Investing

Post about boosting your funds through investment. Includes both traditional and non-traditional investment opportunities.

Assetz Exchange Review

Assetz Exchange: My Review of This P2P Property Investment Platform

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Today I’m looking at P2P property investment platform Assetz Exchange (launched in January 2019)..

As I have noted before on Pounds and Sense, I am something of an enthusiast for property investment (and specifically property crowdfunding). Among other things, I like the fact that you can make money from both rental income and capital growth. And investing in property can be a good way of spreading the risk when you have equity-based investments.

Of course, investing in property directly is costly and carries all the risk inherent in putting all your eggs in one basket. A major attraction of P2P property crowdfunding investment is that you can get started with much less money and build a diversified portfolio to help mitigate the risks.

In addition, if you invest this way you don’t have to deal with the day-to-day hassles of being a landlord, from finding tenants to repairing broken boilers. This is taken care of by the platform itself and/or their management company. You just have to sit back and – all being well – wait for the rental income and (hopefully) capital gains to materialize.

That said, there have been a few reversals in the P2P property sector over the last few months (see this recent post, for example). So I am now more concerned than ever to ensure that any investments I make in this category control risk as effectively as possible.

What Is Assetz Exchange?

As mentioned above, Assetz Exchange is a licensed P2P property investment platform. It is owned by well-known P2P lending platform Assetz Capital, but run quite separately from them. If you already have an account with Assetz Capital, you will have to register separately with Assetz Exchange.

Assetz Exchange aims to offer net yields to investors of between 5.2 and 7.2% per year. These are generally paid by institutional tenants through multi-year leases. All properties are unleveraged, providing additional security (and stability) for investors.

Assetz Exchange has some similarities with Property Partner, but they differ in some important ways. For one thing, many of the properties are rented out to charities (e.g. NACRO) or housing associations. These organizations generally sign longer contracts than private individuals. They don’t have voids (periods when the property is untenanted and producing no income). Neither are there any maintenance costs, as the organizations take responsibility for this themselves. And finally, these organizations are directly funded by the government, giving them a secure income stream.

Another area of specialism is show homes. Working with a national housebuilder, Avant Homes, Assetz Exchange purchases fully furnished show homes from multiple sites around the country. These are then leased back to the developer for fixed periods of up to five years to be used to help sell other plots. This eliminates potential void periods and avoids any maintenance costs. At the end of the leases, investors will be able to vote on whether to lease the houses to tenants or sell them to home-buyers on the open market.

Assetz Exchange also offers investors the chance to get involved with a new generation of modular eco-homes. This is already a popular approach to house-building in Europe and the United States. Assetz Exchange fund the acquisition and conversion of land into serviced plots, allowing buyers to then order a house to be built on that plot to their own specification. These modular-built eco-homes are sustainable and low energy. They are also typically quick to complete and have a lower impact on the environment.

Assetz Exchange do also buy and let some standard properties as well, offering investors the chance to further diversify their portfolios.

Signing Up

Before you can invest through Assetz Exchange, you will of course have to sign up on the platform. This is pretty straightforward. You just visit the Assetz Exchange website, read the information there, and click on Register in the top-right-hand corner.

You will then be required to enter your contact details and confirm which of four categories of investor you fall into. The options are as follows:

High Net Worth Investor – This includes individuals who have an annual income of £100,000 or more or net assets of £250,000 or more.

Self-certified Sophisticated Investor – This includes individuals who have made more than one peer-to-peer investment in the last two years or who meet certain other criteria relating to investment experience. This is the category I selected myself.

Investment Professional – Including corporate investors and SIPP or SSAS professional service providers.

Everyday Investor – This category is for investors who don’t fit into any of the categories above. They can still invest via Assetz Exchange but must pledge not to invest more than 10 per cent of their portfolio in P2P loans.

You will also be required to answer some multiple-choice questions to confirm that you understand the nature of investments that can be made on the platform. I found some of these questions quite challenging, and was pleased to get them all right first time. I would therefore recommend reading the information on the Assetz Exchange website (including the Help pages) carefully before proceeding to register. If you do make any mistakes, however, feedback is provided, and you can take the test again until you achieve a 100% correct score.

Once you have done all this, you will be able to fund your account. This must be done by bank transfer, as Assetz Exchange do not allow debit card payments. You will then be able to browse the range of currently available property investments:

Investing

Once you are registered on the platform and signed in, click on Exchange in the menu at the top of the screen and all current projects will be displayed. Here are a couple that are showing at the time of writing…

Assetz Exchange 1

Clicking on any of these will open a page devoted to the investment concerned. Here you can read all about it, view reports and site plans, and so on. One very important area is the Order Book (see example below).

Order Book

All buying and selling on the platform is conducted via an exchange (otherwise known as the Order Book) which works similarly to the secondary market on Property Partner.

So if you want to buy shares in a particular project, you can do so by accepting the best price currently available on the exchange. In the example above, there are £4,895 of shares available at zero discount (i.e. the original offer price).

If you want to get your shares at a lower price than this, you can make a bid. In the example, an investor has put in a bid for £75 at a 1.04% discount and another investor (or maybe the same one) has put in a bid for £154 at a 2.08% discount.

Conversely, if you wish to sell some or all of your shares at any time, you can accept the best bid (or bids) on the Order Book currently, or place an offer and wait to see if this is matched.

It does take a little bit of getting your head around at first, but it’s actually a simple and straightforward process. One thing to note is that if there is nothing showing on the right-hand-side of the Order Book (under Offers) you won’t be able to buy shares in that project there and then – though you can of course place a bid if you wish and see if a seller wants to match it.

In any event, if you want to buy, just click on the green Buy button (either on the Exchange page or the details page) and complete the short online form. You will need to indicate how much you want to invest, whether this should be from your General or IFISA account (see below), and whether the amount should include the FCC or not (see What Are The Charges? below).

You will also need to indicate whether you want to buy at the current best price (selected by default) or you want to try for a better price (in which case your bid will be added to the left-hand column in the Order Book).

The IFISA Option

As mentioned above, if you wish you can invest with Assetz Exchange via an IFISA (Innovative Finance ISA). As discussed in this recent post, this type of ISA for P2P investing gives you the same tax advantages as a cash or stocks and shares ISA. You don’t have to pay any tax on the money you make, whether this takes the form of dividends, income or capital gains.

Everyone has a generous annual ISA allowance of £20,000 in the current 2020/21 tax year (and next year as well). This can be divided any way you like among the three types of ISA. So if you open an Assetz Exchange IFISA, you can still have cash and stocks and shares ISAs with other providers as well, so long as you don’t invest more than £20,000 in total. You can also only invest money in one of each type of ISA in any one financial year.

Choosing the IFISA option on Assetz Exchange is very easy. You can do it when first registering on the site or later. The only extra thing you have to do is enter your National Insurance number.

If you have maxed out your ISA allowance – or have already invested in another IFISA in the current tax year – you can still invest via your default ‘Regular’ account. You can invest any amount this way, but of course any profits you make will potentially be taxable.

What Are The Fees?

Assetz Exchange do not charge any monthly fees to investors (this is in contrast to Property Partner, who made the unpopular decision to impose an Assets Under Management charge and monthly fee, greatly impacting small investors on the platform especially). The company does have to make money somehow, of course, and they do this from three sources:

Arrangement fee

When a property is first purchased, Assetz Exchange charge an arrangement fee which is included in the Fixed Costs & Contingency (FCC). When parts of the property are sold on the Exchange, this fee is added to the purchase price of the buyer (see above) and so is recovered by the seller. The size of this fee is included in the loan conditions.

Monitoring fee

Assetz Exchange charge a percentage of the gross rent received for the property. The percentage is stated in the loan conditions of the property.

Property disposal fee

A fee of 2% of the gross sales proceeds is charged if investors vote to sell and the property is physically sold.

What Are The Safeguards?

Like most other property crowdfunding platforms, all investments in any project on Assetz Exchange are held in a Special Purpose Vehicle (SPV) for the project concerned. This gives investors in the project some protection if the main company were to go into administration.

A contingency balance is held within each SPV which acts in a similar manner to a provision fund, covering unexpected short-term cash-flow disruptions. It is topped up from receipts and no distributions are made to investors if it falls below a certain level.

SPVs also benefit from indemnity insurance which covers non-payments from tenants. This in theory also covers disruption to cash-flow, but it does not cover voids (periods where the property does not have a paying tenant). For reasons mentioned above, voids should not be an issue with most of the properties listed on the platform.

In common with most other P2P investment platforms, Assetz Exchange does not fall within the remit of the Financial Services Compensation Scheme (FSCS), which covers customers with UK financial services firms up to £85,000 if the institution in question were to go bust.

Pros and Cons

Here is my list of pros and cons for Assetz Exchange.

Pros

1. Fast, easy sign-up.

2. Well-designed, intuitive website.

3. Low minimum investment (as little as £1 per project!) – this makes building a diversified portfolio straightforward.

4. Assetz Exchange take care of all the work involved in buying and managing properties. You just choose which ones to invest in.

