Is Investing In Stocks & Shares As Good As BTL/Property?

Ok…time to fess up, I’ve been less than honest in my first post.
I’ve had a mutual fund for about 5 years, think the return was about 3.5% after fees. I suppose it could have been more, but as stated earlier, I’m extremely conservative. I like a sure thing. (It takes one to know one. Lol) Anyway, currently I’ve got 50k in one of the aforementioned accounts similar to the nationwide thing, except I’m with NatWest. I’m expecting a little over 500 quid after a year. It’s a paltry return to be fair.
So, in short there are no easy ways to a better investment. There are more involved but quite safe investments though. Currently I’m considering investigating in an established franchise such as McDonald’s. Their people have done all the hard grafted research into location, profit margin and guarantee my investment. Margins are about 12% and Each location makes around £/$150,000 profit a year. I suppose my only issue is my aversion to owning a McDonald’s. It’s not exactly what a scientist normally does for a crust, but money is money, so I suppose I should just swallow my pride and pull the trigger. What do you guys think?

When I’ve looked at current pre-tax BTL rental returns (3 flats in s.London) then around @ 4.2% is what I get. Deduct some tax then under 4% is what I get.
I’ve therefore looked at other investment vehicles, rather like yourself, Landlord.
I’ve also been invested in stocks & shares for around the same period of time as property and can say that, despite the 2008 shitshow, staying invested has proved positive & beneficial.
Again, I’m not offering financial advice as I’m not qualified to do so, however, apart from indirect stocks & shares investing, I’ve found a couple of interesting online investing “opportunities”.
The ones that I liked and which offered decent returns were “Peer to Peer” lending sites. The one I chose, because it was backed by security on “bricks n mortar” was LendInvest.
It has a decent online portal where you can manage your risk exposure and see everything else that’s relevant to your investment.
To date, I’m running at a tad over 6% return. Of course, there’s no capital appreciation as there may be with directly owned property but there’s also no dicking around with the whole BTL shebang.
I agree that a diversification strategy is key but the mood music around both me and my friends, who also own BTL, is we’re starting to look at leaving and “cashing out”.

I invest in low fee index tracker funds in an ISA, have done for about 20 years.

Mostly in the UK (60%) followed in order by US (20%), EU (7%), Asia.

Just looked up one of them that I've been using from the start and averaged 7.24% pa.

I've lost 800 quid this week.

I invest in ISA's as I already have a good pension scheme.

Not investing in property for the foreseeable and have been drip buying (pound cost averaging) around 2K per month.

Just bought 20K of premium bonds.

@Landlord, unless you are very near retirement, you're being a pussy.

Hi Landlord,

Many thanks for your interesting blog post.

I started investing in Crypto’s around two years ago, for the first few months it went very well but then I made the mistake of investing a little too much when it was booming.

I then saw my amount go south pretty quickly. Now I’m not back to even but getting close.

Nowadays I’m interested in similar to what you’re doing so I think I’ll also join Nutmeg. I think it’s a good time to be looking at diversified investment. The market will only rise again in the future so it’s good to get in now while it’s cheap.

I see the same with property, it’s a good time to looking at lower prices and steady rental returns so why not invest, it at least invest wisely. Btw would you be interested in receiving good deals for a fee or perhaps a JV situation?

Cheers!

...and if BTL wasn’t enough of a p.i.t.a. just now, just wait until St.Corbs & his Merry Men get into No.10, then your metaphorical balls will be well and truly in the vice of property appropriation and you’ll likely as not become part of the social housing charitable sector!

I agree with your sentiment on further property investment in the current market. Having a stocks and shares ISA(or even a cash ISA) is a good hedge for those highly leveraged as the market turns, especially if they have issues at remortgage and need cash to reduce LTV. The scary alternative is to sell - but when many have been 'educated' to use remortgaging as a cash machine - they tend to forget capital gains liability and then it becomes a mess, and ultimately a crash.

Personally, I'm a fan of HSBC Stocks and Share ISA - I think it is called InvestDirect - or it was when I started with it. Tracker for the unimaginative, I've gone for strong cash-generating dividend heavy choices.

I'm concerned that so many people are so highly leveraged at such low rates and are being educated that this is the ultimate strategy. It's going to get nasty, and then I want to come through it will cash to buy the best assets at the lowest prices.

Agree with everyone so far. BTL isn’t what it used to be for investors. @The Landlord, as I said I really am in two minds about this. I save my pennies eating pot noodle and buying charity shop clothes. (To be fair I like pot noodle and think charity shops are fun) I invest in the low risk stuff because my money wasn’t easily made. That said, I also know my money is no longer working for me in the same way it used to. Why oh why didn’t I do economics at uni. :-/ And you’re right, everyone does like McDonald’s, maybe we all ought to go buy a bit of their stock.

