Q: What about buying a house for BTL in cash, no mortgage.
Is still good idea?
Is it still good idea?
Hi,
With such a tiny understanding of property investment – you would be wise to do nothing, keep the money in the bank and spend a long long time learning about property investment and financial inteligence.
There a massive financial penalties if you get it wrong
guy
I don't really understand guy's reasoning. Regardless of percentages, it's ￡￡￡s that are lost or gained.
The answer is to do the sums. Say the house is ￡150K and you intend to pay cash. ￡150K invested in safe, hassle-free investments should return about ￡5K – ￡6K so that is what your BTL needs to return BEFORE you make a profit. So, rent needs to be ￡750 per month to make it worth even considering.
House prices are regarded to be too high by many people. If prices fall by 10% you would see the value of your BTL fall by ￡15K. That's ￡15K of your money.
Good luck.
GG
To turn it into cash terms:
Buy a house for ￡150k for cash. If the value drops by 5% you lose ￡7.5k If it rises 5% you gain ￡7.5k
Buy a house/houses for ￡1,000,000 with a ￡150k deposit (you are making the same intial investment). If the value drops by 5% you lose ￡50k, if the value rises 5% you gain ￡50k. The leverage amplifies your profit or loss.
It depends on your attitude to risk which is better. I reckon the former is better in the current market but it's your cash.
PS Watch out, watch out there's a troll about!!!
I don't really understand guy's reasoning. Regardless of percentages, it's £££s that are lost or gained.
The answer is to do the sums. Say the house is £150K and you intend to pay cash. £150K invested in safe, hassle-free investments should return about £5K – £6K so that is what your BTL needs to return BEFORE you make a profit. So, rent needs to be £750 per month to make it worth even considering.
House prices are regarded to be too high by many people. If prices fall by 10% you would see the value of your BTL fall by £15K. That's £15K of your money.
Good luck.
GG
…and then delete them from your history, cos you won't want to be going there again.
*ironic joke.
Do a search on them.
For some good advice on building your portfolio I hear 'Inside Track' come highly recommended.
Now whilst the first comment has merit in the hands of a wise investor, please do note the ironic smilies following the second remark…
Indeed it is a no-brainer. You can buy outright, pay 20% (or more) income tax on every penny you earn in rent, and leave no capital to invest elsewhere.
Or you can buy with a mortgage, pay around 6% interest on the loan, but get every penny you subsequently pay in mortgage interest tax free.
You're only taxed on the profit you pocket, and you get to keep most of your capital to do with as you please.
How much you choose to borrow depends upon the wisdom of your investment. Why is your chosen property desirable, and why will it appreciate in value?
If you're going to buy, then you must have reason to believe it's a good investment. In that case it would be unconventional and counterproductive to buy outright when the system provides such means to preserve your capital, whilst making borrowed money work to your advantage.
Simplistically, if you put down a 15% deposit and house prices rise 5% you made a 33% profit. If they fall 5% you've made a 33% loss. If you buy for cash and prices rise 5% you've made 5%, if they fall 5% you've lost 5%. It depends on your attitude to risk which is better but I'd be looking to protect against any fall in house prices personally.