So... in the long run, what pays of better.. investing in property - bricks and mortar - or investing in funds/shares?
This is painfully open ended...
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Vik2001
4 comments
Rusty2
Depends on many things. What shares, what funds? Where is the property, what sort of property, is it to live in or rent out. When you buy. Shares are a lot more flexible. Property you need lots of money. Property has lots of costs, buying/selling and maintenance Also laws have changed for BLT recently. For me shares are better, property is too much hassle.
Maybe best to look at some stats for property and shares. Don't forget dividends.
gus 1065
Two of the best and one of the worst investments I ever made were in the physical properties that I have lived in. The worst was a maisonette I purchased in 1989 to get the benefit of double MIRAS relief with my fiancé/wife just before it (the tax relief, not my wife) was abolished. Purchased at £95k spent £20k doing it up and sold it for £80k or so in 1994. Better luck with property 2, where the equivalent figures were £165k, £40k and £465k when I sold it in 2001. Property 3 I'm still living in 16 years later and it has probably doubled in value although no plans to sell anytime soon. With hind sight buying bigger than needed, leveraging up with an offset mortgage and then saving/offseting as quickly as possible paid dividends for me although many of my peers came unstuck when interest rates spiked up, they lost their jobs and/or became forced sellers due to e.g. divorce. Your own property is probably the ultimate Buffett stock (even down to the moat in some cases!). "Never buy an asset you wouldn't be prepared to still own ten years on."
I also dabbled a bit in early B2L, setting up a BES company in the late 1980s. Massive tax benefits (40% tax relief on the invested amount etc) and made a good return but a lot of hard work sourcing and renovating the properties and then managing the tenants (probably the biggest headache of all). Liquidated the whole shooting match and am now an armchair property investor in a few funds, ITs and specialist REITs. Less good returns but much easier to manage and a lot more liquid. I think there is still money to be made in B2L but much less tax beneficial, the U.K. Residential Property market is probably now a bit toppish and don't underestimate the work and stress involved day to day even if you make use of a decent managing agent (if you can find one).
As with most investments, detailed research into both funds/shares and physical property is the key to success. No short cuts.
Good luck.
Gus.
cig
In the long run all asset classes return approximately the same (risk adjusted). Otherwise everybody would just buy the magical asset class that always outperforms, until it doesn't.
Owner occupied property is very tax efficient (no tax on imputed rent). It's hard to diversify in areas where property is expensive (people with mortgages can end up with more than their entire net worth invested in the one house, which is a bit like investing all of one's funds in one small cap share, using a spread bet).
