Is it worth doing a "buy to let" as an investment for our pension

Janeainsworth I look at it differently. I don't think my having having B2L's causes other people not to be able to afford the deposit to buy their own home. Nor does it mean they would earn enough to meet the stringent demands of a mortgage company who will only allow certain multiples of salary and deduct for childcare and student loans. I supply a good quality home which I tend to let to couples or young families. I keep rent stable and ensure if their are any issues with home I send repair person around immediately. I use same gas engineer and electrical contractor for all our houses and because I am a good customer my properties are prioritised meaning the tenant gets any necessary repairs done quickly. I charge below market value and when a long term tenant goes to buy a home I have given them their reference for their mortgage company. There is a huge shortage of good quality rental accommodation and if all b2l landlords sold their homes it would not mean more 1st time buyers could suddenly afford to buy them but it would mean many families with small children had no suitable accommodation as councils do not have enough houses to meet the demand which you must realize. Many years ago I was in the position where I needed to rent a property before buying our own home and renting allowed us to save for our deposit. I try to treat our tenants fairly and well.

I wasn’t getting at you personally newnanny. You sound like a good landlord.
I was just wondering how much of the housing stock at the lower end of the market is owned by private landlords, and how much that affects the selling price.
And if the private landlords were taken out of the equation, whether the prices would then be affordable for young people.

www.mortgagefinancegazette.com/features/influence-buy-let-uk-housing-06-02-2017/
Interesting article about how buy-to-let has increased house prices in the past 20 years, but also saying that recent tax changes make it a less attractive investment.
The article also points out that if all Britain’s golf courses were built over with new houses, we could have 8 million more new homes

I do wonder how much buy-to-let and second home ownership contributes to the problem of young people finding it difficult to buy their own homes.

Round here, significantly, janea. I live in a terraced street of what used to be affordable first homes. Now at least 50% are owned by buy-to-letters and occupied by young people who may well have saved up a deposit, but would be hard pressed to find a small house locally they can afford. Most of the rest are owned by older owner occupants like us - as soon as their houses become available, they're snapped up for buy to let.

I agree with janea and Maggiemaybe about the impact of buy to let on young people. I'm not having a go at buy to let owners because I recognise the pro's and cons as well as the risks and hard work they put into managing their investment.
Terraced and former council houses in our town are often snapped up by buy to let landlords. As Maggie said, some streets and former council estates are largely owned by private landlords. I've always felt strongly that the sale of council and social housing is just wrong. Another downside is that some former council tenants who were eg evicted for anti social behaviour or drug dealing can move into a former council house and begin their reign of terror again.

Sorry if we had an edit button I'd add that my concern is largely aimed at corporate or large buy to rent landlords who don't live near their tenancies or have any real interest in their tenants. I have come across so many disadvantaged tenants who were shipped out of expensive rents in the south east to the north because rents are cheaper. Rats, cockroaches, damp and disregard have been common.

I would concede that "buy to let" has been a factor in pushing up house prices. London of course has the problem of foreign nationals buying top end properties and leaving them empty. Whilst that would not affect the first time buyer as far as affordibility is concerned, I guess it could have a knock on effect of forcing up prices down the line. What I did read a while back is that the new middle classes of China are now buying cheaper property in less fashionable areas such as Croydon and then leave them empty which definitely would disadvantage the first time buyer.

As Iam stated above there is a huge difference between the corporate and multiple property owning landlords who have little concern about their tenants and those of us who own a letting property and take our landlord commitments seriously.

We're in Yorkshire, and I would think it's a problem across the country. I'm not getting into the issue of good and bad landlords, though I know that young people have had experience of both on this street. But I think it's a shame that they can no longer buy these little houses, because someone who wants to add to their portfolio can pay a little bit more. We've told our children that when we fall off our perch we'd prefer this house to go to someone who wants to live in it, even it they aren't the top bidder. Whether they take notice of that or not is entirely up to them.

Buy to let vs stocks and shares ISAs.

Suppose you had a pot of £200K, invested in an ISA. That could generate a net income of £6-7K, plus some capital growth. All you do is watch the income being paid into your bank account from the comfort of your armchair, occasionally monitoring its progress.

Compare that to renting out a house valued at £200K. I’m guessing the rental income would be around £700 per month, giving an income of £8400 per year.
Less tax, agents’ fees, maintenance costs, and potentially a lot of aggravation.
And in most areas house prices are not going up.
Happy to be corrected on the potential rental income. I appreciate it could be a lot more from a holiday let, but that is seasonal, or HMOs, but they come with a raft of compliance regulations in addition to everything else.