@ The Landlord, Good post.

I think there's still cash to be had in BTL. I stopped investing in London for now and just completed on a property in Manchester with tenants in place generating 16% ROI. The extra stamp duty etc is annoying but not crazy if the property is cheap to begin with.

I have also tried the Old Mutual about 2 years ago and doing about 5% on average per year

I did throw £800 in crypto 2 years ago and I'm currently down to about £620

The first thing is that the price of shares go up and down.. and up..then down, then up all before Lunch !
You can see the price at any time, whereas with property you can kid yourself that the price has held up when all around houses aren't selling, price reductions are coming in thick and fast from Rightmove, even when they sell unless you search after the event you won't know what a property sold for or how much someone has invested in tidying up/extending etc.

You expect 5% a year, its probably about right....over a 25 year period, in the meantime it can vary a LOT. For an average return of 5% you can expect 8 out of 10 years to be outside the range of 3% to 7% returns, that's how much it varies. I have invested over the last 30 years ( probably at a risk level of 9 on the scale above) and averaged around 11% pa but the return I can get in any one year is more likely a loss or 20% gains, you have to live with the variations.

Keep the costs down. Active funds are no good, there will be always be the odd winner until they lose `9 they all do eventually.

30 years experience , seven figure portfolio and I know what I don't know, ITS IMPOSSIBLE TO TIME THE MARKET but over time the trend is up

I have 1 btl and it has a mortgage. Over 12 years my 17k deposit gave me a 100k return whilst my 17k Stocks and Shares only giving between 2%-4.5% annual return which is equivalent to £340-600 per annum. Based on this factor I still have faith in the property market for a long term investment.

Great post, Landlord! I hear you on being cautious about investing more money in UK property, especially as St Jezz is now threatening to confiscate landlords' houses.

I've started to buy a few S&P 500 ETFs on the Swissquote platform (I'm in France so cannot get an ISA). This platform lets you buy any sort of shares, bonds, funds etc. However, I'm always worried the stock marked could tank at any time!

I read "The Intelligent Investor" by Benjamin Graham, Warren Buffett's mentor (first edition 1949!!) and his advice seems to be that no one can predict the next crash, but that you almost certainly will make money over the long term, if you live long enough, ie. think decades! He also talks about the difference between value investing (in productive businesses over the long term) and speculating. He says it's almost impossible for Joe Soap to beat the market index, so I guess in today's terms that means investing in index funds. He also suggests dollar cost averaging, ie. invest the same amount of money every month, whatever the market conditions, and in fact he advises to rarely take any notice of what the market is doing.

Thanks for the information you shared.

Had to laugh at'taking on an adult-baby that mysteriously forgets to pay rent, or thinks it’s acceptable to take a dump anywhere other than in the bog.' Other than that I have had a flutter with Funding Circle, they only Loan to other businesses, currently 4.7/4.9% which I just leave in so it accumulates. They split the investment across lots of loans so you end up with lots of pies but it is evenly divided. They also do a investment Isa but not worth it forme. I drip feed a few quid every so often but it is rather nice as you are able to control it yourself or allow Funding Circle to manage it.

Hi Landlord,

A blog no where as amusing as yours for education on all things finance And passives index tracking is this

https://monevator.com/maximise-savings-rates/

It’s an excellent blog, that only slightly went down hill post the 2016 B word issue as his postings are now often turn into brexit style complaining.
The savings rate tart post is excellent, takes a while to set up but once going is epic.

Nutmeg and such “brokers” taking 1% is WAAAAY to high. Go work out what 1% fee is on the expected return. Unless its in an ISA if you only make 4% they are taking 25% of your profit.

Simply find a cheap platform then buy a basket of the following
https://monevator.com/low-cost-index-trackers/

If you think because Nutmeg et al are “safe”..... think again
https://monevator.com/investor-compensation-scheme/

I agree with your house sentiments. THis year or so we have unloaded 4 properties. 2 left to go. Although they gross rent % on what we bought the properties for was 10%, when you work it out based on what the properties are currently worth if they are sold, then the return is more like 8% gross, then take off all the other BS compliance costs, accounting, insurance, GDPR license!! Tax rate if you are HR tax bracket then the return on rental is piss poor.

Might as well dump £200k into BP shares paying a healthy dividend or a diversified investment fund (CTY) been playing 4.5% dividend for decades.

