New research has shown that if you are a buy to let investor with a large portfolio your returns can be greater than investing your money into a pension. If you ever had any doubts about developing a buy to let property portfolio then this post will help to alleviate them.
We are not talking about a single buy to let property investment here. A good pension fund will always be able to beat that. We are talking about a portfolio with multiple properties where it will be possible to drive up your profits and exceed a pension pot. And this is taking into account the recent tax increases imposed by the Government.
Example of a £100,000 Investment
A recent analysis by A J Bell looks at the different outcomes of investing £100,000 in buy to let properties and a pension scheme over a period of 20 years. For the pension, the first 10 years was accumulation and the second 10 years was in drawdown.
A comparison was made between a pension scheme investment and a single buy to let property without a mortgage, and also the purchase of three buy to let properties where £300,000 was borrowed with mortgaging. The £100,000 was split three ways to provide a 25% deposit on the three properties.
For the first 10 years of the pension scheme the investor would have £203,612. After 10 years of drawdown this reduces to £174,008. This beat a single buy to let property which would offer £123,095 in the first 10 years and appreciate to £156,331 by year 20.
However in the example of the three buy to let properties there would be an investment value of £171,600 at the end of the first ten years and after another ten years this would be at £217,932. An annual pretax income of £7,242 would also be generated.
Multiple Buy to Lets Can Outperform Pension Schemes
Looking at the figures above it is clear to see that buy to let investing can outperform a pension plan. And that is in spite of the punitive tax measures that the Government has enforced on landlords.
There are certainly more risks with buy to let property investment but where there is risk there is reward. The best policy to adopt is a buy to let portfolio and a pension plan. You do not want to have all of your investments in the same basket.
You should opt for a managed pension fund so you do not require any hands on involvement. Developing a buy to let portfolio yourself will require that you are very actively involved to ensure that everything goes to plan. A portfolio of buy to let properties can be tough to manage on your own.
Consider Hands Off Property Investment
It can be very time consuming and energy draining managing your own property investments whether they be buy to let or otherwise. When you are in this situation it is possible that you will make mistakes and these can be very costly and shatter your investment dreams.
It makes sense to work with a property investment company that has the experience and knowhow to run all property investment projects successfully. CPI are a one such company and we are offering a small number of hands off property investment partnerships to the right people.
If you are interested and want to learn more please contact us.