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Monday, September 17, 2012

Property Pensions

The FT had an interesting article over the weekend about the increasing popularity of buy-to-let with investors when it comes to pension planning.  It looked particularly at how young investors are increasingly turning their back on financial advisors and stock market investments and instead investing their pension pots in buy-to-let property.  We at Property Hawk have consistently advocated residential property investment as a big part of your pension planning.

FT stats

Of those landlords surveyed over 70% saw properties as their pension.  This increased to 80% for the over 55 age group.

Buy-to-let perfect as pension

If you look at the characteristics of a buy-to-let property purchased with a repayment mortgage it's perfect.  You buy it during your earning years when your income is at it's highest and your requirement on investment income is at it's lowest.  Most carefully selected buy-to-let investments should be self financing anyway with the rental income covering any investment costs.  Then during the investment period your mortgage payments will reduce if your repayment mortgage works on a reducing balance basis.

As you look to pay off your mortgage before you retire at the end of the mortgage period you will have an asset that pays you a steady rental income and you have a valuable capital asset should you wish to 'cash in your chips.'

Government policy doesn't make sense

My question to the government and politicians is why oh why can we get huge tax breaks for investing in all sorts of 'dodgy' stock market based investments when there is nothing available for investors looking to purchase a safe steady investment that residential property has proved to be.  Does this make sense to any body else?

To read the full FT article.

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1 comment:

Anonymous said...

Tax Break... Wash your mouth out! This is Britain, not the USA or Australia or... well pretty much everywhere else!