We here at The Motley Fool don’t like buy-to-let. We don’t like the government’s assault on landlords by hiking tax liabilities, ramping up regulation, and escalating operating costs and admin fees.
And many of us fear things will get much worse given the political capital that comes with bashing landlords, not to mention the real-world impact such policies are having to free up homes for first-time buyers.
‘Things Can Only Get Better’ was the anthem which ushered The Labour Party back into power at the Conservatives’ expense 22 years ago. For buy-to-let landlords, though, things are likely to get much worse should the party seize the keys to Downing Street in any forthcoming general election. Make no mistake, the Brexit deadlock means the chances of an election are rising by the day.
Jeremy Corbyn’s opposition party have long promised a buy-to-let revolution and, under his last manifesto in 2017, policies like three-year tenancies and rent caps were pledged. And, as pre-election preparations have begun, Labour has upped the ante yet still further.
Just this week, shadow chancellor John McDonnell announced plans that would allow private renters to buy their rented homes “at a reasonable price” rather than at market value, a move that could leave plenty of landlords out of pocket and plunge many others into so-called negative equity.
Is the FTSE 100 better?
For every action there comes a reaction, of course. And so the Conservatives are likely to also cram their own hypothetical manifesto with lots more punitive policies for landlords in the event of a general election indeed being called soon.
It’s no wonder British buy-to-let owners are becoming more and more pessimistic over the outlook for the sector’s near term and beyond. Given all of the above, why gamble on the rental sector as a way to try and make yourself a big cash pot to retire on?
I, for one, would much rather buy into the FTSE 100 instead, either by buying a tracker fund, which follows the movements of the broad index, or by buying up individual shares instead.
The benefits of buying a tracker? They’re low maintenance, low cost, and there’s a stream of factors — from the prospect of the pound still plunging, to rising investor demand for world-class companies with little-to-no UK exposure — that could propel the index higher during the rest of 2019 and beyond. What’s more, thanks to the Footsie’s strong dividend yields (the forward average currently sits at around 4.5%), it means investors can receive regular, and really quite significant, income flows at the same time.
So give the increasingly-problematic and costly buy-to-let sector a miss, I say. You’d be much better off preparing for your retirement by buying into the FTSE 100 instead.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.