can look much better.
That's like saying that being teetotal generates an income because you don't have to buy wine.
Opportunity costs are not income.
What? No, your primary residence does not generate Any income because there is ZERO cash flow. It’s 100% money out.
I rent and my investments cover the rent and then some. I guess I should buy if the house prices decline a bit next year, but financially it's not the logical choice.
@@chargers9221 and @ChrisShawUK You extract value from the home that you live in that is equal to the rent that you would have otherwise paid. The fact that it doesn't show up as cash in your bank account does not mean that you should ignore it. It is a real and significant component of the return from owning your own home. If you want to make good financial decisions, it's important to include this when comparing owning your home to alternative investments.
The home you live in is a roof over your head, it does not preclude you from having a stocks and shares ISA
Really great explanation and appreciate the use of evidence and statistics.
Glad you enjoyed it @udhaydasoar8199
dear algorithm, these are the kinda channels/ videos am on youtube for 😁🥰
thank you for this informative, well presented channel 🥰
You’re welcome 😊 @yokai_G
Thanks Ramin. Perfect balance of analysis as usual.
I have a large SIPP and looked into ways to use it to buy property. It felt like it was loaded with fees for advisors and was going to suck a large % out. Is this something you have any knowledge of and can help me and your members understand better?
For me, married to an estate agent and a father in law who is a builder, the potential is good but my cash is all in SIPP.
As you mentioned its the total return on property and the leveraged yield you earn after adjusting for risk that 'can' sometimes lead to better returns than equities in the long run.
Fun fact: The prices of Prime Central London residential property has not moved since 2014. In fact, it has dropped slightly. In inflation adjusted terms, there is a very large loss.
Hi, may I know the source of this info? Thanks
@@blhlow4904 Rightmove! W11, W8, W14, SW1, SW7. It’s common knowledge and even agents like Knight Frank and Savills have written about it.
A mate of mine sold his flat for 1.6m when the usd was 1.80, 2.88m usd in around 2013. That same flat is 1.4m now, about 1.75m usd...... For the intl owners it's been a disaster
Rents are going up though. Rent is the equivalent of a very nice dividend and is almost certainly a guarantee in London.
@@jacc88888 Yields are going up, because, prices on PCL have come down. Yes, rents have gone up slightly also. However, PCL you can expect to get
Ramin is very soothing to listen to.
So pleased you enjoyed it @MultiMogman
This is so useful, I wonder what the correlation is between gold-property-stocks is? I personally have been put off property because of all of its pitfalls, and the leasehold stuff didn't help. But I feel if I were to invest in a small house as an investment, then it could be an interesting hedge.
Another great video and great analysis.
Much appreciated @bprosperie
Very well argued and balanced
Thank you I am glad you enjoyed it @michelhedley1805
I've always invested in property until I was 53. I then stopped renovating and development works. I now put all my spare money into globally index accumulation funds. ISA's first then SIPP, then JISA's. As and when mortgages come due, I will consider selling a house every 2-3 years to increase fund holdings in equities, which essentially mean easy access to money. If the markets are down, I will just put a mortgage on a property if I 'NEED' the money. Prob. a good time to put that mortgaged money into equities !!
Thankyou.
Personally I prefer to go all in with a global index fund and rent.
You have diversification with real estate in there anyway, so you’ve all bases covered.
Besides property is illiquid and many people don’t factor in maintenance costs, taxes and interest when running the numbers.
For property it depends on your country, where I live (Spain) there's a 7% sales tax when you buy a place (+ estate agent of 3% for the buyer). This means Global index fund very attractive - although there's no tax shelters here.
Thanks, this was really interesting and covered lots of aspects I'd never thought of. I've pitched totally with stack market which I now know suits the fact I'm not phased by it being intangible and it is less effort. The difference between buying to live and buying to let was something I'd not really considered and a second place to stay would be for the fun of it but very likely come with a cost ... as most fun things do.
Glad it was helpful @davidcollier6520
A brilliant video. I personally do both. Invest in the VHVG but also But to Let Properties to help increase my stocks each month.
That’s smart
Same, most of my rental income goes into stocks.
What about getting exposure to property through stocks, I.e. REITs etc. Best of both worlds?
One thing which is in favour of property is that a low cost leverage is available. Whereas leverage for stocks would be high interest with usual high risk. Therefore if we compare property and stock with equal amounts of leverage built in, then property on paper may look like doing better. But bad tenants, maintenance costs may pull it down.
