Property Vs Pension in 2012

[National PropertyPortfolio]

Recent figures are suggesting that many people in the UK are still notsaving up enough money for their retirement and with the large debts that theUK government has amassed, it means that public sector workers pensions are beingsqueezed tightly. As a result many people are now looking at propertyinvestment as a different option to pension or savings.

Pensions in the past have been an investment that many people did notpay attention to because it was so far in the future, it seemed too far off tostart planning for. Pensions, however were much larger and the payments thatyou made to them went a lot further and so in many respects as an investmentthey took care of themselves.

These days things are much different and the payments that people makeinto their pensions do not go anywhere near as far. Cash that is invested intopensions during these years are not in a stable environment because the moneywill be utilised in 'equities' which is a very unpredictable place to havemoney, therefore making the 'sure thing' of a pension a thing of the past.

Looking back over 2011 we can see that the FTSE was down by roughly 4percent, moreover we can also see that the bank shares were down by around 24percent during 2011 as well. Now as we are in the early stages of 2012 expertsare predicting we will see similar patterns due to the poor economic outlook ofmany countries, Eurozone instability and unstable stock markets.

Due to this poor economic climate and the fact that things won't begetting any better anytime soon, it is not surprising that property is theinvestment many people are now turning to for long term stability and thebenefits that gives a person when it comes to their retirement.

More people are now paying attention to their future and are seeingproperty as a good way to have some financial security when they retire. As itstands a quarter of a million pounds pension would only equate to roughly£16,500 per year which is not much especially with the high cost of livingtoday.

We need to see more people taking a greater interest in their futureretirement plans and analysing if their pension is going to be adequate forthem to live off in later life. Property is a very stable investment eventhough it is much harder to get on the property ladder due to the strictercriteria lenders require, however if people can get a property it could givethem a far more secure future.

www.nationalpropertyportfolio.co.uk

[Richlist]

I'm not sure that I agree with your post.

Looking back over 2011 we can see that the FTSE was down by roughly 4percent, moreover we can also see that the bank shares were down by around 24percent during 2011 as well.

I think you will find that many areas of the country showed property prices falls in excess of 4%

Due to this poor economic climate and the fact that things won't begetting any better anytime soon, it is not surprising that property is theinvestment many people are now turning to for long term stability and thebenefits that gives a person when it comes to their retirement.

More people are now paying attention to their future and are seeingproperty as a good way to have some financial security when they retire.

* Property investment is still subject to the same rules as any other investment........ie past performance is no indication of future gains.

* Property prices also show peaks and troughs.

* Investment property is subject to capital gains tax. For the vast majority that means paying 40% of the realisable gains in tax......pensions are tax free.

* Property is not a very liquid investment ie disposing of it is NOT as easy as cashing in on other investments.

As itstands a quarter of a million pounds pension would only equate to roughly£16,500 per year which is not much especially with the high cost of livingtoday.

In order to end up with £250,000 a property investor would need to sell property for £435,000........using their £20,000 joint tax free allowance and paying £166,000 in capital gains tax. It all seems quite painfull.......especially if you don't like paying £166,000 in tax......and for most people........a totally unattainable goal.

[Carryon Regardless]

RL I think the idea is to invest in BTL pay down the mortgage and live off the rents as the pension.

A little like a pension plan where you never see the money you've theoretically saved (save the 25% lump sum). You die (and spouse) and then somehow your fund dies to.

My little lot are presently returning 5.2% against estimated value, before voids and repairs and any management costs.

So at those rates mortgage free properties of £250k would produce a revenue of £13k (before voids and repairs.....).

The benefit is that your 'fund' can be passed on.

NPP tohaveanychanceofpayingdownthemortgageaninvestorwouldhavetoinvestprettyyoungoratretirementalargeportionofrenuewouldbeconsumedbytheoustandingmortgage.

[Richlist]

It won't work CoR.......the numbers don't add up.