I will keep reading your most excellent blog simply to remind me of all the fun I had as a landlord 😂

Ciao. Grumpy

@newbie

Your house price rise is 100% correlated to the interest rate dropping from 6% 12 years ago to nothing today. When interest rates go back to 6% see how many people can afford it then.

Landlords are currently are less popular in the UK than an ISIS training camp. And that’s under a blue government. Thanks Osborne you f*&£$%.

Wait until magic grandpa ands his business friendly cohorts make you give all tenants free housing. They will probably legislate you providing a free massage services with or without happy endings to all tenants.

Good luck👍

Hi,

I’m not a major investor but know a few good places to begin. I use this blog, one of the best clear user friendly advise, written but a normal investor, it’s called Monevator.com.

The blog has loads of clear useful information from the beginning and break the complicated stuff down from Pensions to personal Passive investing.

I would not touch Wealthify with a barge pole! They have extortionate fee’s, which is why they can spend millions advertising.

I would recommend AJ bell the cheapest place, 0.25% ongoing fee’s and only £1.50 dealing for funds usually. They have all the funds, which you can filter and I would recommend using the Monevator page for useful guidance on choosing these funds.

Thanks

Mattey

I have been scared of Stocks and Shares for years! always put my money in Savings account and Cash ISA but got sick of how low the interest was for so many years hence decided to try on Stocks and Shares ISA from last April with Nutmeg, MoneyFarm and eVestor. 1 year 5 months later, they all doing pretty well average at 7%-8% some is 10%! I'm not planning to sell them anytime soon and would like to keep it for 5 years at least which I think it seems to be more sensible than buy BTL property now considering all the regulation/tax changed recently and current political climate we're facing now. I already have 1 BTL hence don't think the return worth all the effort you have to put in and the worry of footing the mortgage bill when no one in the property.

I would recommend eVestor as a low cost fees, cheaper than most platform. though overall I prefer Nutmeg in term of how easy to use their website and app. all info. are there for you to check the performance on how the fund is doing. But yes this is a long game so not get rich quick same like property as well. Totally agreed with you on diversify the investment to various channels to be safe!

Thanks for your blog, I truly enjoyed reading it and got a really good advice since I became an accidental landlord few years ago :-)

@Landlord

I am no investment specialist, but I saw family members get stung so I will share my observations.

1. Forget all this shit about high risk slow risk or the even worse labels of slow n steady, that is all to make you feel more comfortable and give them a get out if they lose your money.

2. Never invest money you need at any sort of notice, the only way to make money on stocks is to invest long term, you get a 25 year mortgage so think in the same terms. Otherwise you open yourself up to every little to and fro that affects a share.

3. Do not try to pick shares and never invest in tips, simply follow the John Bogle strategy which is to choose say the FTSE100 and/or NASDAQ100 and spread your risk across them all. These are called Indexes, being in the top 100 they are solid corporates that give good returns over the long term and give you dividends along the way. Because there are 100 you are hedged but the nature of them is that they are at the top of the market so they rarely fail.

4. Beware of people misusing the term MUTUAL, they do this because it is essentially passing off. A truly mutual fund has extremely low rates.

5. Be ruthless about not selling, pick a term, 5, 10, 15 20, 25 years, decide to put all your dividends back into the same fund, at the end of the 5 years, either sell or carry on for 5 more years saving you sell fees.

That is it, you do not need some company with their app that teases you into thinking you should sell, instead check out books actually written by John Bogle.

https://www.amazon.co.uk/s?k=john+bogle&crid=14PY3SZG2X84N

There are other ways to invest in local companies such as direct investment or angel investing.

Some of my relatives have gone for buy2let cars which promises up to 11% they have been around for a while now.

Love your articles. They always make me laugh out loud. Will be using/stealing the flip flop/communal shower analogy in the future.

An alternative get rich not very quick but comfortably plan for you.

Have you considered lower end value commercial property. We have been investing in such freehold (not long lease) commercial units (with no resi element) for the past three years and, thus far, all is good with significantly over 6% returns.

Partly restricted by our own purse but we are buying units at the sort of values of two bed terraced houses in our area so keeping the monies used manageable. This also means that we are letting to commercial tenants who are small businesses. Risky some might say but we took the view that if you vet the tenant business type to ones not likely to be massively affected by this Brexit debacle (whatever your leaning) and you research them properly before letting to them then, unless we are unlucky and just pick a duff tenant, the letting is easy. We have a Buisiness management adviser company in one unit, a small legal firm (a niche and specifically NOT private client/conveyancing) and an artist in the other two.