From my experience as someone that considered the possible idea for it, it seems that its mostly the people without the money or that never had to deal with a second or more properties that are super enthusiastic about investing in property to rent out. Especially among people that are renting and cant even save up for a 1st house deposit at first place as they tend to believe that landlors are living the dream with hassle free money raining on them. But spending more than 10 seconds going over the topic, it becomes apparent that its not the hassle free easy money that people think of (mainly for the reasons mentioned in the video). Overall, its not for everybody and one has to have something going for them either by knowing their way around the system or perhaps by being into decorating by trade in order to save themselves a lot of the building costs that will inevitably be needed (and then a question arises on how much we can view this as passive income).
I think you are spot on. The people who love property as an investment the most are those who don't have any investments at all.
Yes, if you are expert at renovating and have time to spare then I think buying buy-to let property is an excellent idea. Investing is only as good if you have 30 or 40 years to invest to take advantage of compounding and or are on a high income and can afford to invest a lot of money each month.
Great video.
I’m interested in maybe adding REITs to my portfolio.
I’d love to see REITs vs property
Problem is REITs are mostly commercial, not domestic renting, although I think there are some student rental REITS
@@aldoromano-be8su Not sure why that is an issue for an investment portfolio?
I have between 10% and 15% of my portfolio in UK REITs. A good option to balance in between equities and bonds.
I think the only addition for housing is how involved you would want to be if the property needed renovation that percentage could go up dramatically, if you ever watch homes under the hammer they are normally make around the 7% of the price of the property per year, but I've seen some that are 14%+ and when you think the person put in a 25% deposit and they are now gaining that much every two years from the property, which is just impossible with stocks in the long term the best investors in the stock market have ever have got close to that.
Biggest drawback to the property market is that governments (especially here in Aus) are actively trying to reduce inflation in it to lessen the housing affordability crisis. So the past returns which we saw in the property market are very likely to continue. You can’t have houses 40x annual household income (it is already 15x), that just won’t happen. So unless wages miraculously start to inflate inline with property, there is no chance that property will appreciate at past levels. Buying quality companies at a good price is always the way to go.
The opposite is true where I live in Canada. The government is doing everything to try to blow the housing bubble much higher.
Great video Ramin! Leverage makes BTL property better imo but it’s not for everybody. I love the liquidity & tax benefits of equities. I £ average into both the property market and equities. I aim for 50:50 in both but I’m slightly property skewed atm.
Thanks for sharing @anthonyuzum
I heard in one of your videos say that you use R for your graphs etc, I'm starting to learn but struggling, could I ask how you learned how to use the language and would you recommend any resources to learn to create plots graphs etc? I'm not looking to become an expert, just have decent understanding as I'm interested in data analysis. Thanks.
Something on my mind is that most investors would purchase a BTL property with an interest only mortgage. So leverage + mortgage costs. It would be good to factor these points somehow to reflect the average investors experience.
Leverage is an important factor. I've made over 20% pa on my BTL over 25 years after factoring in tax if I sold. My initial investment was £5k including costs. If I'd invested that in equities I'd have made around 9% pa and wouldn't have received any income. I bought 25 years ago though and it was initially my home. It's not worth it now.
I own 253 houses in Fort Wayne, Indiana 2 in Naples Florida and one in Boca Raton Florida. I buy deep out of the money puts on the major U.S. indexes each and every month waiting for the inevitable crash in the U.S. stock market back down to its long term trendline of 5,000 on the DOW.
2:44 0.2% all in seems low to me. Yes it’s possible, but when comparing I’d probably use something a little closer to average, 0.3-0.5
Would investing into a property fund equate to a BTL but without the administration hassle?
The RoR paper volatility dif is illusory. Remember vol affects price return more than income; and property simply has a higher yield. You can get similar "fool's gold" like the fallacy of dividend investing. Related: equity isn't that swingy, you're just valuing every 15 mins / 1 second. Your property would look volatile too if you did that. Try looking only every quarter. Similar "fool's gold" with statement funds & private equity.
Arguably, I say that buying a house and living in it does actually generate an income in terms of the rent you don't have to pay. Its a sort of invisible income, but currently working well for me (with no rent or mortgage to pay).
PS - Don't tell the tax man, or he will regard the "rent" you pay yourself as something liable for income tax.
