BTL property vs Investment trust REIT

18th Feb by tony akram

3 comments 239 reads

Hello

I thought I would ask the thoughts of the Stockopedia community . I own one BTL property value £170k (no mortgage ) I receive an income not very high less than 5 % yield.

With the hassle of owning a rented property I was thinking to sell it and just buy say 5 or 6 Property REITs and/or Dividend heroes on the AIC website.

https://www.theaic.co.uk/incom...

I think this would be a good idea as the income would be the same (possibly higher ) with access to the funds as well as the option to put some of this each year in to an ISA or SIPP with the tax benefits that both bring .

I understand they are risks however I think they would be mitigated by spreading them in to 6 ITs . I believe it would make life so much simpler and less hassle.

Does anyone have any thoughts keen to know what I am missing ?

Thanks

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ShoeShineBoy

18th Feb

Hi tony,

certainly the UK Government has made it difficult for BTL recently. I don't see that trend reversing any time soon. All the political parties would prefer to have the many votes of first time buyers rather than the few votes of BTL landlords.

For good discussions on possible REIT investments, head over to the Investment Trust board set up by Charles Mitchell. Some good options posted there.

I know Ken Mitchell (not related) is a fan of several of the high dividend paying REITs, look out for Ken's posts. I own Primary Health Properties (LON:PHP) and Schroder Real Estate Investment Trust (LON:SREI), both trading at a discount to NAV and paying covered dividends. In the case of Schroder Real Estate Investment Trust (LON:SREI), the revenue reserves cover 7.44 years worth of dividend payments. At a 32% discount to NAV, I am thinking of adding to my holding.

http://tinyurl.com/mwjvda36

Best of luck whatever you decide.

SSB

tony akram

many thanks SSB will have a look now

intuitive6191

19th Feb

There are a few points you may wish to consider. First and foremost is the subject of Capital Gains Tax which may have to be paid and hence reduce your capital available for reinvestment.

From a lower capital base you may have to get a higher yield than 5% to keep the current level of income. From your comments this might not be your most important consideration.

The big difference in owning an individual property versus a managed collective is that you can fairly accurately value the individual property ( you already have done so - 170k). A collective such as a REIT is harder to value and in a forced disposal situation might not achieve the asset valuation.

Yes, BTL has had a relatively benign environment for investors over the years. The good news is that you have a capital sum to invest or spend as you wish.

BTL property vs Investment trust REIT

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Tony Akram

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