Having a lively debate at work – lady here has a small house within no mortgage which she rents out for £750 per month. She says tenants not a problem as long term. House she reckons is worth £200K and unlikely to appreciate much over time. She thinks this is a good investment. But bun fight over whether £200k in a long term savings account would pay better, be safer, lower tax burden, if house has no real capital gain, what’s the point etc.

Does anyone have facts to add to this? (Others here are just jealous of the overall problem 😕 )

I have made much, much, more money by investing my cash in assets than I would have a bank over the last 10 years.

Bank rates are low however other investments can offer higher gains.

People who own and rent out houses often ignore some of the costs involved such as finding tenants, making repairs, periods of no occupancy, safety certificates etc etc. Even in this case she would have some expenses per year. When you factor those in the returns can be negligble or even non existent.
If the asset isnt rising in value I would think it is not good value.

surfer, matches my argument, esp if asset value is static

Hang on, no mortgage and return of £750 a month? Er £9k a year less maintenance, insurance etc..
Call it £8.2k a year.. Hmm. Off the top of my head say you get an interest rate of 3.5% on your savings (sounds good to me but not got a clue if realistic..) you’d be looking at £7k return a year. If she’s got good tenants it sounds like she’s better off renting the house out- even if it’s just for a few more years till the market picks up again.. No?

Aus – House she reckons is worth £200K and unlikely to appreciate much over time.

Over how much time though…in the long term it’s rare that a property doesn’t go up in value, especially with typical family homes.
The rent amount will probably go up every couple of years too.

Assuming she could get 4%, that’s £8k pa. £750 pcm = £9k, allow anywhere from £500 to £1500 for ongoing maintenance and insurance to the place and you’re in the same ball park. If you have an accommodating tenant and do your own work, repairs can be cheap, as can finding tenants.

At the end of the day, it depends on the local market, and whether she wants to keep the house long term maybe to live in again. Not a bad investment if she’s not risk averse. If starting from scratch she might have found a better rent to value ratio property, but to start again would be hard work, depends on the area again.

There has been a recent baby boom, houses and moreover food sources will soon become worth a lot more, unless of course the Zombie wars start which is highly possible of course!

Also depends where the property is.
And also if there is any new investment
in the area, which you will see property
prices increase.

Think she is doing the right thing
Even better if she or friends are doing the maintenance to the property
which keeps the cost down, and what roughly every 5 years you re decorate

Transactional costs make hopping on and off the property ladder on a whim a bit pricey