At this point, it is difficult to tell which party will claim victory in the general election that’s slated to take place on December 12. Although the one thing we do know for sure is that whoever wins, buy-to-let investors will not catch a break.
Both the Conservatives and the Labour party are promising further restrictions on landlords. Labour’s proposals are by far the most severe. The party has discussed the possibility of introducing legislation that would let tenants buy property from their landlords at a price below the market rate.
On the other hand, the Tories will undoubtedly push ahead with their plans to remove mortgage interest tax relief for landlords entirely from April 2020.
New eco-friendly standards are also set to come into force from the beginning of April, and there has been talk of introducing a minimum three-year term tenancy agreement, although this plan seems to have stalled for the time being.
Considering all of the above, I think the best option for buy-to-let investors is to get out of the industry altogether and diversify into international blue-chip stocks instead.
The best vehicle to use to invest in global stocks is the FTSE 100, in my opinion. A low-cost FTSE 100 tracker fund will give you exposure to the index at the click of a button.
With more than 70% of the index’s profits coming from outside the UK, the FTSE 100 should continue to produce healthy returns for investors no matter what happens when voters go to the polls in December.
Another bonus of investing with a passive index tracker fund is that you don’t have to worry about managing the portfolio yourself. All you need to do is sit back and watch the income roll in, which is undoubtedly a lot less effort than managing buy-to-let property. There will be no unforeseen costs or charges either if you fail to keep up with property maintenance. And there’s absolutely no risk whatsoever of having a tenant who does not pay their rent.
The other advantage of the FTSE 100 is its diversification. The 100 different companies that make up the index operate in a range of industries around the world, so you don’t have to try to predict the success or failure of just one particular sector.
The index also offers one of the highest levels of income of any primary stock market around the world.
At the time of writing, the FTSE 100 supports an average dividend yield of 4.5%. As this payout is an income stream from 100 different companies, I think it is much more secure than any income from a rental property.
So that’s why I would dump buy-to-let and invest in the FTSE 100 instead. Its global diversification and income stream should protect you against any general election uncertainty and produce a steady income, no matter what happens to the UK economy in the weeks and years ahead.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019