#93 - BTL Still worth it (updated link)

Hans Chan -

What I’m Watching

The Road to Tokyo - Episode 1 of a three-part series on YouTube documenting Team GB’s rowing team’s journey to the Olympics. A lot of emotions, heartbreak, disappointments, incredible highs, and a fair bit of behind-the-scenes stuff. I binged the episodes.

Resource of the week

I’ve just signed up for the Times online newspaper, they have a deal at the moment where you get 4 months’ access for £1. As with all of my recommendations here, I have no financial incentive unless explicitly stated as a sponsor. I mainly wanted it for the money section which is quite good. 

Quote

Ambition is a very dangerous thing because either you achieve it and your life ends prematurely, or you don't, in which case your life is a constant source of disappointment. You must never have ambition.

Jeremy Clarkson

Thoughts

So this week, as it’s the end of the year, I thought I’d go back to basics. I sat down and crunched some numbers in terms of how property investing compares to other forms of investment, mainly BTL. It’s something I did at the very beginning of my journey and the fact that conditions have changed so much I thought it was a good idea.

So first let’s go through the downsides. There’s no getting around the fact that it is a tonne of effort at the beginning. Depending on where you live, most viable properties won’t be near your area. I used to take days off work or travel for viewings on weekends. I remember more than a few times when I made 3+ hour trips each way to have all my offers rejected and I’d have to do it all again the week after. One time, I booked an appointment for a hot lead in Nottingham, and drove 3 hours just to see that one property. When I arrived the agent told me they didn’t have the key, and that was my day. 

I say all of this because even when rates were lower, it wasn’t particularly easy finding a deal that stacks up in terms of ROI, now even less so. I’ve mentioned a few times in past posts that landlords are exiting the market. A lot of the landlords that have decided to stay are opting to increase the equity in their portfolios. It’s becoming less viable to take maximum leverage to expand like in the past, still doable but the figures are very tight. 

It means that alternatives are now a lot more attractive. Back when rates were super low, Ray Dalio would say cash is trash, which was true for the times. Central banks were printing money, it was getting devalued aggressively every year while you were getting low returns. In short, there was not much benefit to holding cash, because you could get access to it cheaply. Now it’s a different story where even a basic savings account can offer 5%+ returns. Or an index tracker fund which is something you can just do and forget about it.

So now I would say it depends. It depends on your goals and timeframe. For example, if the timeframe is 5 years, it would be pointless. Even anything less than 10 years is questionable. As with all forms of compounding, the furthest out years yield the greatest rewards. Especially if you have to sink a lot of upfront capital and time into it.

While the vast majority of my portfolio has been straight BTL properties up until now, personally I don’t see this being a big part of 2024 unless there are some amazing deals. I’ll be looking to come out of my comfort zone and explore other strategies.

On the other hand, if you had a long timeframe of 15, 20+ years, it’s a different story, because there is still a core undersupply of properties and an ever-growing demand which is why we’re increasingly seeing institutional investors come into the space, Lloyds, Blackstone, John Lewis etc, etc, because the long term potential is there for those who can ride out the short term. 

Other Stuff

So this week I finally launched Property Academy, for those that have decided that 2024 is the year they want to get into the property space. I plan to keep the first cohort small so be sure to check it out if it’s something you’re interested in. Feel free to book in a discovery call with myself if you have any questions.
https://calendly.com/hans-9xk/property-academy-discovery-call

Hans