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m-network
Oct
31
an investment property should ‘wash its face’
Filed Under house
There are two recurring contradictory pieces of news in the UK about the housing market. The first is that prices are about to crash, and the second is that there isn’t enough supply to meet projected demand. It wouldn’t surprise me if both were true, but over different timescales.
One thing that is agreed upon about the current housing market is the importance of buy to let investors, people who have bought properties as investments. Although I think that your own house is a poor investment, renting out properties can be.
However, renting out a property you own becomes very risky if the property doesn’t ‘wash its face’, which is to say that the rental income should cover the costs. And for a lot of people who’ve bought recently, it doesn’t. People are paying out every month for the privilege of having someone else live in a house they own.
It’s true that in the UK, the increase in the cost of houses has been running at 2% above inflation since the 1970s. While that’s nothing to be sneezed at, if it would be cheaper to rent then buy, and there’s a glut of rental properties, you can be sure there will be a correction and it is unlikely to be in your favour.
In short, if you are losing money month on month by renting a property you are likely to be better off putting your excess cash somewhere else, like say, in stocks and shares.
If you like what you're reading, why not leave a comment below, subscribe to my feed, or check out some of my best posts.You might also like to read:
- planning for retirement: pensions vs buy to let part 1
- inflation is good…sometimes
- planning for retirement: pensions vs buy to let part 2
Comments
6 Responses to “an investment property should ‘wash its face’”
4 pings
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Moolanomy weekly roundup #15: “Habits” edition | Moolanomy on
November 4th, 2007 2:02 pm
[…] An investment property should ‘wash its face’ @ Plonkee Money – Great point about buying rental properties. I was thinking about buying a rental property recently, but it doesn’t make sense because the mortgage is so expensive that I have to pay out-of-pocket each month. […]
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Moolanomy - a personal finance blog on
November 4th, 2007 2:11 pm
[…] An investment property should ‘wash its face’ @ Plonkee Money – Great point about buying rental properties. I was thinking about buying a rental property recently, but it doesn’t make sense because the mortgage is so expensive that I have to pay out-of-pocket each month. […]
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Finance » Blog Archive » Moolanomy weekly roundup #15: “Habits” edition on
November 5th, 2007 9:30 pm
[…] An investment property should ‘wash its face’ @ Plonkee Money – Great point about buying rental properties. I was thinking about buying a rental property recently, but it doesn’t make sense because the mortgage is so expensive that I have to pay out-of-pocket each month. […]
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Moolanomy weekly roundup #15: “Habits” edition | Moolanomy on
April 16th, 2008 2:21 pm
[…] An investment property should “wash its face” @ Plonkee Money – Great point about buying rental properties. I was thinking about buying a rental property recently, but it doesn’t make sense because the mortgage is so expensive that I have to pay out-of-pocket each month. […]
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I’ve thought about buying to let… but one feels that one has missed the boat. Its only recently I actually might have had enough. Now the rents would not be enough for the house payments.
I’m pretty certain that I’ve missed the boat on this one. I’ve got a couple of friends who are successful at it, but I think I’ll stick to my index funds as my primary investment.
Yes, that is my thinking. Just keep plodding on with the ISA contributions to an (FTSE allshare) index. Personally I go with M&G due to the 0.3% management charge… But please correct me if that is a bad choice!
Nice post. I believe England and America are headed for lower housing prices. For many folks, they will lose their equity. It won’t be pretty.
nice post buddy.
This is really wonderful post. An investment property definitely should wash its face. Great word put by this post. I am decided to buy rental properties in past. I think my decision is not correct because mortgage is too expensive that we have to pay extra money. This leads to loss in business.
Thank you for your wonderful post…