One could also benefit from the residential property market indirectly by owning the equity of home builders. This solves the cost of ownership and liquidity problems associated with direct ownership of a BTL, for example. There may also be ETFs that I don't know about. Furthermore, there is the commercial property market (rather than just residential).
And by owning banks who earn the interest from the leverage
Or you could own the equity of homeowners, for example Invitation Homes or American Homes 4 Rent. That should provide more direct exposure.
If you take how an average home has appreciated in value over the past 25 years and subtract the cost of interest on the mortgage as well as all the costs of maintenance & property taxes it works out to roughly a 5-6% annual return on investment, which isn’t substantial considering that’s only a few basis points higher than inflation. I also figure the real return is lower when you consider how much money people actually spend on the upkeep of their homes plus the cost of renovating which doesn’t always increase the resale value as much as homeowners think (and they end up refinancing it to do so eating away at equity).
Apart from the great expense and hassle involved in buying and selling and managing property, its great problem is that any money tied up in it can't be gradually spent down. I'm 65 and want to spend my capital, eroding it over time so I even rent where I live. I have pensions to cover my basic costs. I can't see how dying rich is avoidable if invested in property and relying on rent for income.
Borrow against the property so the rent covers 110% of the loan payments and spend the capital.
You mean equity release. That’s a bad way to go. Run the numbers based on the interest they add. You pay back eye watering amounts.
@@JohnSmith-gy8rc how can that be done when retired? I doubt I could get a mortgage and even if I could the max age limit would mean only very short term. If I could find a way, I would.
@@VoiceOfThe yes, and ER effectively removes the potential to relocate as that could cause big problems and expenses.
@@adm58 Downsize then - there is always a way to release equity from real estate.
What do you think about Nasdaq 100? To risky to invest into ?
The answer is to have a bit of both, isn't it? BTL no longer works if highly leveraged, esp if a higher rate taxpayer, but a Ltd company solves that issue. Keys are not to have too much debt, manage yourself and pick your tenants carefully.
Agree double so if property is on lower end of market.
But there a admin hassles/expenses with running a limited company and you get double taxed if you take money out (corporation and income)?
@@user-sg1wn7ho2r Nope - corp tax only on profit, as salary is an expense to the corp but you will pay normal income tax on the salary you draw.
I have both. If you put property in a limited company, there’s no inheritance tax, same with a pension; otherwise holding property in your personal name will generate inheritance tax and the same with investments outside an ISA
Shares in a company (that owns property) are subject to inheritance tax.
@@ashhigh not so if the person has B shares. Once the A shares dies, the B shares move up to A shares and control of the company. They only pay tax if they make money - usually as a dividend, which is much lower in tax, plus they maintain control of the assets
Can you do a video about Return on Arse? I'm sure it would be very popular :)
🤣 that's how I kept hearing it too
Do the returns from the stock market in the report include compounded returns? if so the stock returns seem pretty low. Without the magic of compunding you're better off investing in properties in the long run; like you said less risk!
The end of the easy money era means BTL is, if not dead, then still a very poor reward vs risk proposition. You ain't getting any significant capital growth, and yields are maybe 1-2% above borrowing costs, so the advantage of deploying a truckload of leverage that used to be property's ace in the hole is greatly blunted. Throw in unfavourable tax and regulation and its clear that the overlord are keen to dissuade property investors.
Dunno, the buy to let market is scarier because its less liquid, and at worst times might be incredibly illiquid.
If I could by an ETF that just buys houses and let’s them out I might. I suspect after fees it wouldn’t be a great buy though and my REITs haven’t performed particularly well. But my global all caps boiler never breaks or locks it’s self out so I’ll stick with that.
I know several people who have become very wealthy through property and these are people who weren’t wealthy to begin with but I don’t know anyone who has become as wealthy through investing in the stock market.
The downsides are the stress and time needed when investing in property though.
Owning your own home has comparable cashflows to buy-to-lets. When you have your own home, you do not have to pay rent, therefore you are making a saving which is comparable to the rent received if you were to let it out. Owning your own home has less headaches, less costs and is much more tax efficient. Though owning your own home is a balance between investment and consumption considerations and carries idiosyncratic risk by itself.
Thanks
Welcome @mattanderson6672
Absolutely love it!!! I'll have to be financially stable in every sense before purchasing my first supercar. The best thing to do with your money is to invest rightly because money left saving will end up with no returns
2 questions
1) do you own your own home you are living in?