By the time you take voids, repairs, management AND tax off of your 5.2% you are likely to be left with so little, selling might be a welcome option. Then consider that in retirement you might not be able to handle what you do now and will need to employ someone .....further reducing your 5.2%

If you do decide to sell you'll be subject to 40% tax.

If you decide to keep the properties your decendants will have to pay inheritance tax.....thats also 40%.

Now there is a way out........but I'm not telling anyone !

[Carryon Regardless]

Oops my percentage included my mortgage payments, so w/o the return 7.1% on the same principle.

I can't see my mortgages being reduced any time soon though.

Now on £250k of clear of credit property the return becomes £17,750 insurance, ground rent and gas checks allowed for (mine anyway).

Assuming it to be possible to create reliable properties (anticipated works completed) prior to reaching a lesser capable age, the burden may well be minimal.

In my case ditching the 'higher risk from T' properties would be intelligent to reduce the stress from them.

I have hope to leave the better for A management while I'm in a beach location 50% of the time(ish).

[Richlist]

I hope you get all you wish for.

I have quality tenants in quality properties in quality locations and a few without mortgages but the thought of faffing around trying to organise, sort out and, administer these wasters whilst I'm topping up my tan on some far away golden beach is not something I want.

I think lots of people have your dream but the reality is somewhat different.

My advice is.....make sure you have a Plan 'B'.

[Melboy]

Well,as a person who has reached retirement age but not "retired" and I don't intend to, I can give you the perspective of what probably happens when the magic age number comes your way.

All my properties have no mortgage on them so any income from tenancies comes directly to me as I manage and maintain my own properties, hence the "no retirement" bit.

I have no intention of selling any of them and cashing in as I don't need the money and I am not paying 40% capital gain tax either!!

I have "gifted" two of them under the 7 year rule to my children.....perfectly legal as well and all I have to do is live for 7 years longer but as I am pratically immortal this should not be a problem...lol

I still believe if you buy property at BMV and rent out for 20 years plus then you should make a comfortable retirement money pot to live on so I don't knock anyone for going down this path and giving it a try as indeed I did some 25 years ago now and it has paid off for me but unlike Richlist, who has a far better grasp of the technical stuff than me, I just operated by the seat of my pants and pure logical business thoughts.

The one thing I did decide many years ago was that I was in this business to make me comfortably off in retirement and not to make anyone else rich so I avoid all unecessary money payments to organisations who claim to have a way of making me well-off and that includes life insurance companies as well! Just look at the miserable returns being paid out on those policies if indeed they have not gone bust in the meantime.

I still carry on with my main job which is buying and selling of refurbished property but so far nothing has come my way for some while now as the property market around my location is saturated with BTL buyers getting their money out of their bank low interest accounts and becoming BTL Landlord's in the hope of making bigger returns on their investment.....doesn't always work though as some of my friends have found out.

Mel.

[Carryon Regardless]

So this thread has caused me to revisit some calculations.

Have we reached that point where BTL is attractive again ?

The downside for me has been the ever increasing risk and responsibility caused by our legislations and Court of Toyland pathetic effective protections of the abusers.

But the devalue of property now make the revenue returns look attractive by comparison to most other options.

This morning having devalued, on paper, my properties the gross returns are between 7.1% and 9.9%.

On the principle that a buyer picks up such a property 'ready to go' it can be seen that a mortgage interest rate would have to be higher than available to destroy the revenue advantage, which we can anticipate it will be but there are fixed rate deals available.

Even allowing for o/h's like gas, insurance, ground rents (mine on average less than £200 p.a. per property) the return looks good. Repairs and voids can effect more seriously but I see voids (and you know I've suffered here) are approx 8% of the possible revenues. On a 'ready to go' I would suggest a pessimistic figure of £400 - £500 p.a for repairs, against average revenues of £5,200 pa., taking away the possible costs / losses of £700 leaves £4,500. The return still looks attractive.

There are many, some come here for advice, who have available cash, then there are the company investors.

I can see the possibility of increased interest (no pun) in the BTL market and that will start a push, even if gentle at first, on prices- and we're off again.

The signs are there, waddya think ?