Property and pensions

lunar

lunar

lunar

Associate
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18 Jul 2015
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440
Location
London
I was listening to the radio this morning. The host was discussing property prices and renting etc.
It was only a matter of time before a caller stated 'i bought a buy-to-let for my pension'.
I don't mind people investing in BTL but I detest it when it is mentioned that it will fund the pension in the future. I just feel rather sorry for the tenant. I suppose its evolutionary, I.e. survival of the fittest.
 
The stock market has performed poorly over the past 20-30 years and so people took up BTL instead as a valid mechanism for providing for their retirement. Entirely reasonable behaviour tbh.
 
lunar said:
I was listening to the radio this morning. The host was discussing property prices and renting etc.
It was only a matter of time before a caller stated 'i bought a buy-to-let for my pension'.
I don't mind people investing in BTL but I detest it when it is mentioned that it will fund the pension in the future. I just feel rather sorry for the tenant. I suppose its evolutionary, I.e. survival of the fittest.
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So whats ok with you then?
 
What I mean is, Ok invest in BTL to make money but I find it irritating when the investor mentions pension.
 
What I mean is the tenant is giving the rental to the landlord, who then would suggest that this is going toward my pension.
 
lunar said:
What I mean is, Ok invest in BTL to make money but I find it irritating when the investor mentions pension.
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Why?

A £120,000 2 bedroom house in a nice area will fetch around £500 / month for the owner.

This represents around a 5% Return on Investment, which at the moment is relatively reliable and easy to manage.

There aren't many accounts you can deposit £120,000 and expect around 5% return.

A few houses @ £500 / month and you've got around 75% occupancy rate on these so you're looking at around £1500 a month which is a reasonable pension to be honest.

Technically it's not a pension it's a continued job, however with a reasonable letting agent it's not really much work.
 
lunar said:
5% return and not forgetting that the house price would have increased.
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Exactly, so where's the problem?

You're probably best off doing this as a separate company and thus it sits outside of your estate to avoid unwanted capital gains tax; also then you can pay yourself £10,000 tax free and the rest in dividends when required.
 
BTL landlords who are using it for long term investments (pension equivalent) are far better for the rental market than short term investors looking for quick cash!

If all landlords had a 30+ year plan and were in it for the long haul then the rental market in the UK would be far less screwed. It's the short termers who are on the cusp of affordability that's the issue.
 
Skeeter said:
BTL landlords who are using it for long term investments (pension equivalent) are far better for the rental market than short term investors looking for quick cash!

If all landlords had a 30+ year plan and were in it for the long haul then the rental market in the UK would be far less screwed. It's the short termers who are on the cusp of affordability that's the issue.
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Agreed, buying with a mortgage to let is probably going to cause issues and without the right advice you're likely to lose money.
Buying outright and then letting is much less of an issue and will mostly gain you money.
 
Deathjester said:
Agreed, buying with a mortgage to let is probably going to cause issues and without the right advice you're likely to lose money.
Buying outright and then letting is much less of an issue and will mostly gain you money.
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Getting a BTL mortgage you can easily afford as part of a 30 year investment plan is also pretty stable. I've raised this in a few other discussions, but in my view getting a BTL mortgage should be a lot harder than it currently is, which will make sure that only those who can afford it and see them as long terms schemes get them.

One of our directors at work owns a few rentals on absolutely tiny mortgages (under £200 a month). If they a sat empty he could still afford to make payments without breaking a sweat. He has no plans to sell any of them for 20+ years, if at all, and all of them have long term tenants in them that have been there for years and years. Id be happy if the rental market was built on top of more people like him.
 
One property is probably not sufficient. It is getting more and more difficult to get a positive cash flow on properties unless you have a lot to put down, even with such low interest rates.

I am going to get in to it in the future and aim at owning multiple property.
 
Skeeter said:
Getting a BTL mortgage you can easily afford as part of a 30 year investment plan is also pretty stable. I've raised this in a few other discussions, but in my view getting a BTL mortgage should be a lot harder than it currently is, which will make sure that only those who can afford it and see them as long terms schemes get them.

One of our directors at work owns a few rentals on absolutely tiny mortgages (under £200 a month). If they a sat empty he could still afford to make payments without breaking a sweat. He has no plans to sell any of them for 20+ years, if at all, and all of them have long term tenants in them that have been there for years and years. Id be happy if the rental market was built on top of more people like him.
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True, but if you can't afford the capital, you're probably better off getting some let to let properties and renting them out fully furnished as Apartments for contractors etc.
 
At risk of getting beaten, I am a small BTL with 2 properties invested for my 'pension'. long term investments. everyone thinks it is easy and it isn't. at the moment I am lucky to do more than break even, but at the moment I don't rely on the income, I look after my tenants, and they return by staying and looking after my investments. 10 years time they will be paid off, and I will need to make money, but good business is about looking after your customers. As per the pension, I don't force them to rent, my properties are not close to the bottom of the market, they could rent a lot cheaper if they wished, but choose not to. As to how I wish to invest their rental, pension or otherwise, surely this is my choice. There are I am sure some terrible landlords in the market, but we all get tarred with the same brush by the press. I offer a quality option, which my tenants choose to take over cheaper choices.
 
For all the people who say 'so what...who cares....its just capitalism in action' well Lord Turner one of the most respected economists in the UK and advocate of Capitalism thinks the BTL is definitely NOT ok and says we should ban banks from giving out BTL mortgages.

Houses aren't a typical supply and demand product and their price and availability is being exploited in the current free market rules they are being traded in. First and foremost a house should be a home, not an investment vehicle, then Landlords shouldn't be able to utilise the cheap credit available to reduce the availability for people wanting to buy.

Why do you think Osborne has started curtailing this market, because he is listening to people like Lord Turner

Anyway, watch the first 5 mins of this hard talk for a very interesting viewpoint from a staunch capitalist.

http://www.bbc.co.uk/programmes/b06wdcx9
 
Nothing wrong with a long term investment for retirement. You could always get a SIPP and invest in a commercial property if you really want to 'pension' your property.
 
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