5. Option to access money any time by selling on the secondary market (though this does depend on another investor being willing to buy your shares at a price you find acceptable).

6. Relatively low-risk investment options (though of course there are no guarantees)

7. Customer support (in my experience anyway) is fast, friendly and helpful.

8. Charges are reasonable. There is no charge for selling investments.

9. Potential to make money through both capital appreciation and rental income.

10. Rental income is paid into your account every month. You can either withdraw or reinvest it.

11. No monthly fees and only transaction-based charges to pay.

12. Opportunity to invest in socially beneficial developments such as sheltered housing

13. Tax-free IFISA option to which any investment on the platform can be added

14. Investors can vote for their favoured exit option (e.g. selling up) when the time comes

Cons

1. Can’t invest using a debit card

2. No auto-invest option currently available

3. Not as many opportunities as some P2P platforms (although the number is increasing steadily)

Closing Thoughts

I was impressed enough with Assetz Exchange to invest a small amount (£100) of my own money initially and will report back on PAS about how my portfolio fares. Here is how it’s looking at the time of writing, roughly a month after I opened my account. As you can see, my initial investment has grown by £3.87 from a combination of income received and capital growth. For a month that’s not bad at all – if it carries on growing at that rate I’ll be delighted! – but of course it is much too soon to draw any firm conclusions from this.

My Assetz Exchange investments

I particularly like the fact that with the low minimum investment on Assetz Exchange, even if you’re starting very cautiously (as I am) it’s easy to build a diversified portfolio. I like the relative simplicity of investing on the website and the fact that you can exit an investment any time via the exchange (though that does depend on willing buyers being available at a price that is acceptable to you). It is also good that there are no charges associated with selling on the exchange.

  • You can, of course, withdraw uninvested funds from your Assetz Exchange account at any time.

Obviously there are risks in any form of investing and it is important to do your own ‘due diligence’ before proceeding. You should also bear in mind that this type of investment is not covered by the Financial Services Compensation Scheme, which covers savers with UK banks and other financial institutions up to £85,000. On the other hand, the potential returns are significantly better than the fractions of a percent typically on offer from savings institutions right now, while the risks appear to be at the lower end of the spectrum, with many of the properties on long-term leases with corporate/institutional tenants.

To be very clear, nobody should put all their spare cash into Assetz Exchange (or any other investment platform for that matter) but in my opinion there is definitely a case for including AE within a diversified portfolio.

As mentioned above, I shall be reporting back on how my Assetz Exchange investments perform on PAS in future. In the mean time, if you have any comments or questions about this post, or Assetz Exchange more generally, please do leave them below as usual.

UPDATE JANUARY 2025 – Assetz Exchange have now rebranded as Housemartin. They continue to operate as described above, but going forward will focus entirely on supported housing projects, as these have proven the most reliable and hassle-free (not to mention the social/community benefits). For more info, see my new blog post P2P Property Investment Platform Assetz Exchange Rebrands as Housemartin.

Housemartin logo

Disclaimer: I am not a registered financial adviser and nothing in this post should be construed as personal financial advice. You should always perform your own ‘due diligence’ before making any investment and speak to a qualified professional adviser if in any doubt how best to proceed. All investments carry a risk of loss.

Please note also that this review uses my affiliate links. If you click through and make an investment or perform some other qualifying transaction, I may receive a commission for introducing you. This will not affect any charges you pay or the product/service you receive.

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Give your ISA a cash boost

Give Your ISA a Cash Boost!

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At the time of writing there is just over a fortnight till the end of the 2020/21 ISA season. That is all the time you have left to make use of this year’s allowance of £20,000 before it is gone forever.

If you haven’t already used your allowance – and you have money available to invest – it is therefore essential to take action now. Investing via an ISA means that any profits you make will be free of Income Tax, Dividends Tax or Capital Gains Tax. And you won’t even have to declare it on your tax return, which if you’re anything like me will be a welcome simplification…

You can of course put your money into a Cash ISA, but the rates of return on such accounts are currently derisory, and basic rate taxpayers now have a £1000 tax-free savings allowance anyway (higher rate tapayers get £500 and top rate taxpayers nothing at all). The argument for investing in a cash ISA is therefore weak for most people, although if you think interest rates are likely to rise significantly in future there might still be a case for using one. Count me out, though 🙂

That leaves Stocks and Shares ISAs and the relatively new Innovative Finance ISAs (which are mainly for P2P lending). You can invest in either or both of these ISAs up to your annual £20,000 limit, though you can only put money into one of each type in any tax year. In today’s post I wanted to reveal some ways you may be able to get an extra cash boost if you plan to invest in an ISA in the next couple of weeks.

Cashback Sites

I have mentioned cashback sites on various occasions on Pounds and Sense. Basically, these sites refund some of the commission they receive from ‘introducing’ you to a company if you click through to it via a link on the cashback site. The two best-known cashback sites in the UK are Top Cashback and Quidco, though newcomers My Money Pocket are also worth joining and checking out. You might also like to try Cashback Angel, a comparison service for UK cashback websites, which I reviewed here recently.

Clearly you will need to sign up for an account with a cashback site before you can get any cashback from them. I highly recommend registering with Quidco and Top Cashback and maybe My Money Pocket too, even if you aren’t planning to invest in an ISA immediately.

So what cashback offers are currently available with ISAs? On Top Cashback (my personal favourite) one of the best comes from Fidelity. They are offering a maximum of £160 cashback if you open a new Fidelity Stocks and Shares ISA with a minimum deposit of £15,000. But even if you begin with as little as £2,500, you will get £50 cashback. You have to be a new customer and remain invested for a minimum of three months to get the cashback.

If you invest in a Shepherds Friendly Stocks and Shares ISA, an even more generous top payment of £305 is on offer for a maximum £20,000 ISA investment. Or you can earn up to £300 cashback if you set up monthly deposits, though to get this amount you will need to put in £1,500 a month or more. Again, you must remain invested for a minimum of three months to receive the cashback.

Over on Quidco there are also some great offers. With Foresters Friendly Society, for example, at the time of writing you can get £244 cashback with a maximum £20,000 investment. Or you can get £40 cashback with a minimum initial investment of £5,000 (other options are available as well). Again, you must remain invested for a minimum of three months to receive the cashback.

  • Please be aware that cashback offers change frequently, so I can’t promise that the exact offers mentioned above will still be available by the time you read this post.

For more ideas, just browse the Investment category on either Top Cashback or Quidco. Alternatively – or in addition – you can try searching for any ISA provider you are interested in to see if they have a cashback deal on offer.

Obviously you shouldn’t invest in an ISA purely for the cashback. But if you are thinking of doing so anyway, it is well worth checking what deals are available on cashback sites to get the benefit of the extra money available.

Special Offers

Of course, all investment platforms know that now is a peak time for ISA investment, so they compete extra vigorously to attract new customers. It is therefore well worth shopping around right now to see what offers are available.

In addition, as an ISA investor and money blogger myself, I have access to some special deals and bonuses that I can offer my readers. I’ve put a couple below, both with ISA providers I have invested with personally.

Kuflink

Kuflink is a P2P property loans platform I have been investing with for around three years now. They offer a range of investment options, including an IFISA. They have a generous welcome offer, where you can earn up to £4,000 cashback on a £100,000 investment. Of course, that’s well over the ISA annual limit. But if you invest £20,000 in an IFISA with Kuflink you can get 3 percent cashback or £600, which still isn’t too shabby. For more information about Kuflink and their welcome offer, check out my Kuflink review.

Nutmeg

Nutmeg is a robo-adviser investment platform I have been investing with since 2016. As you will see from my Nutmeg review, I have enjoyed very good returns from them (55.5% to date). They offer a Stocks and Shares ISA using ETFs (Exchange Traded Funds). If you sign up with Nutmeg via my link, while I can’t offer you a cash bonus, you will get six months’ portfolio management free of charge.

I hope this post has encouraged you to use your 2020/21 ISA allowance before it’s gone and maybe take the chance to pocket a bonus or cashback as well. If you have any comments or questions, as always, please do leave them below.

Disclaimer: I am not a professional financial adviser and nothing in this post should be construed as individual financial advice. Everyone should do their own ‘due diligence’ before investing and seek advice from a qualified financial adviser if in any doubt how best to proceed. All investment carries a risk of loss. In addition, please be aware that some links in this post include my affiliate (referral) code, so if you click through and make a purchase, i will receive a commission for introducing you. This will not affect in any way the terms and benefits you receive,. Indeed, as stated above, some offers are only available to people investing via my link.

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FI Money Review

Review: FI Money: Learn the Hard Way, Teach the Easy Way by Peter Duffy

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I was pleased to receive a review copy of FI Money: Learn the Hard Way, Teach the Easy Way from Peter Duffy. Peter is the author of the book (and a fellow UK money blogger).

FI Money (as I’ll call it for short from now on) is a self-published paperback of 222 pages (it’s also available as a Kindle ebook). It is organized into 28 main chapters plus additional material. I won’t list all the chapters here, but here are the first ten to give you a flavour of the content (and style).

