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Property or a Pension?

GR88038
Posts: 4 Newbie
I am 24 years old and self employed, living with my parents. I realise how important it is to make provisions for my retirement and I have been considering my options regarding a pension.
I have savings of £16,500 and have been wondering whether instead of taking out a pension, it might be better to invest in a buy-to-let property. Property is relatively cheap in the region I live in, so £16,500 would make up a healthy deposit on a small house in the area.
At some point in the future I plan to buy a property to live in myself, but this would be in addition to any buy-to-let property that I could invest in now, and probably wouldn't be for a couple more years.
Any advice would be very appreciated! It seems there are so many options out there, all with their own pros and cons. I want to make sure I invest my money sensibly!
Thanks.
I have savings of £16,500 and have been wondering whether instead of taking out a pension, it might be better to invest in a buy-to-let property. Property is relatively cheap in the region I live in, so £16,500 would make up a healthy deposit on a small house in the area.
At some point in the future I plan to buy a property to live in myself, but this would be in addition to any buy-to-let property that I could invest in now, and probably wouldn't be for a couple more years.
Any advice would be very appreciated! It seems there are so many options out there, all with their own pros and cons. I want to make sure I invest my money sensibly!
Thanks.
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Comments
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at the moment buy to let is a difficult one especilly with interest rates on the rise. property prices are currently very high due to supply and demand as we currently have more people coming into the country than leaving. if that was to change in the next couple of years prices will fall.
if as you say prices are relatively cheap in your area it may be worth the risk - you are going to want to buy your own house at some point in the future anyway.
an alternative is to do both by investing in property investment trusts within a pension."The Holy Writ of Gloucester Rugby Club demands: first, that the forwards shall win the ball; second, that the forwards shall keep the ball; and third, the backs shall buy the beer." - Doug Ibbotson0 -
Property is relatively cheap in the region I live in, so £16,500 would make up a healthy deposit on a small house in the area.
At some point in the future I plan to buy a property to live in myself..
I should go for it.
Tip: look for a place which you would be happy to live in yourself. Agents like to tell naive new investors that buy-to-let property is somehow different from owner occupied property.IMHO this is rubbish - it's just a way of flogging substandard properties as BTLs that most people wouldn't buy to live in themsleves ( eg poky new build flats, flats above shops and restaurants etc.
Tenants are perfectly normal people: it's likely if you would be happy to live in the property, your tenants would be too. What's more, when it comes to sale time, your property will be attractive to a wider market, both investors and owner occupiers.Trying to keep it simple...0 -
I wouldnt go for it.
You have limited savings and would be buying at the top of the market. You would almost certainly leave yourself with no emergency fund and you could reduce the ability to buy your residential property in the future.
You would be entering into a medium/high risk transaction without any real capital behind you.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
If you get the btl now and another property later to live in you could end up with exposure to the property market and no other savings.
Do you have an ISA? If not I would save in that rather than a pension as it's more flexible. Put at least couple of K into cash in case you need it quickly and 4K into funds.
That'll leave you with maybe 10K
With the rest I would put most into a high interest account at the moment but you might want to get more exposure to the stock market - you can buy property funds/shares if you wish.
But then I'm pretty cautious - the btl could be a winner and it could start you on the way to a successful property empire (or bankruptcy). Before you try it look at the rental income compared with the mortgage. Remember you will have expenses and voids and mortagage rates could increase if you don't fix.0 -
Forgot to mention the state pension.As a self employed person you are eligible for the bargain of the century - class 2 NICs at just over 2 quid a week.
When you think that you would have to save up approx 130,000 quid to get the equivalent of the state pension income on the open market, you'll see this one is not to be missed.
https://www.thepensionservice.gov.uk
IMHO other pension saving should be left until either you are paying higher rate tax or have an employer contribution going in.Trying to keep it simple...0 -
or have an employer contribution going in.
Which is a bit difficult when you are self employed.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Thank you for your responses. It is helpful to hear a range of opinions, even if they're not all in agreement!
If I did decide to go down the property route, I would have to do a lot of research to ensure I invested in a property with the maximum potential for rental income etc. As you say, nrsql, expenses, voids and mortagage rate increases are all significant issues. Property has proved a very good investment for members of my family, who have quite a lot of experience in this field. They could probably offer me a good deal of advice and guidance, as well as some free legal advice (I come from a family of solictors!)
However, that's not a reason in itself to jump on the bandwagon. Just because it has made good returns for my parents and grandparents doesn't mean that will continue to be the case. Obviously the market now is very different from when their generations made their investments.
With regards to the class 2 NIC's, I have been making the contributions from the outset - I completely agree it is well worth doing.0
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