There's another aspect to BTL that hasn't been mentioned yet.

My BIL lives and works in Dubai, he is a UK national. He owns several "buy-to-let" properties in Newcastle, which were run down and in a poor state of repair when he bought them. He has now refurbished them to a high standard and lets them to students. Surely that's a good thing ... I wonder why so many properties are left to go to rack and ruin.

Newnanny I'm like you as a landlord(lady?). We were so badly exploited by landlords when we first arrived in the UK and we were tenants in London, we committed to being exemplary toward our tenants with our buy-to-let house. And so we are .

janeainsworth, correct me if I'm wrong, but isn't the maximum one invidual can invest in an ISA £20,000? Stocks and shares are subject to the vagaries of the market and how much risk you wish to take with your nest egg. I leave that side of our affairs to my husband, since retirement he has made that part of his raison d'etre and consults fairly regularly with an independent financial advisor, but is pretty good on knowing where and where not to invest, keeping himself up to date reading the financial pages of various publications. I do know he has invested in an ISA in my name as well as his own. I'm not sure I'd have the knowledege or confidence to do that if it was just me. Yes I know that's what an IFA is for but they charge an annual fee, or course that's to be expected, but in my experience they aren't infallible, some holdings recommended haven't always performed as well as anticipated. Apropos of your post, I did a quick reckoning and estimate after all the deductions, agents fee, management/mainteanance fee and sundry variables if the flat is fully let, then the return is between 4% and 4.50% of the initial value, without taking into account any appreciation. Of course that is not the case between lets. There has been some capital appreciation since I took ownership, although I appreciate if I were to sell, I may well have to pay some Capital Gains Tax.

Yes you’re right about the annual limit for ISAs Terribull. But for a couple, that’s £40K per year and so it would only take 5 years to get up to £200K, not that long in investment terms.
There are risks in any investment I think, and generally return is related to risk.
With rented properties, besides the risk of bad tenants, the risk is long periods of the property being empty, especially if there is a buy to let mortgage which still has to be paid even though no income is being generated.
gk of course it’s a good thing that properties are improved and refurbished - but who’s to say that if your BiL hadn’t bought those properties, they wouldn’t have been bought and improved by young couples? I doubt if I’m the only one on GN whose first property was a run-down two-up two-down terrace house, back in the early 70’s when a mortgage to buy a property cost less than the rental would.
I don’t deny that there’s a need for some rented accommodation, for students or workers on short-term contracts, and I think that most of the blame for the massive increase in house prices over the last 40 years lies with banks and building societies who lent too much money, but I also think that buy to let and second homes are part of the problem.

I take your point re young people possibly buying up run-down properties and improving them too. My daughter and her husband did that.

If you had £200k to invest in B2L you would utilise the full potential of your investment by buying 4 properties with mortgage and putting £50 deposit into each, buy on a interest only option and maximise profits. When you wish to liquidize your assets sell B2L homes and claim back any stamp duty you paid. As well as upwards of £17k which you will have to pay tax on your houses will increase in value and so you will have capital increase as well when you come to sell. If you are prepared for a little work it is a no brainer.

There are many entry level houses for sale where I live and many on market for up to 6 months with no one buying them. Plenty of chances for first time buyers if they have deposit and can get mortgage. It is the restrictive stress tests set by mortgage company's that prevents many first time buyers from gaining mortgage not a shortage of housing stock.

Our property is just outside the Lake district national park and as a privately owned property among BTL it has now probably reduced in value. The letting agents are not doing their job and often wrongly assume that DH is a caretaker and ask him to sort things out. I am livid.

newnanny I think your strategy is high risk in that if your properties lie empty, you are still having to fund those mortgages and pay council tax in them.
There is no guarantee that their value will go up, in some places house prices have actually fallen.

In ten years we have only had any of our properties empty in between lets when we were decorating or refurbishing. You do not pay council tax if property is empty for up to 2 months. Ours have never been empty for more than the one month we were working on them. We have a waiting list for our properties probably because we are good landlords who keep properties well maintained and decorated, and charge a little less than going rate. Hence full occupancy. We find some greedy landlords who overcharge for rent sometimes have to wait a couple of months in between some tenancies. Also our tenants tend to stay long term, one up to 8 years so we do not think it is a risky strategy. Also even if the council charged tax on empty property that is still a tax deductible expense so written off against tax paid.

House prices have gone up in the area we live.

Spot on newnanny
I can't remember the last time property went down here in Southend.