  1. Force yourself to smile
  2. YouTube obsession
  3. Your relationship with money
  4. Overthinker
  5. Understanding our ‘Chimp’ emotions
  6. Goals written down
  7. Crystal clear goals
  8. Stress less
  9. Mental training
  10. How NOT to invest

FI Money is a personal account of one man’s journey towards financial independence (the FI referred to in the title). It is a self-development book, but as Peter says in the Introduction it isn’t the usual success story typically associated with such books. He says, ‘I am a work in progress, similar to a building under construction.’

The chapters are generally quite short. They are well written and broken up with bullet-points, headings, To Do lists, and so on. Peter focuses on different aspects of his quest for financial independence, with a particular emphasis on buy-to-let. As this is not something I have ever got into myself (apart from some investments on property crowdfunding platforms) I was particularly intrigued by this. Peter talks about his experiences with refreshing honesty and is not afraid to disclose some of the mistakes he has made along the way. If you’re thinking of investing in buy-to-let yourself, there are some valuable lessons to be learned here.

The book covers many other subjects as well, including property renovation, tax, investing, keeping records, and more. I particularly enjoyed Chapter 10 ‘How NOT to Invest’ which focuses on some of Peter’s less successful investments. These include Premium Bonds (like me he’s not a fan), Bitcoin and other cryptocurrencies, and a particularly ill-advised buy-to-let project early in his career. There are some salutary lessons to be learned from all this (and a few laughs to be had as well!).

In addition to the practical advice, FI Money has a particular emphasis on the psychological aspects of achieving financial independence – the money mindset, as Peter calls it. He is a firm believer in building your financial knowledge, but also adopting the right emotional and practical disciplines and carefully planning and managing your journey towards FI. There is a lot of food for thought in the book from someone who really has been on this particular journey himself (or at least is well on the way there).

As mentioned earlier, Peter also runs a personal finance blog called Duffmoney. This is well worth a read as well, and will give you a flavour of Peter’s style and his attitude towards investing and money matters generally.

As always, if you have any comments or questions about this review, please do post them below.

Disclosure: In common with many posts on Pounds and Sense, this review includes affiliate links. If you click through and make a purchase, I may receive a fee for introducing you. This will not affect in any way the price you pay or the product or service you receive.

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March 2021 Update

My Coronavirus Crisis Experience: March 2021 Update

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Here is my latest monthly Coronavirus Crisis Update. Regular readers will know I’ve been posting these updates since the first lockdown started a year ago now (you can read my February 2021 update here if you like).

I plan to continue these updates until we are clearly over the pandemic and something resembling normal life has resumed. Obviously, I very much hope that will be sooner rather than later.

As ever, I will begin by discussing financial matters and then life more generally over the last few weeks.

Financial

I’ll begin as usual with my Nutmeg stocks and shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, since last month’s update my main portfolio has been through some ups and downs. It is currently valued at £19,155. Last month it stood at £19,008, so it is at least up a little (£147) overall.

Nutmeg March 2021

As you may recall, three months ago I put £1,000 into a second Nutmeg pot to try out Nutmeg’s new Smart Alpha option. The value of this pot rose as high as £1,040 in mid-February, though it currently stands at a more modest £1,007. Here is a screen capture showing performance to date, though obviously it is much too early to draw any conclusions from this.

Nutmeg Smart Alpha March 2021

You can see my in-depth Nutmeg review here (including a special offer at the end for PAS readers).

I mentioned last time that my first investment with P2P property investment platform Property Partner reached its five-year anniversary, at which point investors can vote to sell their shares or continue for another five years. Along with just under half of the other investors, I voted to sell my shares.

The shares of everyone who wanted to sell were duly put up for sale on the platform. Unfortunately, though, there were few buyers, so with a substantial number of shares unsold, the property has been put up for sale on the open market. That means there will be a period of several months – possibly longer – before a buyer is found, and there is no guarantee that the independent valuation price will be achieved.

That is obviously disappointing, though as I only have a very small amount invested in this property (about £50) I’m not going to lose any sleep over it. In my view Property Partner didn’t make much effort to market these shares to investors. I suspect the same may be the case with at least some of the other properties coming up to their five-year anniversaries. It may be that Property Partner are happy to get some of the smaller houses and apartments off their books, especially the city-based ones for which demand has fallen as a result of the pandemic. Currently I have another small investment going through the five-year process. I voted to sell my shares in this too, but suspect the outcome will be the same.

As I have noted before on PAS, shares in many properties on Property Partner are currently available on the secondary market at a discount to the independent valuation price  Based on my experiences to date, however, I would advise caution about regarding this as a buying opportunity. If properties that are relisted attract little interest from existing PP investors, they will have to be sold on the open market. In that case you are likely to have a long wait until you see any return on your investment, and there is no guarantee of an overall profit even then. I shan’t therefore be investing on the Property Partner secondary market for the foreseeable future.

That wasn’t the only disappointing financial news last month. Property crowdfunding investment platform The House Crowd unexpectedly announced that it was going into administration. I still have some investments with THC, though thankfully not as many as I did two or three years ago.

Apart from one small loan – which I accepted some time ago had gone south – my remaining investments are in traditionally crowdfunded properties, all of which are currently up for sale. The money is therefore secured by bricks and mortar, so I expect to get at least some of it back (and have of course been receiving dividend payments from rent received). As with other property crowdfunding platforms, each THC property is owned and managed by a separate Special Purpose Vehicle (SPV), which gives it legal protection from claims against THC by creditors. How this will pan out in practice remains to be seen, but I note that the administrators have said that their appointment is ‘not expected to have a material impact on investors.’

So I am being philosophical about this and awaiting further developments. These have undoubtedly been tough times for property investors, and regular readers will know that I also recently lost money with another property crowdfunding platform called Crowdlords. Overall, when you allow for my successful property investments and rental income, I am more or less breaking even, but even so (as I have said on the blog before) I am a lot more cautious about this type of investment nowadays.

Personal

February was another long, cold month, but at least there are signs of better times ahead now. The vaccine roll-out continues to go well and case numbers are dropping rapidly, giving us all hope for a return to something approximating normal life in the weeks and months ahead.

And, of course, we are heading into the spring now, with longer, brighter days and – eventually – the prospect of some warmer ones!

One thing that always lifts my spirit at this time of year – and especially in the current circumstances – is the arrival of spring flowers. In my garden I have crocuses and snowdrops out at the moment, and it won’t be long until the daffodils are in bloom. Here’s a photo of a flower bed in my front garden…

Garden

I had my first Covid jab in February, at the Whitemore Lakes mass vaccination centre near Lichfield. It was run by a team of NHS staff, military and volunteers. Everyone was friendly and efficient. The only slight blip came when I was checking in. I happened to notice that the clerk had put ‘female’ on my form, doubtless due to my lockdown hair. She was embarrassed when I pointed this out, but of course I couldn’t just say nothing. I shall be very pleased when we are allowed to visit hairdressers again!

I received the Oxford-Astra Zeneca vaccine. After I had a bad reaction to my last flu jab (fever and nausea) I was prepared for something similar with this, but thankfully that didn’t happen. Apart from very slight soreness in my arm the next day, I had no side-effects at all. I hope I am just as lucky with my second jab, which I have already booked for May.

Also on a medical theme. I had my latest trip to the eye clinic at Queens Hospital Burton last week. Regular readers will know that last autumn I was diagnosed with a perforated retina in my left eye. My first laser treatment was only partly successful, so Iast time I received a (more powerful) top-up treatment. This visit was to check if it had been successful, and I was pleased and relieved to hear that it had. So once again I need to express my thanks and gratitude to all the staff there, and especially to Mr Brent, the consultant who performed my final laser treatment and gave me the good news this time. I have been told that if something like this happens once it increases the chances of it happening again, so I have to be on the lookout for any potentially worrying changes to my eyesight in future. But that aside I am lucky that this problem was detected early before anything more drastic (e.g. a detached retina) occurred – so big thanks to my optician at Vision Express Lichfield as well!

As I write this update, the schools are just about to reopen to all students. I am delighted about that, as I know that it has been a tough time for many children. While some schools have been very good about running online classes, these can never be a complete substitute for face-to-face teaching. I also know from speaking to friends that some schools have been less supportive, simply sending pupils written lessons or assignments to complete on their own. That is obviously less than ideal for younger children especially.

I do think it is regrettable that the government has advised that secondary school children should wear masks in classrooms. The same applies to the mandatory twice-weekly testing. In my view these measures will achieve little apart from traumatizing young people and making it harder for them to learn. I understand these measures have been introduced partly to placate the teaching unions and some worried parents, but hope they will be swiftly withdrawn when (as I fully expect) there is no big ‘spike’ in virus cases following the return. Okay, I’ll get off my soapbox now!

As always, I hope you are staying safe and sane during these challenging times. If you have any comments or questions, please do post them below.