The lease terms are full repairing so 90% of the procedural and potential trip ups of resi letting are avoided. We insist on monthly rent (over the more common quarterly) as it minimises default by the tenant and we employ an agent to collect the rent and ultimately be the first point of contact for our tenant. They are also great for keeping us in check and making sure that, notwithstanding our inexperience, we are good landlords. We have also kept things local so we are buying in nearby towns only so that we have actual knowledge of ‘stuff’ going on in that area before we throw our money in.

So far our investment has been smallish office buildings just off the high street. Freehold high street shops are proving to be just a tad expensive for us but if we get one I am advised by those that know (which by the way is certainly not me!) not to shun the dreaded charity shop tenant.

Stocks and shares scare the wotsits out of me because it just screams to me that I am just taking a trip to a posh William Hill and placing bets with minimal info and with someone who’ll take a fee whether I win or lose. My betting history does not merit a following by the way.

Good luck and I hope it pays off for you. This time next year Rodney.........

It's not as good, it's better. And I remember telling you this quite some time ago.
The tax advantages make it a better proposition, and if something starts to go wrong you can swiftly change.
It can also compliment property ownership.
Finding a nice big juicy yield in a company that is secure and steady and sit back and take that low hassle low tax income.

Dear Landlord
I have been following your blog etc. Firstly , I would like to thank you for sharing your extensive knowledge. It’s been invaluable and sometimes I feel you must know what I am thinking about, because your blog always comes through with my challenge !!

I have had a change in circumstances, namely being made redundant. So, I am looking to sell one of my properties and invest the money in stocks and shares. To be frank I have had enough of bad Tennant and it seems to only cost money.

I can reassure you as an ex bank manager that stocks and shares are an excellent option. However, you should consider sticks and shares ISA and using a fund managed by provider. Santander Isa managers have won several awards and some of the funds had seen returns consistently over 5%.

You can register for investment hub without being an account holder and see the Key Facts documents. These are updated quarterly so you can track which is best for your risk profile.
Benefits is that the Isa managers are liking after it full time and the returns are tax efficient and the withdrawal of any funds take 3 days from my personal experience. The fees are very reasonable especially considering the returns.

Anyway good for thought , wishing you well
Rebecca

P.S fewer expletives would be nice as I feel this detracts from your excellent knowledge and experience

https://jlcollinsnh.com/stock-series/

monevator.com

A couple of places to get you started.

I’ve got a chunk of dollars at the moment so I think I’ll make use of the good exchange rate and buy more UK property. Not yet though. I’m expecting cheaper deals once the full mortgage interest tax kicks in next year and Brexit has finally (?) happened and really buggered up the economy. I anticipate a recession is on the way, not just in the UK, which is a good time to be cash rich. In the mean time I’m dropping those $ into £ and putting them in premium bonds. I want low risk for now. But over time the cash flow from rentals will be going into a vanguard mutual fund until it makes a big enough pile to invest in the next property. Rinse and repeat.

Max out premium bonds mate, at least you can win money. I do agree, there's no where good to put money anymore. ISAs are a joke but if the rates go up you might be laughing and it's easy access at least

It is harder to manipulate the property market than the market for a particular share, stock or bond and remember "NEVER SELL SHELL" :)

Property, all day long. Don't do btl though, holiday property is where the money is.

I own two in Luss.... Loch lomond and they both do 14% roi each year. Guests stay, leave, you clean, rinse and repeat.

Buy a holiday cottage in a desirable tourist location and it will always be full. If there is a swing on the pound sterling down the shitter you will be protected a bit better knowing that Johnny foreigner has more spending money.

Hi Landlord
“Fossil fuel is the past. It's all about renewal energy, my friend :)”

Wishful thinking😆.... as a filthy rich landlord you are no doubt driving around in your Tesla, charged up by pure pixie dust. 😉

Did you know if you own a ltd company (or houses in a ltd company. If you sell them then then your company can pay Upto £40k per year into a nice tax free pension for you.

If you have not yet paid in anything to a pension you you can use the carry forward rules to use up you past 3 years allowance... so 160k dumped from the ltd company into a pension. Cap gains tax hugely reduced and the contribution reduces the P&L for the company.

If mrs landlord also a director . Ditto

Adding rental income into you salary for full higher rate income tax not worth it now!

