Should I consider investing my pension pot in buy-to-let property after pension changes in April 2015 ?

When George Osborne’s announced in the budget that from next April over-55s would be free to spend their defined contribution pension pots any way they liked, many have predicted that next year there will be a rush into buy-to-let, but retirees may not always make good landlords.

When we have first time landlords approach us for research and advice into suitable investment property in Dunstable, Houghton Regis and Leighton Buzzard one of the first questions I will ask is ‘Have you spoken to an Accountant yet’ ?

Surprisingly many haven’t even considered the need to, and for those who will be considering using their pension pot from next April they should consider that they might not have a regular salary to fall back on if the investment goes wrong. There may also be dangers in tying up all of one’s capital in a property – issues unlikely to apply to a younger person with a good income.

If you are someone who is newly-retired, or nearing retirement you will have a different perspective on buy-to-let than someone in their twenties, thirties or forties.

For anyone thinking of investing their pension in property after next April I would recommend the following:

For your first investment it is advisable to have some expert help as an investment in property is rarely entirely hassle.

Which sort of property should you purchase? A property requiring refurbishment is likely to provide the best return as it will be the least expensive to purchase and can usually be improved inexpensively compared to a modern ‘ready to move into’ property. The modern property is likely to have less maintenance and repair issues, but the property requiring refurbishment will show better capital return.

For a refurbishment property ensure you have sufficient funds to pay reputable contractors to carry out the work or have a collection of friends and family to help you carry out the work.

Maybe look to invest jointly with a younger member of your family or another recently retired friend. There are also some very useful property investment groups you can attend where you can gain advice from other experienced property investors and also find new investors you might be able to partner with. One of these groups is called Property Investors Network (PIN) and there is a new one opening in Luton in June. If you want more details please email and I can send you more information.

Remember it is an investment not a second home so set personal taste aside. Ask the staff at Belvoir Dunstable about the potential rental returns of property you are looking to purchase. As the local Lettings only Specialist we are not trying to sell you a property only to give the best advice for the rental potential.

Remember to allow for other costs when you are calculating your figures; Maintenance, Insurances, management fees, safety certificates and void periods. At the moment void periods should be kept to a minimum as there are more tenants than properties and a good well maintained property will have a tenant waiting to start a new tenancy.

Remembering my earlier advice about talking to an accountant., when you come to sell you will need to consider the implications of capital gains tax (CGT). Also a property bought with a pension pot is a capital asset which the authorities can compel you to use to contribute to care or nursing home costs.

Property offers the security of savings plus the more favourable returns associated with the stock market but it also requires more effort.

For advice and research in the Buy-to-Let (BTL) property market of Dunstable, Houghton Regis and Leighton Buzzard call our shop on 01582 343209 and ask for Daniel or email and I will be only to pleased to advise and carry out research on any investment property you are considering.