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Review: The Good Retirement Guide

Review: The Good Retirement Guide

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Today I am looking at The Good Retirement Guide, an annual guide published by Kogan Page. I bought the current 2021 edition, which was published last month.

The Good Retirement Guide 2021 is 318 pages long. The text is fairly dense but broken up by plenty of headings and bullet-point lists. There are 14 chapters and an alphabetical index at the back. The chapter titles are as follows:

  1. Are You Looking Forward to Retirement?
  2. Money and Budgeting
  3. Pensions
  4. Tax
  5. Investment
  6. Your Home
  7. Leisure Activities
  8. Starting Your Own Business
  9. Looking for Paid Work
  10. Voluntary Work
  11. Health
  12. Holidays
  13. Caring for Elderly Parents
  14. No-one is Immortal

The chapter titles are pretty self-explanatory. The book attempts to cover every aspect of making the most of your senior years. The style is clear and readable, and additional resources are signposted as appropriate.

In contrast with Sod 60! which I also reviewed recently, The Good Retirement Guide covers the financial aspects of later life in some detail. I thought the information about pensions and benefits in particular was very good and tells you most of what you need to know.

Some of the other chapters are a bit less comprehensive. The one on leisure activities, for example, lists various things you might like to do – or take up – in retirement, but the information is frequently sketchy and can verge on stating the obvious. Here is what it has to say about poetry, for example:

There is an increasing enthusiasm for poetry and poetry readings in clubs, pubs and other places of entertainment. Special local events may be advertised in your neighbourhood.

And apart from a mention for the Poetry Society and a link to their website, that is all you get on this subject 🙂

I don’t want to appear too harsh. Obviously in a wide-ranging book like this, it can be hard to judge the degree of detail appropriate to any particular topic. At least by mentioning a wide range of possibilities, the book may give you some ideas about activities you might like to pursue further in retirement.

The health-related content is a bit of a mixed bag. Some subjects are covered in reasonable depth, others less so. There is just half a page devoted to keeping fit, for example, with a further couple of paragraphs about yoga and Pilates. On the other hand, there is some good information (and advice) on health insurance, long-term care plans, and so forth. Again, this illustrates that the book’s primary focus is on the financial aspects of retirement.

One thing that did surprise me is that although this 2021 edition of The Good Retirement Guide was only published last month, there is no mention of the pandemic in it. You will search in vain for Coronavirus or Covid-19 in the index. I know there can be long lead times in publishing, but in an annual guide you might think they could have inserted a section about it somewhere. Maybe we will have to wait for the 2022 version?

Even so, a lot of the subjects discussed in the guide – holidays, for example – have been seriously impacted by the pandemic. The advice and procedures for travel abroad in particular may be very different even after the pandemic is officially over.

Final Thoughts

Overall, I thought The Good Retirement Guide 2021 was a helpful book for people approaching retirement. As I’ve said above, it has a strong emphasis on financial matters, and is well worth reading for that alone. Some of the other content is a bit hit-and-miss, and the surprising lack of any mention of the pandemic means that at times it reads like a guide to an alternate world where Covid never happened. Of course, none of us really knows what the ‘new normal’ will be in future. We can but hope it will be not too far removed from the old normal we remember and which this book – despite the 2021 in its title – basically depicts.

As always, if you have any thoughts or questions about this post, please do leave them below.

Disclosure: As with many posts on Pounds and Sense, this post includes affiliate links. If you click through and make a purchase, I may receive a modest commission for introducing you. This will not affect in any way the price you pay or the product or service you receive.

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my coronavirus Crisis Experience - February 2021 Update

My Coronavirus Crisis Experience: February 2021 Update

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Here is my latest Coronavirus Crisis Update. Regular readers will know I have been posting these since the first lockdown started in the spring of 2020 (you can read my January 2021 update here if you like).

I plan to continue these updates until we are clearly over the pandemic and something resembling normal life has resumed. Obviously, I very much hope that will be sooner rather than later.

As ever, I will begin by discussing financial matters and then life more generally over the last few weeks.

Financial

I’ll begin as usual with my Nutmeg stocks and shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, since last month’s update my main portfolio has been through some ups and downs. It is currently valued at £19,008. Last month it stood at £18,886, so it is at least up a little (£122) overall.

Nutmeg main portfolio Feb 2021

As you may recall, two months ago I put £1,000 into a second Nutmeg pot to try out Nutmeg’s new Smart Alpha option. The value of this pot rose as high as £1,037 in mid-January, though it currently stands at a more modest £1,010. Here is a screen capture showing performance to date, though obviously it is far too early to draw any conclusions from this.

Nutmeg Smart Alpha Feb 2021

You can see my in-depth Nutmeg review here (including a special offer at the end for PAS readers).

Incidentally, I was recently asked by Nutmeg to contribute an article about my ‘Investing Journey’ for their blog. This was published in early January and you can read it here if you like. In the original version I was more explicit about why I left the charity I used to work for (basically a personality clash with the new Director who saw me as a rival). Nutmeg presumably decided this might ruffle a few feathers – even 25 years on! – so they changed it to something blandly neutral. Anyway, I thought I should let you know, as the opening section reads a little oddly now 🙂

The Nutmeg article brought quite a few new subscribers to this blog – so if that includes you, welcome to Pounds and Sense! I do hope you find my posts interesting.

Moving on, I had an email this week from the peer-to-peer lending platform RateSetter saying that all their lending activity is being transferred to Metro Bank (which now owns RateSetter). All investor accounts are therefore closing at the start of April, with investors’ money being returned to them in full along with all interest due.

I know some RateSetter investors are unhappy about this, but personally in these turbulent times I’m just glad to be getting my money back with interest. I originally invested £1,000 in September 2018 with an eye to claiming the £100 new investor bonus. The latter was duly credited to my account a year later, so by April I expect there to be a total of around £1,180 in my account. That equates to an annual interest rate of around 7%, which I am perfectly happy with.

This last year has undoubtedly been tough for P2P lending companies, with rising default rates and withdrawal requests along with reduced demand for loans. This has caused some platforms to experience cashflow problems and bad publicity. The only other one I have any money left with is ZOPA, which has also had a challenging year. I have only a few hundred pounds left in ZOPA as I switched some time ago from reinvesting repayments to withdrawing them. I’m not sure I can see much of a future for P2P lending in the UK, but of course in these unique times anything is possible. I don’t foresee myself putting any more money into P2P lending for a while, though.

I also heard recently from Property Partner. As you may know, this is a property crowdfunding platform. A few years ago, when I was investing regularly in property crowdfunding, I put around £5,000 into twenty or so properties on this platform.

Anyway, the email revealed that the first property I bought shares in has now reached its fifth anniversary. All investors therefore have the opportunity to sell up at the current independent valuation or else continue for a further five years. I voted to sell my shares, since (as mentioned in this recent post) I am currently trying to reduce the total amount I have invested in property crowdfunding.

The way the five-year anniversary process works is that all shares owned by investors who want to sell are bundled together and put up for sale on the Property Partner site. Assuming they are all bought by other investors, everyone who voted to sell then gets their money back at the current valuation. If that doesn’t happen, Property Partner put the property concerned up for sale. But obviously that is likely to take months and there is no guarantee the valuation price will be achieved. So you might end up getting back less than anticipated (or perhaps more in a best-case scenario).

Obviously I’m hoping this process goes smoothly and I get my money back soon. I would comment, though, that many of the properties that are coming up to their five-year anniversary are on offer on the resale market at well under the current valuation price. So if you are of a speculative persuasion, there is an opportunity to buy shares now at a discount and maybe make a quick-ish profit through selling up via the five-year anniversary process. I must admit I am tempted to try this, but haven’t made a decision yet!

Moving on, my two Buy2LetCars investments are still delivering the promised monthly returns without any fuss. As I am semi-retired but don’t yet qualify for the state pension, the £450 or so I receive from them every month represents a major part of my monthly income currently. I am also looking forward to receiving a substantial lump-sum payment in April when my first investment with them matures.

As I’ve said before, investors with Buy2LetCars put up the money to finance a car for a key worker such as a nurse or police officer. They then receive 36 monthly capital repayments followed by a final balancing payment of interest and capital. If you are looking for an income-producing investment with a substantial lump sum payment after three years – and you like the idea of doing a bit of good with your money too – they are well worth checking out (and likewise if you’re a key worker looking for a lease car yourself). If you’d like to learn more, you can read my review of Buy2LetCars here and my more recent article about the company here. And here is a link to Wheels4Sure, their car-leasing website. Note that you can’t invest with Buy2LetCars through an ISA, so the interest part of the final payment will have some tax deducted. Depending on your circumstances, you may be able to reclaim this.

Finally, several more readers have now signed up with the low-key matched betting opportunity mentioned in some previous updates. New members are still being accepted, but the company has had to reduce their payouts slightly. New members now receive £50 a month for the first six months, reducing to £25 a month thereafter. Considering that this opportunity is cost-free, risk-free and hands-free, that’s still a pretty good deal, though 🙂

As I said above, this opportunity is based on matched betting, a sideline-earning opportunity I have been pursuing for several years myself. I was asked not to divulge too many details about it publicly, for good reasons I will explain privately to anyone who may be interested (and no, it’s not illegal!). As I said above, it doesn’t require any financial outlay, is entirely hands-off, and will provide a passive income of £50 a month for the first six months and £25 a month thereafter.