Dear Landlord, thank you for your blog. It is 'my go' to whenever I'm struggling with my BTL. I am an accidental landlord. I tried to sell my 3 bed house in south London in 2005 but the buyer pulled out on the day of exchange and in those days anyone could get a BTL mortgage - well they gave one to me - and I got one at 1.99% for the lifetime of the mortgage. Anyway, it's always been a worry being a landlord whilst trying to juggle running a business and raising 3 children with an ex who contributed nothing. But I've kept it on thinking about my kids future and my retirement (I'm self-employed so have hardly made any pension contributions). 3 years ago I went with a management company who also offered guaranteed rent and they went bust last year. I took my eye off the ball, which was unlike me, and wasn't sure they'd done all the paperwork correctly. I subsequently had real trouble getting out a tenant who no-one else wanted to live with. He ended up living there alone for £600pcm! with a fortnightly cleaner for a few months until I took the risk and enacted Sec 21. Thankfully, he's gone. But it scared me witless that we might need to go to court and the judge find in his favour. Long story short, I am selling the house now because of this experience and it's due to go through next week. My plan has been to invest in stocks and shares. Currently I have a SIPP and ISA self-invested on the A J Bell platform in Vanguard FTSE Dev Wld ex UK Eq Idx Acct l, recommended to me by a good friend who worked in investments with M and G for years. It's made 15%, but I know it probably won't make that this year but my friend told me that historically the trajectory is up and to take the long-term view. He also said stay away from Nutmeg, they're too young.

But I have to tell you, every day I've waivered as to whether I'm doing the right thing selling my BTL. I've gone through figures in my sleep, when I'm at work, when I'm cooking, cleaning, driving. I've used compound interest calculators. badgered my friend constantly and even have an appointment with Fishers investments UK who made 16% last year for someone I know on a 300K investment, which is what I will have to invest. I'm so worried I might look back and see my property double in value in 20 years time and think I've let my kids down. If I sell the BTL before 5 April I save £11k in capital gains tax straight away as I used to live in the house, because the relief is changing in the upcoming tax year. My sons tell me, 'mum do what gives you the least stress'. And that would be investing in stocks and shares. The trouble is that so many people say so many different things about the stock market and its growth and figures from 1-10% growth get bandied around and all the time in the back of my mind I'm thinking 'but a property can make huge gains on the capital invested as well as pay out rent'.

But I think I'm going to go through with the sell (little do my buyers know about my equivocating).

I've tried holiday letting (I owned a cottage on south coast for a while) but it's almost as much hassle as a BTL if you don't live nearby. Added to that reviews are so important so you only need to get someone who doesn't appreciate your 5 star efforts to leave you a bad review and tarnish your exemplary record. So you're always on tenterhooks.

Currently I have a lodger in my family home and it's ben hassle free. £600 pcm, no red tape with trying to get them out and tax free (Rent-a-Room scheme). So I have been toying with another idea to buy a bigger family home with the proceeds of my sale from the BTL, a home that will accommodate two lodgers making me £1k-£1600 per annum with £7k tax free. A house in which I can enjoy and maintain on site and that can make capital growth over the years. My partner and I are so busy working we hardly even notice the lodger we have and we can keep on top of their living habits. We've had 3 lodgers in 3.5 years and it's been plain sailing. Plus when this bigger house is finally sold there's no tax to pay.

Regarding investments, I would re-iterate that you really can't go wrong with A J Bell and Vanguard FTSE Dev Wld ex UK Eq Idx Acc

All the best Landlord and thanks again in droves. I've read this particular blog 3 times over the past few months and this time I've read through all the helpful comments from your readers which has helped to clarify things in my mind. So thank you readers too. In truth, I think most of us are great landlords, investing in property so we are not a bane on the state later in life. The government should cut us more slack.

Skip :0)

Thought I'd drop you a comment while your faith in the stock market may be at its lowest. I am guessing you like me have suffered some heavy losses. Does it tempt you to sell even though the advice is not to sell. But surely you're tempted to sell thinking the market could go a bit further down and make some gains instead of losses?
Does your faith in the stock market and underlying businesses perhaps override any short term concerns from all this mayhem? Let me know.

(I myself will not be selling but actually have some cash lying around - I'll be buying some more index trackers after I watch this mayhem go on for a few more weeks I suspect.) I am fortunate I've not given up my part time day job so I've got enough to keep going for a while. Wish you well dear friend.

Dear Landlord, I won't be selling. I have chosen not to look at what's going on and take the view that my investment will go back up at some point between 6 months and 5 years. I saved some money for my son in a LISA and self-invested in Vanguard and now he's ready to buy. I'm sorry for him because he has lost his gains and more - but I'm hoping to persuade him to hold on a little. It's tough for everyone and I guess we have to be very grateful that we have any money to put away. Best of luck to everyone.

PS: I actually sold my London property in the end and invested in a small one bed without a mortgage in a village near me, which I'm going to today holiday let after all.