I read all these articles going on about how buy-to-let is a good investment...doing some quick math here.- Assume you pay a 6% interest-only mortgage (and that's an aggressive rate these days)- Rental yields are below 6% in London (I've checked this myself), but for argument's sake let's say you get 6%- Assume 1% p.a. running costs (repairs, checks, etc.)- Assume the value of the property appreciates by 3% p.a. in line with inflationSo that's a postive 2% return p.a. in REAL terms all in all + the hassle of dealing with/finding tenants, etc.Unless you have a VERY strong view on property prices (and they all seem going downhill at the moment) WHY is it such a good deal as people claim?Or am I missing something here?

Your analysis sounds correct, although I can't help but think that taxes and insurance costs would also reduce profitability. The buy-to-let craze flourished on the assumption that property price appreciation was much much higher than 3% p.a. The scheme also assumed that the owner's labor (in becoming a property manager) was free.

Is it residential or commercial real estate? The type of the estate is important since rental contracts are quite different. You also omit "downtime", when one tenant leaves it make take some time before a new one arrives, causing a gap in your revenue stream. At the same time you have to spend money for minor or major refurbishments. Moreover, repair costs can be accrued unpredictably both in timing and in magnitude. Another potential cost can be tenant's default. You need some sort of a liquidity reserve to cope with the above, thus you need to account for the associated funding or opportunity costs. Additionally, keep in mind that the land the building sits on is considered as inflation shield. The building itself just depreciates over time, unless you talk about an architectural monument. The scale of the investment can have a role in the picture, as well as your potential participation in the development of the building. QuoteUnless you have a VERY strong view on property prices (and they all seem going downhill at the moment) WHY is it such a good deal as people claim?Anyone can claim anything. Its up to you judge and critically assess each claim without necessarily herd.Regarding my claim, i would rather invest in farming land than in overpriced and risky big city real estate.

Given that food prices do seem on significantly upward trent, I see why anthis sees farms as a better bet.But...That will presumably be in the price when you buy it, and I don't see how to make a better risk adjusted return unless you have a superior model of the future than others bidding for the property.Being older than most here, I would also point out that the previous major fuckup in US banking was over-lending to farmers secured against their land.My family are builder/speculators, and whereas none of them have done stochastic calculus, they do have a deep understanding of what they call "tarting up and bodging".That is the efficient application of investment to upgrade properties. There are many people like this out there competing with you. Why do you think you can do it better ?They can not only make better decisions than you on where to spend your money in enhancing property, but they can do this cheaper than you.Here's a simple question which is so obvious to anyone who has an idea of this market that even a black sheep of the family like me can answer.What colour granite gives the best return on investment ?(actually I'd bet small money that half the people here don't even know where I'd put the granite, of even that the price of granite varies considerably with colour).If a successful property developer reckoned he could successfully bet half his wealth on (say) VIX options, would you not smile, and work out how to catch the money he would almost certainly lose ?If he were a friend would you superglue him to the floor to stop him screwing up on that scale ?

QuoteOriginally posted by: DCFCGiven that food prices do seem on significantly upward trent, I see why anthis sees farms as a better bet.But...That will presumably be in the price when you buy it, and I don't see how to make a better risk adjusted return unless you have a superior model of the future than others bidding for the property.Being older than most here, I would also point out that the previous major fuckup in US banking was over-lending to farmers secured against their land.My view is that farming land, at least the one i am aware off, is rather cheap, and cant go lower. Thus no downside. With rough estimations of payback period for investment capital between 2 and 5 years, if you do the farming yourself, it is certainly an investment that may worth a closer look. Plus the option, that some time in the future, the green zone a farm is located may become suburb zone of a city with corresponding huge capital gains.

QuoteOriginally posted by: AnthisQuoteOriginally posted by: DCFCGiven that food prices do seem on significantly upward trent, I see why anthis sees farms as a better bet.But...That will presumably be in the price when you buy it, and I don't see how to make a better risk adjusted return unless you have a superior model of the future than others bidding for the property.Being older than most here, I would also point out that the previous major fuckup in US banking was over-lending to farmers secured against their land.My view is that farming land, at least the one i am aware off, is rather cheap, and cant go lower. Thus no downside. With rough estimations of payback period for investment capital between 2 and 5 years, if you do the farming yourself, it is certainly an investment that may worth a closer look. Plus the option, that some time in the future, the green zone a farm is located may become suburb zone of a city with corresponding huge capital gains.Plus you can get the EU to pay you not to use it!

QuoteOriginally posted by: DCFCIf a successful property developer reckoned he could successfully bet half his wealth on (say) VIX options, would you not smileIt's not unheard of for people to be good at one, or even two things. Like an architect who can play the violin, or a quant who can manage rental property.

QuoteOriginally posted by: dirtydroogQuoteOriginally posted by: AnthisQuoteOriginally posted by: DCFCGiven that food prices do seem on significantly upward trent, I see why anthis sees farms as a better bet.But...That will presumably be in the price when you buy it, and I don't see how to make a better risk adjusted return unless you have a superior model of the future than others bidding for the property.Being older than most here, I would also point out that the previous major fuckup in US banking was over-lending to farmers secured against their land.My view is that farming land, at least the one i am aware off, is rather cheap, and cant go lower. Thus no downside. With rough estimations of payback period for investment capital between 2 and 5 years, if you do the farming yourself, it is certainly an investment that may worth a closer look. Plus the option, that some time in the future, the green zone a farm is located may become suburb zone of a city with corresponding huge capital gains.Plus you can get the EU to pay you not to use it!Nice!

it used to be a good deal as house prices used to be much cheaper, and rents almost the same as now.lots of people saw it and bought houses to do buy to let, which contributed to house price inflation.this tooke place over the last 10 years or so.Now, as you say, not so good investment, so less people buy in order to do buy to let.I find it amazing, the time it took for that arbitrage opportunity to disappear.

Thanks - any thoughts on buying property in Dubai or in China?

ak2000, nobody here is going to recommend you any particular city or location. Most people here were kind enough to show you the mechanics and technicalities of such an investment, its parameters and the conditions that must stand in order to turn out a successful allocation. Do your homework, analyze the strengths and weaknesses of each alternative both in a static setting and a dynamic one. You need to model the evolution of both interest rates and rental income over the investment horizon, assume a liquidity buffer, and dont forget that the, any, capital gains will be realized only at the end of investment plan when you, and not the bank, sell the property.At the bottom line its an investment for people of certain net worth or above, with long term investment horizon, and a strong view on property prices.

Prices in Belfast, Country Antrim went up a lot in 2007.

QuoteOriginally posted by: CuchulainnPrices in Belfast, Country Antrim went up a lot in 2007.So ?

QuoteOriginally posted by: TraderJoeQuoteOriginally posted by: CuchulainnPrices in Belfast, Country Antrim went up a lot in 2007.So ?you mean, you don't know? ah, well