There’s a reason I never invested in buy-to-let, even though I’m fascinated by all-things bricks and mortar, and would love to have a string of properties to my name.
It is simply too much trouble.
Buy-to-let bother
Becoming a landlord involves a lot of expense, as new figures from LV= make all too clear. Last year, UK landlords spent a grand total of £4.7bn on their rental properties, at an average cost of £3,134 each. And that’s only the start of their troubles.
A quarter of them have disputes with their tenants at least once a year, most commonly over rent, damage and cleanliness. Carpets, walls, white goods and doors take the brunt of the damage, with other costs including replacing flooring, cleaning at the end of a tenancy, and removing items left by previous occupants.
Who wants to pick up after others?
Time to sell
It is hardly surprising that more than 600,000 landlords are considering selling their rental property due to time and money constraints. That’s quite aside from the Government tax and regulatory attack, which made a tough situation even harder.
The glory days of capital growth are over too, especially in London, where the latest Land Registry figures show house prices falling by 4.4% in the year to May, and UK-wide growth of just 1.2%.Â
The case for investing in a Stocks and Shares ISA is just so much stronger these days.
1. ISAs are easier
Buying a property is a faff, whereas you can set up a Stocks and Shares ISA platform online in a matter of minutes. If you haven’t done it yet, you can find reviews of leading investment platforms here.Â
Once you have your platform up and running, you can buy and sell shares and funds in seconds. By contrast, property is highly illiquid, you cannot buy and sell it in a hurry. It can take months, longer in some cases.
2. ISAs are cheaper too
Stamp duty on properties can run into tens of thousands of pounds, plus you have legal costs, mortgage arrangement fees, renovation expenses, and so on. By contrast, you can buy and sell stocks and shares for as little as £10 or even less on some sites.
There are other charges, for example, monthly or quarterly account fees, but these rarely total more than £100 a year. That’s a fraction of the £3,134 the average landlord spends.
3. ISAs are more tax efficient
The Treasury has squashed the life out of buy-to-let with a 3% stamp duty surcharge, reduced wear and tear allowances, and the loss of higher rate tax relief on mortgage interest. Incredibly, with a Stocks and Shares ISA, you do not have to pay any tax at all. No income tax on dividends, no capital gains tax on growth, for life.
You can even pass on these benefits to a spouse or civil partner when you die. The investment performance may be better as well.
And you still dream of buying a rental property? For me, there’s no competition. But then, I like the simple life.