Let’s be honest – we Brits have always loved property. There’s something solid about bricks and mortar, something you can touch and feel. When your mate down the pub tells you about his buy-to-let success story, it sounds much more real than “I made good money over 10 years holding a globally diversified fund.”
The appeal makes sense. Property feels familiar – many of us own a home, so buying another one doesn’t seem too hard. The rental returns look good too, currently around 6%. With average rent of £1,300 per month, you’re looking at properties worth around £260,000. On paper, it all looks quite appealing.
You’re not just buying a property
When you buy a rental property, you’re not just making an investment – you’re starting a business. And like any business, it comes with costs, jobs to do, and quite a bit of hassle that nobody mentions at dinner parties.
Let’s talk about those costs first, because they come in waves:
The upfront costs: Before you even see your first penny of rent, there’s stamp duty, solicitor fees, surveys, and those “little jobs” that need doing before anyone decent will want to live there.
The monthly costs: Here’s where it gets interesting. You need to budget around 30-35% of your rental income for ongoing costs. Insurance, repairs, letting agent fees, times when the property sits empty between tenants, and surprise big repairs – boilers don’t fix themselves.
The selling costs: When you finally decide you’ve had enough, there are estate agent fees and possibly capital gains tax to think about.
The bit that never shows up on spreadsheets
But the real cost that never appears in any spreadsheet is your time and peace of mind. Property investment isn’t hands-off – it’s something that can take over your life if you let it.
Picture this: You’re on holiday in Tuscany when your phone rings. The property’s radiator has burst, there’s water everywhere, and it needs fixing right now. Suddenly, instead of enjoying your wine, you’re calling plumbers and trying to arrange emergency repairs from 1,000 miles away.
I’ve watched clients become property repair experts without meaning to, learning more about boilers and building rules than they ever wanted to know. Some love it, treating it as a hobby that pays. Others quickly discover they’d rather spend their weekends doing anything else.
When 6% isn’t really 6%
Let’s get back to those attractive 6% returns. After you add up all those costs we mentioned, plus the tax on any money left over, that 6% can quickly shrink to 2% or less – especially when you think about times when the property sits empty.
Now, 2% might not sound terrible until you remember that most buy-to-let investors borrow heavily – usually putting down just 25% and borrowing the rest. So on a £200,000 property, you might invest £50,000 of your own money and borrow £150,000.
This borrowing can work well when property prices go up – a 20% increase in property value gives you an 80% return on your money. But it works just as well in the wrong direction. A 20% fall in property prices wipes out 80% of your investment. And yes, UK property prices have fallen by around 30% (after inflation) during big downturns in 1989 and 2007.
Few investors would dream of borrowing three times their investment to buy shares, yet buy-to-let investors do exactly this without thinking twice.
How has property really done over time?
Working with Albion, our investment analysts, we’ve looked at buy-to-let performance versus traditional investment portfolios from 1981 to 2024. Even being generous to property (assuming a 2% net after-tax return and adding house price growth), traditional mixed portfolios have consistently done better over the long term.
To be fair to both sides, we’ve taken 1% each year from the traditional portfolios for costs, but we haven’t taken away any of the upfront costs from buy-to-let (even though these can be quite large).
The difference becomes even bigger when you think about the time and effort needed. While property investors are managing repairs and admin, stock market investors are free to focus on their careers, families, or whatever else brings them joy.
The pension worry that doesn’t need to exist
Part of property’s appeal comes from decades of bad news about pensions, much of it unfair. Yes, there were problems in the past, but modern pensions offer amazing tax benefits and access to global markets that have historically done much better than inflation.
The same cannot be said for house markets, which, for all their emotional appeal, represent a bet on just one type of investment in one country.
A simpler way to build wealth
Here’s what I’ve learned over the past 17.5 years: successful long-term wealth building usually involves patience, spreading risk, and keeping costs low. It means using tax-efficient accounts like pensions and ISAs, spreading risk across global markets, and avoiding putting all your money in one basket.
This doesn’t mean property has no place in your wealth – your home, for instance, provides both somewhere to live and potential growth. It also improves your life. But as a way to build wealth, buy-to-let investing is better understood as running a small business with an asset that needs constant attention to achieve returns somewhere between bonds and shares.
The change our clients have made – from property-heavy portfolios to mixed investments – shows a growing understanding that there are better ways to build wealth. Ways that don’t require you to become an expert in tenant law or keep emergency plumbers on speed dial.
What it all means
Buy-to-let isn’t necessarily a bad investment, but it’s not the straightforward path to riches that popular culture suggests. It’s a business that demands time, attention, and tolerance for hassle. For some, that’s perfectly fine – they enjoy the hands-on nature and don’t mind the late-night phone calls, or paying someone else to handle them.
But for most of our clients, life is busy enough without adding landlord jobs to the mix. They’ve discovered that using tax breaks and investing in well-structured, globally diversified portfolios offers a more sensible route to retirement planning – one that frees up time for family, hobbies, and the things that actually matter.
Who do you know who could benefit from this perspective on property investing? Please share this piece with them.
If you’d like to discuss your own investment strategy, you can get in touch with us here.
This article is for information purposes only and does not constitute investment advice. Past performance is no guarantee of future results. The views expressed are those of Emery Little and can change without notice.