No knowledge of betting is required, and you don’t have to place any bets yourself (this is all done by the company’s clever software). You just have to set up a separate bank account for bets to go through, but running the account is entirely financed by the company. Please note that this opportunity is only open to honest, trustworthy people who haven’t done matched betting before and have no more than two accounts already with online bookmakers. For more info (and to receive a no-obligation invitation) drop me a line including your email address via my Contact Me page.

Personal

I don’t know about you, but January to me has felt a very long month. It’s been cold, damp and depressing, with the whole country stuck in what seems like a never-ending lockdown.

As you may know, I live on my own since my partner, Jayne, passed away a few years ago. I am lucky to live in a fairly large house with a good-sized garden, so being mostly confined to home hasn’t been as big a challenge for me as I’m sure it has for some. Also, I am well used to working from home, having done this for the last 30 years or so. Even so, being unable to see friends and family has been hard for me, as has the closure of my local swimming pool (which I used to visit twice a week). And I appreciate that in many ways I am one of the lucky ones. I don’t have any major financial worries, and I’m not trying to home-school any children!

I did have a ‘day out’ at the end of January when I had to go to the eye clinic at Burton Hospital for a follow-up appointment. As regular readers will know, in the autumn I was diagnosed with a perforated retina in the left eye. I had laser treatment for this, and my January appointment was to assess how successful it had been.

As it turned out, there was some good news and some bad. The consultant told me that the treatment had been three-quarters successful. In one area it hadn’t ‘taken’, meaning I needed top-up treatment. He administered this then and there. I guess he cranked up the laser a bit, as unlike my first treatment it was somewhat painful and I had a headache for a couple of days afterwards. I have to go back at the start of March for what I very much hope will be a final check-up. Keep your fingers crossed for me!

Because they put drops in my eyes at these appointments, I can’t drive. I therefore took a taxi to the hospital and caught the train back. On previous occasions the trains have been very quiet, but there were noticeably more passengers this time. The roads too seemed pretty busy. I get the impression that people are (understandably) becoming fed up with lockdown now and the government’s Stay At Home message isn’t being as well complied with. Not a criticism, just an observation.

I am still aiming to go out for a walk once a day, though with some of the bad weather in January, I have missed a few. Here is a photo of my front garden about a fortnight ago 😮

snowy garden

On the plus side, I do enjoy watching the snow as long as I don’t have any essential trips to make. And I like to go for a walk in it once it has fallen. It was lovely to see (and hear) the local children getting out their sledges and enjoying some much-needed fun during these difficult times.

As far as evening entertainment is concerned, I finished my box-set of the tongue-in-cheek detective series Agatha Raisin and am happy to recommend that. On a similar note, I am enjoying the new (second) series of The Mallorca Files, which is currently on BBC iPlayer. It is just a shame that because of the pandemic they were only able to record six episodes.

Also, inspired by this post by my fellow blogger Caz, I have been investigating what is on offer on Amazon Prime Video. I have Amazon Prime mainly for the fast, free deliveries. But of course members do get access to a range of free films and TV series as well.

Anyway, I found a couple of series I really enjoyed. Being a Star Trek fan, I had to check out Lower Decks, a cartoon series focusing on the junior ranks on board one of the Federation’s least illustrious starships, the USS Cerritos. This has some great laugh-out-loud moments but some good stories as well. There are plenty of allusions to familiar Star Trek tropes that will keep any fan of the franchise amused. Watch out also for an appearance by an evil incarnation of Microsoft’s infamous ‘Office Assistant’ Clippy!

  • Of course, if you’re a Star Trek fan and haven’t yet seen Star Trek: Picard featuring the great Patrick Stewart as the eponymous hero, you should definitely watch this on Amazon Prime Video as well 🙂

The other series I enjoyed is Undone. Indeed, this is one of the best things I’ve seen on TV for quite a while. It’s almost impossible to describe, but it’s an animation that combines elements of mystery, comedy, romance, science fiction/fantasy, and more. And all with stunning, almost psychedelic, imagery, and strong acting and characterization. Here’s a screen capture that will give you some idea of the style. If you watch nothing else on Amazon Prime Video, give this a try..

Undone

Going back to the pandemic, there has at least been some good news this month. The vaccine roll-out has been going well – I’ve just heard that 10 million people have now had their first injection – and the number of new cases has been falling rapidly. As a 65-year-old I have not yet been called for vaccination but assume this is likely to happen fairly soon.

I do hope these developments will allow lockdown and other restrictions to be eased in the coming weeks, as in my view they are causing grave harm to people’s physical and mental well-being. In particular, I would like to see schools reopen, along with swimming pools and gyms. I would also like to see pubs, restaurants and hotels allowed to reopen before many have to close their doors for good. In the (slightly) longer term I would like to see all restrictions lifted so that normal life can resume. I am not a fan of mandatory masks and would like to see them made optional for those who believe they offer some useful protection from the virus (personally I have never been convinced of this).

As always, I hope you are staying safe and sane during these challenging times. If you have any comments or questions, please do post them below.

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How I lost £3000 in a day in property crowdfunding and lessons learned

How I Lost £3,000 in a Day in Property Crowdfunding (And Lessons Learned From This)

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This isn’t an easy post to write, but I like to be honest with readers about my investing failures as well as successes. So here’s the sad story of one failed investment…

How It Happened

About a week before Christmas 2020 I got a cryptic email from the property crowdfunding platform Crowdlords directing me to their website for information about one of my investments. The email didn’t give anything away, but I had a premonition it wasn’t going to be good news.

Anyway, I followed the link to the Crowdlords site and logged in. The update concerned a property development I had invested £3,000 in back in 2016. Originally this was referred to as Seven Eco-Apartments (CL Number Four), but latterly it has been described simply as Kennington Road.

There was a long, involved explanation of what had been going on with the development. But the bottom line was that it had failed completely and investors were going to lose not just some but all of their money.

At first I wasn’t entirely sure I had read this correctly, so I emailed Crowdlords for confirmation. I received a quick reply from Richard Bush, co-founder of Crowdlords. Among other things, he said:

‘Kennington Road is one of two investments (from 72 we’ve completed to date) which have suffered from a very unusual combination of factors – delays, cost overruns, lost sales due to Covid and then further delays getting back to the market only to find the values have dropped. The perfect storm, almost.’

So there it was. At a stroke I had lost £3,000. As you may imagine, I felt pretty sick about this. I have subsequently heard from other people who lost much larger (five-figure) sums on the projects concerned (I’m not sure what the other project was). But that was no consolation, of course. About the only positive thing I can say is that I have had other Crowdlords investments which did deliver the promised returns. But even so, I am well down on my investments via the platform overall.

While it’s tempting to blame Crowdlords for the losses, I accept they are not directly responsible. Clearly they – along with many other businesses – have been the victims of unique and challenging circumstances in 2020. I do, though, think their communications with investors could have been a lot better, especially when it was becoming clear that problems were mounting. While they were quick enough to notify investors about successes – and new projects requiring investment – I couldn’t help feeling that failing projects were being swept quietly under the carpet. To be fair, Crowdlords aren’t the only investment platform I have noticed this with.

I do think it would be a nice gesture if Crowdlords were to offer modest ex-gratia compensation payments from their own profits to investors who have lost all their money. Even a book token would be nice. But realistically, I will be surprised if this happens now.

Lessons Learned

So what lessons have I learned from this experience? I’ll try to sum them up below.

Be a Sceptical Investor

Perhaps I’m stating the obvious here. But when I started investing in property crowdfunding it was pretty new and I found the concept intriguing and exciting. At that point, of course, there hadn’t been any failures to take the shine off. Plus I had recently come into some money through an inheritance and was looking for interesting and profitable ways to invest it.

Looking back now, I can see that I was a bit too ready to buy into the property crowdfunding idea, and put too much faith (and money) in it. I am not saying property crowdfunding can’t work (many of my investments did pay off). Nowadays, however, I am a lot more sceptical when assessing such projects and the claims made about them by their promoters.

It’s important to remember that property crowdfunding platforms are all in business to make a profit. To put it bluntly, they make their money by persuading potential investors to part with theirs.

There is nothing automatically wrong about that – all businesses do it – but it’s essential to examine any potential investment carefully and objectively before opening your wallet. That includes ensuring you understand exactly what the project entails and what the risks for investors are. Which brings me neatly to my second lesson…

Know What You are Getting Into

Property crowdfunding investment opportunities take many different forms.

