Grow Your Pension Pot 1st Jul 2017

Landlords are facing challenging times with tax changes and tougher criteria for mortgage lending, yet the right buy to let investments can provide an enviable pension pot for landlords who grow their portfolio.

Data (AJ Bell) reveals how much £100,000 would grow (in capital and returns) over 10 and 20 years in three scenarios. Using historic and housing stats, the projections compare investing in a pension (assuming a basic rate taxpayer) with someone buying a single buy-to-let property without a mortgage and with someone buying three properties with a total mortgage borrowing of £300,000. The original £100,000 is split into three where each third becomes a 25% deposit on a property. Stamp duty, tax and other costs are factored in with the property investments.

 Scenario  Value of Investment over 10 years
Annual Income over Period (Pre tax)
 Value of Investment over another 10 years
 Buy-to-Let (1 x property)  £123,095  £4,188  £156,331
 Buy-to-Let (3 x properties)  £171,600  £7,242  £217,932
 Pension drawdown after first 10 years  £203,612  0  £174,008

The scenario shows that 3 buy to let properties give £42,000 more than a pension over the 10 years.

Investors need to be very aware of the risks as well as the rewards attached to buy to lets, and need to have a sound plan from the outset. It is always wise to take professional financial advice. Consider all outgoings AND ensure that there is contingency money left over. You need to have sufficient funds to cover all your costs, including, but not limited to, mortgage, taxes, service charges/factoring fees, all safety certificates, smoke and heat alarms, landlord registration etc. You have to have money set aside for major repairs and void periods. Property is definitely a long term investment.

Property requires active management, and it must be treated like a business. If you have never let out a property before then there are numerous factors you need to consider. You have to allow time to deal with preparing the property for letting, ensuring you are fully compliant with all legal requirements and regulations. It is essential that you keep updated with everything that is happening within the Private Rented Sector if you are renting out a property. Failure to comply can lead to loss of rent, hefty fines, and a criminal record. You need to deal with advertising, viewings, finding the right tenants, compiling an inventory and all the legal paperwork, being responsive and dealing with all repairs in a timely manner (be prepared for night time call outs), dealing with deposits and rents, preparing the property for re-let when tenants hand in their notice and going through all of the above process again. If you do not have time to deal with all of this properly, then enlist the services of a letting agent.

The Key Place can fully manage your property for you, taking the stress out of letting. Call us now to discuss our fully managed services.