2) the adjusted returns on housing stats you showed, does it take into account the leverage used in buy to lets?
I think you can invest in both
It's better to invest then don't
Between stock and house choose bond.
I’ve worked in the property industry for 10 years. How many BTL properties do I have? 0. They are not worth the hassle.
The main advantage of property investment: leverage
The main advantage of stocks: liquidity
If you have money, you should do both.
Charlie Munger once said that his investment portfolio largely consists of stock market index and many apartments. In the medium to long term, this simple strategy will perform better than most 😊
This year is definitely going to be worse. Last year, I made terrible investing selections that cost me a large sum of money that I would not have lost if I hadn't been so concerned about my portfolio. I couldn't determine whether to start paying for a house or continue investing. I eventually sold my stocks, and the house turned out to be more of a fixer-upper than I had expected. I don't know how much longer I can do this.
Few more cons of BTL that were not mentioned
1. Taxation on Entry (Stamp Duty with Surcharge) and Taxation on Exit (Capital Gains Tax)
2. Endless Legislation (Such as Section 21 Removal, Renters Reform Bill)
3. Increased Costs eating into profits . (Interest rates , Repair Costs, Estate Agency fee etc) . With Section 24 , You are effectively taxed on Turnover and not on profits .With interest rates at the current levels, a typical Landlord with 1-2 properties will be lucky if he/she breaks even
4. General Anti Landlord sentiment by both political parties used for cheap political points scoring .
If you buy above average properties in above average areas you make great gains with a target tenant audience that gives you very little bother. In a good amount of circumstances you get what you pay for.
The legislations aren't that bad if you have a good portfolio and management, and actually benefits you financially as more landlords get scared off meaning supply and demand gets worse.
Section 21 Removal leaves landlords with no other option except going to courts for evicting problem tenants . I hope you are aware how over burdened the courts are . I used to own a rental property . Too much hassle for me . Sold off and invested proceeds in S&P 500 Core and Tech indexes under ISA tax wrappers . Not touching BTL again with a Bargepole
@@prasa1 I get that to an extent, but the need for s21 is completely subjective. S21 to remove lesser tenants, mostly goes down to poor screening. Selling the property, it's a long term asset. There are other measures to this, but the s21 won't be abolished at least until courts are able to deal with the backlog. I've never required the use of a section 21, again it mainly goes down to management and the type of portfolio you have.
The disadvantages you mention by default translate to making more money due to the landlords who get scared out of the market creating a wider supply and demand market for those who remain, meaning higher rents for the ones who stay
25%+ ROI and very little bother with certain choice of rental portfolio over a 14% return stock is just a no brainer for my personal situation. But I like to do a bit of both.
Rents and House prices can only go up so much as people can afford. In Scotland, you already have rent controls. There is nothing stopping a future Labour government to introduce that to Rest of UK irrespective of costs incurred by landlords. Housing is an area where there can be a lot of govt intervention and I personally don’t like it
@@prasa1 you don't need everyone to be able to afford a low stock product, you only need the better prospects, you're always going to find someone who can afford realistically in this current market.
Scotland is another example of rents skyrocketing because of landlords leaving the sector and ones who remain assessing risk by increasing aswell as tennants demand increasing which is causing further bidding wars. That's just confirming the point I'm making. It's all in the statistics, rent controls increase rents not stagnate them.
Government knows this, but it makes them money to keep it this way. You're going to get risks and social issues with most investment or achievement, doesn't mean you quit because something isn't guaranteed. If that's the case, don't invest in anything at all since nothing is guaranteed to be rainbows and sunshine
I've given this a lot of thought and I'm in both property and stocks. Stocks are better on most counts, especially with the recent tax changes to landlords. However this video neglects the fact that a 10% return in stocks is not a 10% return in property... Because of 4/1 leverage on property the return is far greater in property if you can be bothered with the hassle, poor tax treatment etc.. (buy property in a company name and you're better off)
In my opinion the only sensible way to “invest” in housing is what I do, rent out rooms to lodgers. I have a couple of friends living with me, I charge them under market rent, I’d rather not live on my own anyway, but it means my 80k down payment on the house generates a yield of around 15% AFTER deducting the mortgage interest cost (the main actual cost of the investment)
I'm looking to do this this year
I owned and managed BTL property in St. Louis Mo for 16 years.
Why bother, unless you like being a property manager, and do not mind spending time in court Re: Landlord vs tenant rent and damages suits.