In ‘traditional’ property crowdfunding a group of investors jointly purchase a property. They then receive rental income pro rata to their investment and a share of any profits when the property concerned is sold. With this type of investment, your money is effectively secured by bricks and mortar, so you are unlikely to lose your shirt. On the other hand, problems (from bad tenants to fire or flood) can arise leading to lower rental income than anticipated and/or delays in selling up. And obviously, if the value of the property doesn’t rise, you may not get all your capital back, let alone any profit on sale.

Development projects, which may launch with no more than a set of architect’s plans, are even riskier. If you invest in a development project (such as Kennington Road), while you may ultimately make a bigger profit, there is a real risk of the project failing completely for any number of reasons. In this case (as I discovered) you risk losing your entire investment sum.

Finally, there are platforms such as Kuflink that allow people to invest in loans secured against property (including bridging loans). If such loans are not repaid, the property can be sold to pay off the debt, so again you shouldn’t lose your entire investment. But even so, the legal processes involved can be time-consuming and expensive; and again you may end up losing some of your capital after all costs are paid off. And even if it doesn’t go that far, there are quite often delays in repaying loans (especially at the moment) meaning you don’t get your money back when you expect it.

So my second lesson is to be very clear what type of property crowdfunding you are investing in and what the risks are. And be especially cautious about investing in development projects, which are by nature more speculative and carry a greater risk of losing all your money.

Spread the Risk

This is of course an important principle in all investing but one that applies especially to property crowdfunding.

If you invest £3,000 in one project (as I did with Kennington Road) unless you’re Bill Gates that’s putting a lot of eggs in one basket. When I started in property crowdfunding I put as much as £5,000 into a single project. That is definitely not something I would do any more.

I am not investing as much in property crowdfunding as I did originally, but where I am still doing it I generally put no more than £100 into a single project. If I lose that money in a worst-case scenario, obviously that is not going to hit my finances nearly as hard. My approach nowadays is to have larger numbers of small investments spread across multiple platforms. This spreads the risk while still giving me control over what I invest in.

It’s interesting to note that most of the remaining property crowdfunding platforms (some have gone to the wall or are no longer serving private investors) also now offer some form of shared investment with automatic diversification. An example mentioned earlier is Kuflink, who offer an ‘Auto-Invest’ account paying up to 7% interest per year. Investments are automatically spread across a wide range of projects on the platform. If you want an easy way to diversify your property crowdfunding investments, this approach has some merit. Personally I prefer to build a diversified portfolio myself (which you can also do with Kuflink), but the automated approach is worth considering if you don’t have the time or inclination for that.

  • If you want to make use of your ISA allowance with Kuflink, you will need to open an Auto-Invest IFISA with them. You can’t create an ISA and choose your own investments, for reasons I’m not clear about.

Remember the Big Picture

Finally, it’s important always to remember that property crowdfunding is just one way of investing your money. It is also – as I have indicated – a relatively high-risk one.

So if you are going to include property crowdfunding investments in your overall portfolio, it should only comprise a fairly small part of it – I suggest no more than 10 percent. The rest of your money can then be spread across a variety of other investment types to provide good diversification. And as I have noted before, you should also have at least three months’ of income in easily accessible form in case of sudden, unexpected emergencies.

When I first started in property crowdfunding I made the mistake of putting about a third of my money into this type of investment. I am down to around 20% now, which is still (in my view) too much, but some money is tied up in long-term projects where an exit currently looks some way off. But at least hopefully there won’t be any more complete write-offs now.

Closing Thoughts

So that is the story of my failed £3,000 property crowdfunding investment and the lessons I have learned from it.

I am trying to be philosophical and remember that many of my other property crowdfunding investments have made money for me. Nonetheless, in retrospect I wish I had taken a more cautious approach initially. If I had simply put all the money into my Nutmeg stocks and shares ISA, for example, I don’t doubt that financially I would be better off overall.

Nonetheless, I do still believe in the property crowdfunding concept and am happy to have some money still in it. As I’ve said before in Pounds and Sense, property is relatively less affected by ups and downs in the economy than stocks and shares. Property investments don’t provide a method for hedging your equity investments directly, but they do offer an extra element of diversification and spreading of your financial risks. And alright, I will admit that a part of me does rather enjoy (for example) having a small amount invested in student accommodation in Leicester, my old university city 🙂

As always, if you have any comments or questions about this post, please do leave them below.

Disclaimer: Please be aware that I am not a qualified financial adviser and nothing in this blog post should be construed as personal financial advice. You should always do your own ‘due diligence’ before investing and seek professional advice if in any doubt how best to proceed. All investing carries a risk of loss.

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Can You Still Make Money from Buy to Let?

Can You Still Make Money from Buy to Let?

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In the past buy-to-let seemed a relatively easy way to make money.

So long as you had the capital – or were able to borrow it – you could buy a house, put tenants in it, and collect a steady income from rental payments, along with potentially a lump-sum profit if you sold up at a higher price later on.

In recent years, though, tax and regulatory changes have made buy to let less appealing – to a point where many wonder if there is still money to be made this way. So in my post today I want to address this question.

Let’s start, though, by looking at the upside…

The Attractions of Buy to Let

As stated above, property investors get a double benefit. They enjoy rental income from tenants for as long as they own the property, and also have the potential to make a substantial lump sum profit when the time comes to sell.

A further attraction of buy to let is that your tenants effectively pay off your mortgage for you. So if, for example, you are buying a £400,000 property, you might ‘only’ need to find a deposit of £100,000. As long as your tenants’ rental payments cover your mortgage repayments (with a bit to spare), after 25 years or so the mortgage will be paid off. You will then fully own a second property, having originally paid only a quarter of the full property price. And that doesn’t even allow for the prospect of capital growth. If your property eventually sells for £600,000, you’ll have made an additional £200,000 capital gain.

  • Of course, you don’t have to borrow to fund your buy-to-let. If you already have the capital you need, investing in a buy-to-let property will provide you with a steady income while the capital value of your property (hopefully) appreciates over time.

Buy to let can also be a good way of diversifying your investment portfolio. Rental income is relatively stable, especially if you have a number of properties and tenants. And property values aren’t directly related to the state of the stock market. So while property doesn’t provide a method for hedging your stock market investments directly, it can certainly help spread the risk.

Of course, property prices took a knock in the 2008 credit crunch and subsequent recession, and more recently were affected by the pandemic (though prices generally are on an upward trajectory again now). In the longer term, though, prices have been on a strongly upward trend since the 1970s. On average, house prices have grown faster in the UK than they have in any other European country.

There’s every indication that prices will go on rising in the coming years as well. The UK currently has a serious shortage of housing, caused by various factors. To start with, the UK population is growing rapidly. This inevitably means demand for housing will go on rising, thereby driving up the price of property. According to the Office of National Statistics there will be an annual shortfall of housing in the UK of over 100,000 properties each year for the next decade. This could mean a shortfall of one million properties by 2025 if current trends continue.

Various factors have combined to boost rental demand, including immigration, more people living alone, people moving around the country for work reasons, and rising house prices stopping first-time buyers getting onto the housing ladder. The latter is obviously challenging for young people, but it’s great news for landlords whose buy-to-let properties are being let extremely quickly, while their rental income keeps increasing. All of the above means that residential property can represent a profitable and attractive investment option.

What Are The Drawbacks?

One obvious drawback for anyone wanting to invest directly in property is that it’s expensive! And if you can only afford a single property, you are taking the risk of putting all your eggs in one basket. To mention just a few things…

  • There may be periods when you don’t have tenants (voids, to use estate agent jargon). At these times your property will be costing you money rather than making it for you.
  • Bad tenants are all too real and can be a nightmare for landlords. If they don’t pay their rent, it will take time and money to evict them. And that’s not to mention the costly damage to your property a malicious – or just careless – tenant can cause.
  • There will be maintenance and repair bills to pay. If something expensive goes wrong – the roof or the central heating boiler, say – the cost of the necessary work may wipe out several months of profits for you.

In general, being a landlord – at least, a responsible one – is a hands-on role. While you can outsource some aspects of managing your property to an agency (for a fee) you will still have to keep a watchful eye on your property and tenants to ensure that your investment is protected.

A further drawback is that property isn’t a liquid asset. Yes, putting your money in bricks and mortar gives you a degree of security – but if you need to access your capital urgently this may be difficult or impossible. Even if you’re able to find a buyer quickly, if the timing is bad you could end up selling at the bottom of the market and making only a small net profit or even a loss.

And there’s more bad news for buy-to-let investors. As I said earlier, legal changes over the last couple of years have made the whole buy-to-let process more costly and burdensome. For one thing, from April 2016 anyone buying a residential buy-to-let property (or second home) has had to pay an extra 3% in Stamp Duty. In some quarters this has been dubbed the Landlord Tax.

Another major legal change has affected landlords who use mortgage loans to purchase buy-to-let properties. Before April 2017 landlords were allowed to deduct all of the interest they paid on buy-to-let mortgages from their taxable income. In effect, that meant they paid tax on their net profit from rentals rather than their turnover. The government decided to change the rules, however, arguing they gave buy-to-let landlords an unfair advantage over ordinary homeowners. So from April 2017 landlords were only allowed to claim relief on 75% of their mortgage interest. From April 2018 that dropped to 50%, and it kept falling by 25% a year until it reached 0% in 2020. It was then replaced by a less attractive tax credit equivalent to 20% of mortgage interest (which was particularly disadvantageous to higher rate taxpayers). All of this has meant that borrowing money to fund a buy-to-let has undoubtedly become less attractive (and profitable) than it used to be..

