House Prices

[silver pigeon69]

I was using the figures for B2L quoted by others in the thread. The 'income' funds yield about 3.5 to 4.5% and there is no tax on that. Your 6% is gross and presumably you have to pay some repairs, insurances, legally mandated inspections etc from that - then tax at your rate on what is left? A dividend fund from a major fund manager currently yields 4.6% which is tax free held in ISA.

 

On growth, I agree that property has done well, but is subject to CGT and stamp duty. Bottom line is both 'work' and I think you can spread the risk better by a mixed (inc overseas orientated funds in ISA and ISA has no CGT). The dividend fund mentioned has averaged just over 10% annual growth over 5 years.

 

I used to let a property and had a bad experience with a tenant going bankrupt, and overall taking into account repairs, insurance, and tax ate into the overall return quite deeply.

 

The best property investments will be hard to beat, but when taxation plays a part (and this varies according to your other circumstances), ISA may prove competitive.

Totally agree, "don't put all your eggs in the same basket". Sorry which fund yields 10% annum? Is this a hedge fund? If so a lot of these funds have "management" fees etc, which if you have only £100k in can be quite expensive and with a hedge fund it is very high risk, you could loose everything tomorow! (i will be very suprised if this fund returns 10% this year, as most are struggling no to loose money at the moment.)

[JohnfromUK]

Totally agree, "don't put all your eggs in the same basket". Sorry which fund yields 10% annum? Is this a hedge fund? If so a lot of these funds have "management" fees etc, which if you have only £100k in can be quite expensive and with a hedge fund it is very high risk, you could loose everything tomorow! (i will be very suprised if this fund returns 10% this year, as most are struggling no to loose money at the moment.)

The fund I looked up on line earlier today is a dividend fund from a major name provider. It provides a 'yield' (i.e. annual dividend) of 4.6% of the capital value - and over the last 5 years has averaged 10% growth (i.e. the rise in the quoted price). That is after the 'management' fees have been taken. It is a unit trust fund that is eligible for ISA, and these figures are not 'a typical).

 

I'm not going to name any individual funds as I don't believe that is appropriate here, but these are fairly standard figures. There have of course been times when growth has been either much lower - or even 'negative', but overall the figures have been favourable. My 'main message' however is that the tax free status of ISA both for dividend income and CGT makes it worth a look - especially if you are a higher rate tax payer.

See http://www.telegraph.co.uk/finance/personalfinance/investing/11489789/The-funds-that-have-returned-more-than-12pc-per-year-for-THIRTY-years.html

and here http://www.iii.co.uk/articles/223143/10-investment-trusts-give-you-%C2%A310000-annual-income

[Lloyd90]

What about those of us who are basic rate tax payers?

I've only just left uni so imagine it'll be many a year before I'm lucky enough to cross the 40% threshold but should have enough capital to get a 2-3 bed semi in the city on a buy to let.

 

Still worth a punt? Capital growth in Bristol seems to be doing alright and it was recently voted the best place to live in the U.K. I believe!

[JohnfromUK]

What about those of us who are basic rate tax payers?

I've only just left uni so imagine it'll be many a year before I'm lucky enough to cross the 40% threshold but should have enough capital to get a 2-3 bed semi in the city on a buy to let.

 

Still worth a punt? Capital growth in Bristol seems to be doing alright and it was recently voted the best place to live in the U.K. I believe!

Firstly everyone's situation is different.

Secondly taxation and 'rules' change frequently making long term planning difficult.

Thirdly markets change, both housing and share type investments.

 

My point was simply that when evaluating the options for investment, make sure all factors including income tax and capital gain tax are considered. It is easy(ier) to focus on the investment's direct return and loose sight of the bigger picture which includes the investor's tax status and tax concessions that are available for certain investments (like ISAs) but there are others under 'Enterprise Initiatives" for certain business activities.

Edited September 5, 2017 by JohnfromUK