FTSE 100 shares may have struggled this year but I would rather invest in them than become an amateur landlord through the buy-to-let scheme. If Chancellor Rishi Sunak’s stamp duty holiday is tempting you to invest in property, I suggest you think carefully before taking the plunge.
Becoming a landlord is far more bothersome than investing in shares. Especially now, as many tenants struggle to pay their rent during the Covid-19 pandemic. You may regret it.
I’m worried about what will happen as the stamp duty holiday draws to a close on 31 March next year. Property prices could fall off a cliff edge, leaving recent purchasers in negative equity. Especially if millions have lost their jobs after the government furlough scheme draws to a close in October. We might see a rise in forced sales, driving prices downwards.
I’d buy the FTSE 100, not property Government plans to extend the evictions ban is another concern for landlords. The National Residential Landlords Association claims the government is effectively asking landlords to subsidise struggling renters, while rewarding those who refuse to pay their rent.
I wouldn’t fancy sitting down to a difficult conversation with a tenant who is struggling financially, through no fault of their own. You don’t get that kind of issue when you buy FTSE 100 shares.
Buy-to-let is bothersome even without an epidemic. You have the effort of finding and doing up a property, sourcing and replacing tenants, and paying tax on your income and capital gains. I’m not sure it’s worth it. Especially when you can invest in FTSE 100 shares completely free of all tax inside a Stocks and Shares ISA.
Another reason I would favour UK shares right now is that they have already suffered a sharp correction during the pandemic. FTSE 100 shares trade around 12% lower than a year ago. By contrast, property is up 3.8% over the same period. The housing market is acting as if nothing has changed, whereas the stock market reflects current anxieties.
Buy-to-let can’t beat this I prefer to buy assets after they have fallen in value, rather than reason. That way you get better value for your money. I think now is a great time to buy discounted FTSE 100 shares. It’s not such a good time to buy property.
The stock market is where I would start building my long-term wealth today. There are plenty of top FTSE 100 shares , trading at bargain prices. Many have been unfairly hit by the wider market sell-off, and are looking great value.
Companies like Unilever (LON:ULVR), Rio Tinto (LON:RIO), British American Tobacco (LON:BATS), National Grid (LON:NG), Sage Group (LON:SGE), and RELX look more tempting than property. They offer income, as well as prospects for capital growth when share prices recover. History shows that markets always recover from a crash, if you give them enough time. You should be investing for at least five years, ideally 50 years.
You can invest in exciting UK shares free of tax and with none of the hassle that comes with managing buildings and tenants.
The post I’d ignore buy-to-let and invest in bargain-priced FTSE 100 shares instead appeared first on The Motley Fool UK.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended RELX, Sage Group, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020
First published on The Motley Fool