Equities are far cleaner answer. Place 1 year annual fixed costs in money market account for down stock market year, so you don't have to sell at a bad time.
Most stock market downturns are not long lived.
Where you say "Occupancy can reduce yield", it should say "void periods/unoccupancy can reduce yields"
Would the volatility of someones single house be the same as the property market that contains a variety of housing?
Bingo
BTL are surely reducing as the DB lump sums won’t be as common ? Housing is more of a political football these days and will be taxed, rent controls and standards etc will drive the small single property holders out.
Leverage is the only reason for BTL. Oh and that your competition in the market are 90% owner occupiers who trade 2 or 3 times in your life so not price aware. Otherwise it's a right hassle, I know, I have 50 of the sods.
Where’s the comparison of BTL returns vs global equity index fund returns in an ISA or pension, after tax in the UK? Accounting for stamp duty, BTL interest rates and capital gains tax. Do the benefits of leverage and someone else paying the mortgage outweigh the tax benefits of ISAs and pensions? This video seems to be missing a lot of essential information
This analysis assumes you are buying the buy to let in cash. If you are buying with a mortgage you are getting geared returns which over the long run smashes stocks (assuming these stocks are not geared ofc)
I have no pension, but have 2 btl properties both on interest only mortgages i use the £1000 per month income gained from the rent and invest that into a global etf. I’m getting capital appreciation on the properties and also Investing money into the markets which isn’t costing me anything? Is this a good strategy?🤷🏻
Sounds like you're missing out on the tax relief you would get paying into a pension
You can only lose a bit of money in real estate but virtually lose all of your money in the stock market when it finally corrects to fair market value some 80+ percent lower. The smart money exited stocks ages ago.
Hi @parkerbohnn if you have single stocks you can certainly lose all your money which is why diversification is a good idea. I doubt that the S&P 500 would go to zero, it would take societal collapse in the US to make that happen. The smart money has been invested in equities steadily earning 6% real total return (above inflation) for the last 120 years. Thanks, Ramin.
The returns data on housing reflects unlevered returns. Including leverage which is common for property, the returns are much more significant 😂
Are the returns for property net returns, taking costs into account, or are they gross returns? Because that probably makes a substantial difference.
Yes, I was wondering this too. In particular, are mortgage costs being taken into account when calculating the returns?
@@tiptoemouse if RoR paper then no
rental properties can provide better margins, however they are a hassle and they can turn into money pits...
Stock market you have no stress and if you buy good dividend stocks with high yields and 30 percent franking happy days no bad renter’s not paying no land tax and so on 👍😁😉
But the stock market is much more overvalued today than in 1929 when it crashed 89 percent. Maybe a bit of stress?
I bought a good amount of TSLA and AMD today, I'm focused on the growth of my portfolio this year
Same here, My TSLA is for long term holding, last weekend My portfolio made it to $20m total, started from $1m, investing weekly dividends in long term ETFS that’s my route. to the moon.
Are you a pro? how did you achieve this
No I'm not, Katherine Elizabeth Humphreys is behind my growth, look her up or make proper research for one who is suitable with your goals.
REITs?
Impressive stuff, especially the return from the P2P lending market.
Glad you enjoyed it @simoneloizzo4178
Yeh if you do property like that it’s an issue.
So what are the options for people that find the volatility of stocks too stressful, but also owning property too much hassle... Bonds and money market funds? 🤔
Low stress / hassle > lower returns
in descending risk-volatility return:
high yield corp bonds, emerging gov bonds
corp bonds
gov bonds
money market
cash savings account
I recently read a new study that looked at returns after inflation and I think it said property prices have basically stagnated over the last 20 years. Can anyone corroborate this?
Yep! I bought a house for 315k twenty years ago, have spent 150k of improvements on it and it's worth 550k today.
RPI was 194 in 2005 and it's 383 today. If my house had kept price with inflation then it would be worth 315*383/194 + 150 = 771 today.
So I'm about 200 grand down in today's money.
As others have pointed out, the anti landlord rhetoric in the U.K. is very real. Increasing legislation and unfavourable tax position of btl also makes property a less worthwhile investment vehicle. I think if you are in the property industry (an estate agent, developer, mortgage broker, property manager etc), btl makes more sense. Otherwise it’s just too much hassle and too hands on.
As long as you have the FEDERAL RESERVE manipulating the system, either one will do