Other changes affecting landlords have come in too. For example, from April 2018 all new tenancies and renewals have had to be rated ‘E’ or better on their Energy Performance Certificates, with fines of up to £5,000 for landlords who don’t comply. Most recently built homes should qualify for this rating, but landlords of older, less energy-efficient properties may have to spend large sums bringing them up to scratch. And, of course, this all adds to the administrative burden for landlords, even if it is ultimately helping to save the planet!

One effect of all this has been that some smaller landlords have decided that buy-to-let is no longer worth the effort for them, and they are selling up and moving out of the sector.

So Is There Still Money to be Made?

My answer to this is a qualified yes.

There is definitely still money in buy to let, but it is no longer the ‘one-way bet’ it might once have appeared. You should therefore research opportunities carefully and adopt a highly professional and businesslike approach to the whole process.

A key consideration here is ‘yield’. This is the net amount (rental minus costs) you can expect to make from a buy-to-let property per year, as a percentage of the purchase price. Yield can be compared with the interest rate paid on a savings account. By this means you can assess how profitable a buy-to-let opportunity is and whether it makes sense as an investment vehicle. Clearly, if the yield is less than you could get by leaving your money in the bank, there is not much point in investing this way.

The website Totally Money recently analysed data from nearly half a million properties across England, Scotland and Wales, to calculate the buy-to-let yield for each postcode. The results were eye-opening to say the least. They found that buy-to-lets in the top 25 postcode areas were still delivering excellent returns. At the top was Liverpool, where landlords can enjoy 10% yields. Falkirk (9.51%) and Glasgow (8.71%), both in Scotland, came second and third respectively. Even postcodes at the lower end of the top 25, such as Lancaster and Aberdeen, were returning respectable yields of over 7%. All of these are clearly far better rates of return than you could get from a savings account, and you will have an asset that is hopefully increasing in value as well (see below).

Location is therefore a key consideration for any potential buy-to-let investment and must be researched thoroughly. In addition, the best area for your investment will depend on whether you intend to put your money into flats for professionals, student accommodation, family homes, etc. At the risk of stating the obvious, there needs to be solid demand in the area from would-be tenants for the type of rental property you intend to buy.

  • Of course, while it’s very important, yield/income potential isn’t the only consideration for property investors. In the longer term you will likely be hoping for capital growth as well – so ideally you should be looking to invest in properties in up-and-coming areas rather than those in long-term decline.

Getting Started

Having weighed up the pros and cons, if you do decide that buy-to-let is right for you, here are some top tips to get you started…

  • Speak to a professional independent financial adviser to discuss your plans. They will help you decide how much to invest and the level of return you should realistically be aiming for.
  • You should also speak to a mortgage broker to find out what deals are available and ideally get approval in principle for a mortgage. This means you will be well placed to make an offer as soon as you find a suitable property.
  • If there is a particular area you are considering, visit several times to get a feel for the place. That applies especially if it’s a location you’re not already familiar with. Check out the housing stock, public transport, car parking, shopping and schools, hospitals, and so on. Try to speak to other landlords in the area and local letting agents to get an idea of the size and nature of the rental market and the sorts of rentals that may be achievable. Always remember that the bottom line for any buy-to-let investor is return on capital or yield.
  • Once you find a potential property (with or without existing tenants) research it carefully as well. Obviously before buying you will need to do all the usual searches and a structural survey. As with all property sales, you can expect this process to take several months to complete.
  • Arrange insurance for your buy-to-let. Along with the usual buildings insurance, you should almost certainly have landlord insurance to protect you from financial losses associated with renting out a property. This will typically cover such things as fixtures and fittings, public and landlord’s liability, subsidence, replacement of windows, locks and keys, and so forth. It will also normally cover malicious damage caused by tenants, along with rent arrears and legal expenses (though the last two may not necessarily be included as standard). You can compare landlord insurance here.
  • To find tenants you can either go through an agency or do this yourself. Obviously going through an agency will add to your costs but can save you a lot of hassle, especially if you haven’t the time (or inclination) to be too hands-on.
  • Even if you pick your own tenants – and perhaps already know them personally – draw up a legally-binding contract. That means everyone knows where they stand from the start and can help to avoid potential unpleasantness later on.
  • Review your buy-to-let mortgage arrangements regularly and be prepared to switch to a better deal when your current one expires.
  • Ensure that your rental income is declared in a tax-efficient way and set against any allowable expenses. A good accountant will be able to help with this.
  • Your accountant will also be able to advise you about the pros and cons of running your buy-to-let through a limited company. This comes with additional costs (and paperwork) but for landlords of multiple properties in particular the tax benefits can be significant – not least because you can claim all the interest paid on your buy-to-let mortgage/s against income rather than just 20%.
  • And finally, once your first buy-to-let is up and running successfully, consider adding more. Multiple properties will give you a bigger income and will also reduce the risk inherent in putting all your eggs in one basket (as discussed earlier).

In Conclusion

If you’re considering buy to let, I hope this article will have helped you make up your mind. There is undoubtedly still money to be made this way, but you do need to choose your location and property carefully, and approach the whole process in a professional and businesslike way. That applies from the initial planning stage right through to the day-to-day – and year-by-year – management of your property.

As ever, if you have any comments or questions about this post, please do leave them below. I would also be very interested to hear from any readers who have invested in buy-to-let themselves, along with any tips (or warnings!) they would like to share.

Disclosure: this is a sponsored post.

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My Coronavirus Crisis Experience January 2021 Update

My Coronavirus Crisis Experience: January 2021 Update

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Happy New Year! Here’s hoping it’s a better one for all of us than the year just past 🙁

I shall be continuing my monthly coronavirus crisis updates in 2021, at least till we are clearly over the pandemic and something resembling normal life has resumed. Obviously I very much hope that will be sooner rather than later.

Regular readers will know I have been posting these updates since the first lockdown started in the spring of 2020 (you can read my December 2020 update here if you like).

As ever, I will begin by discussing financial matters and then life more generally over the last few weeks.

Financial

I’ll begin as usual with my Nutmeg stocks and shares ISA, as I know many of you like to hear what is happening with this.

As the screenshot below shows, since last month’s update my main portfolio has continued on a generally upward trajectory and is currently valued at £18,886. Last month it stood at £18,008, so it has gone up by over £800 in value since then. Considering national and world events at the moment, I am more than happy with this.

Nutmeg January 2021

As you may recall, about a month ago I put £1,000 into a second Nutmeg pot to try out Nutmeg’s new Smart Alpha option. This pot has risen as high as £1,015 in value and currently stands at £1,007. Here is a screen capture showing performance to date, though obviously it is far too early to draw any conclusions from this.

Nutmeg Smart Alpha

You can see my in-depth Nutmeg review here (including a special offer for PAS readers). As a matter of interest I was recently asked by Nutmeg to contribute an article about my investing journey for their blog. I will add a link to the article here once it is published.

I had some bad financial news last month from Crowdlords, one of the property crowdfunding platforms I invested with. Three years ago I put £3,000 into a development project to build what was originally described as six eco-homes (it has lately been known more prosaically as Kennington Road). An update on the Crowdlords website revealed that due to a ‘perfect storm’ of problems caused directly or indirectly by the pandemic, the development had made a loss and investors would receive no returns. At a stroke I lost £3,000, which was (as you may imagine) a bitter pill to swallow.

I plan to write a more in-depth post about this soon, including lessons learned from the experience. But i will say two things now. One is that property development projects are inherently very risky and you shouldn’t invest in them unless it really is money you can afford to lose in a worst-case scenario. And second, while I don’t blame Crowdlords themselves for the failure of this project, I do think their communications about it could have been a lot better. I also think it would be a nice gesture if they were to offer modest ex-gratia compensation payments from their own profits to investors who have been hit hard (I know some people lost a lot more than I did). Events such as this clearly damage the reputation of property crowdfunding and mean investors are less likely to risk their money this way in future. I know I shall certainly be a lot more cautious now!

  • In fairness to Crowdlords I should add that I have had other investments on their platform which did deliver the promised returns, However, with the loss described above I am certainly down overall with them.

On a brighter note, a couple of the loans I invested in with Kuflink were repaid (with interest) last month, and I duly reinvested the money in other loans.

Kuflink is primarily a platform for investing in bridging loans, and generally these are safer than development projects such as the one mentioned above. There is still a risk of loss, of course, but as your investment is secured by bricks and mortar, it is unlikely you would lose all your money (though delays in repaying loans can and do happen). I have a diversified portfolio of loans with them paying annual interest rates of 6 to 7.5 percent. These days I generally invest a few hundred pounds per loan at most (and quite often under £100). My days of putting four-figure sums into any single property investment are definitely behind me now!

