content top

Wondering where to invest your pension pot? Think buy-to-let property!

Chancellors always like to produce a rabbit from the hat during Budget speeches, and George Osborne certainly caught everyone on the hop (if you’ll excuse the extended metaphor) in the last Budget when he announced radical changes to the way you can use your pension pots.

In summary, rather than being driven down the route of having to take out an annuity (steady but boring, relatively low returns and not necessarily the best option for all) you can now use your accumulated savings far more imaginatively – including taking a far larger lump sum out before you hit the tax barrier.

So, as of now, you can take up to £30,000 out as a lump sum; from April 2015 that moves to 25% of your total pension pot.

The rest you are expected to invest wisely to secure your long term future… and as tempting as it might be to splash out on a sports car or holiday of a lifetime, is there a safe way to make the very most of that lump sum too?

The short answer, depending on your circumstances and the size of your “pot” is a resounding “yes”. Invest in a buy-to-let property here in Wales.

Buy-to-let lenders currently look for borrowers to have at least a 20% deposit. With house prices here so much lower than almost anywhere in the country, that will secure you a very handy property indeed. Then, of course, you will be expected to service the mortgage. Again, rents here are robust and demand high.

We recently crunched some numbers and discovered that the average time that one of our property spends “void” (and so not paying their way) is a mere seven days. That’s because we work hard to find new tenants as soon as someone hands in their notice. And those few days being empty is usually just enough time for us to go in and undertake any repairs or redecorating for the next tenant.

So will the lenders look at someone in their 50s or 60s? Absolutely – if you have done all your sums.

And again, that’s where we can offer reassurance. The average “yield” on our properties – after all the costs are taken out – is well in excess of 4.5% per annum. So a £100,000 property, for instance, would clear £4,500 in net profit. Buy-to-let mortages are currently sub 5% – so you are close to meeting your costs on what you borrow, as well as getting a handsome return on your capital.

And that, of course, ignores the opportunity for capital growth. House prices may have come off the boil in the South East, but are still moving along steadily in response to the fact that demand still outstrips supply. This is an investment that will grow in value: an annuity could well lose its value overnight should you pass away.

So the sums add up. But isn’t it all rather hard work? Absolutely not. The net profit you make on your property has already taken full account of our fees, for us handling every aspect of managing your property – from vetting tenants, sorting out payments from them and to you, through to organising any repairs or maintenance work 24/7.

You could, after all, be enjoying that holiday of a lifetime – with your investment secure and all the work and worry taken care of!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Portal Logos

© 2013 Red Key Property Services Ltd | Terms of Use | Privacy Policy & Notice | Blog built and maintained by Content Frog | Google+>