As you may be aware, I recently updated my full Kuflink review. You can read it here if you like. They recently passed the milestone of £100 million loaned, and say that since their launch no investor has lost money on the platform. I’d particularly draw your attention to their revised and more generous cashback offer for new investors. They are now paying cashback on new investments from as little as £500 (it used to be £1,000). And if you are looking to invest larger amounts, you can earn up to a maximum of £4,000 in cashback. That is one of the best cashback offers I have seen anywhere (though admittedly you will need to invest £100,000 or more to receive that!).

Moving on, my two Buy2LetCars investments are still delivering the promised monthly returns without any fuss. As I am semi-retired but don’t yet qualify for the state pension, the £450 or so I receive from them every month represents a major part of my monthly income currently.

As you may remember, investors with Buy2LetCars put up the money to finance a car for a key worker such as a nurse or police officer. They then receive 36 monthly capital repayments followed by a final balancing payment of interest and capital. If you are looking for an income-producing investment with a substantial lump sum payment after three years – and you like the idea of doing a bit of good with your money too – they are well worth checking out (and likewise if you’re a key worker looking for a lease car yourself). If you’d like to learn more, you can read my review of Buy2LetCars here and my more recent article about the company here. And here is a link to Wheels4Sure, their car-leasing website.

Finally, I am still getting a few queries about the low-key matched betting opportunity mentioned in some previous updates. I checked with my contact there and they are still accepting new members, but for reasons related to the pandemic have had to reduce their payouts slightly. New members now receive £50 a month for the first six months, reducing to £25 a month thereafter. Considering that this opportunity is cost-free, risk-free and hands-free, that’s still a pretty good deal, though 🙂

As I said above, this opportunity is based on matched betting, a sideline-earning opportunity I have been pursuing for several years myself. I was asked not to divulge too many details about it publicly, for good reasons I will explain privately to anyone who may be interested (and no, it’s not illegal!). As I said above, it doesn’t require any financial outlay, is entirely hands-off, and will provide a passive income of £50 a month for the first six months and £25 a month thereafter.

No knowledge of betting is required, and you won’t have to place any bets yourself (this is all done by the company’s clever software). You just have to set up a separate bank account for bets to go through, but running the account is entirely financed by the company. Please note though that this opportunity is only open to trustworthy people who haven’t done matched betting before and have no more than two accounts already with online bookmakers. For more info (and to receive a no-obligation invitation) drop me a line including your email address via my Contact Me page.

Personal

December was another strange month in a depressing year.

A week before Christmas I had my 65th birthday. Normally reaching that landmark would be cause for celebration, but inevitably in the circumstances it was low key. I did at least manage to meet up with a couple of old friends for a birthday tea (don’t tell Matt Hancock!). It was great to see them and they did their best to make the occasion feel special. We had some laughs and a very nice cake, but it still wasn’t anything like I might have imagined my 65th. I didn’t even have the small consolation of being able to start claiming my state pension, as I am in the cohort of people for whom the age has just been raised to 66.

Work-wise it has remained very quiet (as you probably know, I’m a semi-retired freelance writer/editor). I’ve had very little paid work since the pandemic started and was grateful to receive further financial support from the government’s SEISS scheme. This time round you had to state that your income had been directly affected by the pandemic. I did agonize a bit over this, as it begged the question of how much money I would have been earning if things were normal. I honestly don’t know the answer to that, but it seems to me that the pandemic and government counter-measures have stopped the economy in its tracks, meaning there is less work around generally. Anyway, I applied and was paid without quibble.

The main good news over the last few weeks has concerned the vaccines. Two are now approved, with the Pfizer vaccine being distributed since before Christmas and the Oxford-AZ version coming on stream this week. One benefit of turning 65 is that I have presumably moved up the pecking order to receive it.

The government appears to be pinning all its hopes on vaccines bringing this pandemic to an end by spring/summer. I hope they are right, as the next couple of months in particular look pretty grim. At the time of writing my area has just moved to Tier 4, which effectively means lockdown. So I will have little/no opportunity to see friends or relatives, no more swimming, no more trips away, and the prospect of sporting ‘lockdown hair’ again. But I am still lucky compared to many, I know.

In my blog post Surviving the Covid Winter I mentioned some plans I had for getting through the winter months. In December I started several of these. In particular, I began a couple of DIY jobs I had been putting off. One of these was redecorating the en suite. Initially I planned just to repaint one wall where the paintwork was fading. But the new paint colour didn’t match the old one, so I am now planning to repaint the rest of the room as well. As is so often the case with DIY, what appeared a small job at first has grown into a much bigger one!

I have also taken my first tentative steps in the world of video gaming (my experience prior to this had been limited to Space Invaders/Asteroids and the games bundled with MS Windows such as Solitaire). With some trepidation I signed up with the games platform Steam and downloaded Coffee Talk to my Windows laptop. This was a game I had read about some time ago and liked the sound of. Here’s a typical scene from it…

coffeetalk

Coffee Talk is actually more like an interactive movie or novel. You take the role of owner/barista at a late-night coffee shop in an alternative Seattle frequented by a mixture of human beings and mythological characters such as elves.

Mostly your customers chat with you and other customers about their lives and problems, while you prepare coffee and other drinks for them. This isn’t especially taxing, though I was quite pleased when one of the regulars, Freya, returned and asked for ‘the usual’ and I remembered what it was. It’s a pleasant enough way of spending a few hours, though I am thinking I might try something a little more ambitious next time 🙂

On the TV side, I finally finished the box-set of Deep Space Nine, which I very much enjoyed and recommend to any sci-fi fans among you. At the recommendation of my sister Annie (also a sci-fi aficionado) I have now purchased the box-set of Babylon Five. This is also set on a space station, though with quite a different vibe from DS9. With five (long) series, six full-length feature films, a spin-off series called Crusade, and various other extras, hopefully this will see me through to the end of the pandemic 😀

And for a change from sci-fi I also bought the box-set of Agatha Raisin, a tongue-in-cheek detective drama starring Ashley Jensen and set in the Cotswolds. I wasn’t sure about this at first, but after the first couple of episodes I thought it hit its stride, and I recommend it for a bit of amusing escapism with some gorgeous countryside settings. It’s only a shame that all three series are quite short.

Finally, as a Christmas present for myself I bought the DVD of Roger Waters’ Us + Them concert. This is an epic production, featuring a group of hugely talented musicians and some awesome visual effects (at one point a giant model of Battersea Power Station descends into the arena, accompanied – of course – by a flying pig).

Roger and his band play a selection of Pink Floyd classics alongside some of Roger’s solo compositions, all of which are excellent as well (The Last Refugee is particularly poignant). In the video below, though, they perform Time, one of my personal favourite Pink Floyd numbers. Check out Jess and Holly (aka Lucius) supplementing their backing vocal duties with some exuberant drumming!

So that’s it for now. I do hope you are staying safe and sane in these challenging times. Be kind to yourself and to others, and hopefully things will improve before too long. As ever, if you have any comments or questions, please do share them below.

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Top 20 Posts 2020

My Top 20 Posts of 2020

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As is customary for bloggers at this time of year, here are the top twenty posts on Pounds and Sense in 2020, based on comments, page-views and social media shares. They are in no particular order. I have excluded any posts that are no longer relevant.

I hope you will enjoy revisiting these posts, or seeing them for the first time if you are new to PAS. Don’t forget, you can always subscribe using the box on the right to be notified of new posts as soon as they appear.

All posts in the list below should open in a new tab/window when you click on the link concerned.

1. Ten Reasons Over-50s May Need an Independent Financial Adviser

2. How to Make Money From Your Old Tech

3. Save Money on Your Mortgage With Dashly

4. Twenty Ways to Make Extra Money From Home During Lockdown

5. Nutmeg Review: My Experiences With This Robo-Adviser Investment Platform

6. Why I Switched my Santander 123 Account to 123 Lite

7. How to Make Money From Affiliate Marketing

8. How to Get a Better Night’s Sleep

9. Should You Use Equity Release to Unlock the Value of Your Home?

10. What Are the Best Video Calling Tools for Older People?

11. Why I am (Still) Not a Fan of Premium Bonds

12. Get a Free Share Worth Up to £100 with Trading 212

13. Managing Your Finances and Tackling Debt – A Q & A With MoneyNerd

14. Booking a Holiday With Airbnb

15. Ten Things I Have Learned About Self-Employment Over 30 Years

16. Kuflink: My Review of This P2P Property Investment Platform

17. Looking After Your Mental Health in the Coronavirus Crisis

18. How Over-75s Can Claim Pension Credit to Keep Their Free TV Licence

19. Can You Still Make Money from Matched Betting?

20. Surviving the Covid Winter

I’ll be taking a break from blogging over the festive period (though I’ll still be around on Twitter and Facebook). I’ll therefore close by wishing you a happy, Covid-free Christmas, and for all of us a far better new year 🙂

If you have any comments or questions, of course, feel free to leave them below as usual.

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