Spare £160k buy house or pension pot

chipsdog5a

I have a spare £160k, shall I buy a house to rent out (they are cheap where I live) or put in my pension pot?  I am 61, planning on retiring at 66.  My pot is currently at £350k and I also have a civil service pension.  Just wondered which would give me more money when I retire, the rent or the extra pension?   thank you

Dazed_and_C0nfused

Do you want the hassle of BTL?

How many years will it take for you to get the £160k into your pension?

Are you still employed in the civil service?  If so is buying more civil service pension a third option?

Albermarle

 Just wondered which would give me more money when I retire, the rent or the extra pension?

Nobody can answer that question as we can not see the future .

If you add it to your pension then in 10 years time it could have grown a lot , not a lot or shrunk . Also the pension you will receive from the pot will be highly dependent on how you decide to take it and how kind the markets are.

In any case as alluded to in the previous post , to get £160K into a pension could take some time . Of course you could invest it outside a pension.

I think the main factors in your decision are

Do you have any experience as a landlord?

Do you have good building/DIY/maintenance skills?

How would you feel about handling difficult tenants ?

Could £160K buy you more than one BTL ?( to spread the risk )

dunstonh

I have a spare £160k, shall I buy a house to rent out (they are cheap where I live) or put in my pension pot? 

What rental yield are you looking at net of management costs, other costs and tax?

coyrls

Your total pension contributions in any tax year is limited to your relevant earnings for that year and to £40K (with the possibility of carrying forward unused allowances from previous years) and so it is very unlikely that you can just "put" a £160K in your pension pot.  It is likely that you will have to spread contributions over multiple tax years and possible that you won't be able to get the full £160K into your pot before you retire in five years' time.

Stubod

IMHO I would go with increasing your pension as much as possible and then look at alternative financial investments rather than the BTL option, but I guess it depends on what your priorities are and your attitude to risk? Single property BTL can be hard work and not that good a return particularly if you get the wrong property / tennants?

Grumpy_chap

chipsdog5a said:

I have a spare £160k, shall I buy a house to rent out (they are cheap where I live) or put in my pension pot?  I am 61, planning on retiring at 66.  My pot is currently at £350k and I also have a civil service pension.  Just wondered which would give me more money when I retire, the rent or the extra pension?   thank you

5 years is too short term for BTL.  If you go down this route, when would you plan to sell?

Pension contributions are limited to annual salary or £40k per year.  There is carry forward for unused portion of annual allowance, but this does not trump the earnings limit.

garyelder

I’ve just sold a Btl now many in the bank 
I have another probably sell in a years time although speaking to the estate agent it would sell easy at the present  can’t bear the hassle but my tenants have been excellent but I’m also a good landlord 
remember capital gains when you sell I paid 16k last year and the other Btl will be 26k ish 
Or wait to see how many interest rate rises then lock it in 

Terron

Stubod said:

IMHO I would go with increasing your pension as much as possible and then look at alternative financial investments rather than the BTL option, but I guess it depends on what your priorities are and your attitude to risk? Single property BTL can be hard work and not that good a return particularly if you get the wrong property / tennants?

On the other hand it can be easy work with good returns if you get the right property/tenants and use a letting agency to manage everything. At least it is for me.
I have had properties with poor returns. I have sold them for a profit (no capital gains as one was a former home and the gain on the other was not not high enough to exceed my allowance). I also had a bad tenant who cost me £10k but the property increased in value by £50k whilst he was in it. (He only became a bad tenant after his partner left.)
If you are going into BTL for income rather than capital growth you need to be in a suitable area, generally one with low prices with the OP says is the case.
One property is risky if you will be relying on the income, but if it is just a bonus on top of a pension that could work well. Three properties would continue to provide most of your income even when one was empty.
Using mortgages you can get a higher return on investment though less net cash per property.

Which will give more? BTL in the right area would, but it would require more work than a pension.

garyelder

I would want the easy life 3% interest which is coming and easy money and no grief
But everyone has different circumstances so it’s difficult to advise not knowing all the full  facts 

savingholmes

I think as other posters have said - you would need to share more information or at least consider for yourself the following:

What guaranteed pension are you already due to get and from when?
How much of your lifetime allowance for pension have you used (accrued)?
If you stay in your current job until retirement - how much will you have used of your lifetime allowance by then?
Do you have a fully funded emergency fund? Is that 3-6 months? A year? More?
How dependent would you be on income from the buy to let if you had a dodgy tenant?
What your current background / experience level is
What your desired annual budget is post retirement (how that's different from now - needs to be realistic)
How much of your up to £40K allowance for this year and relevant previous years have you used? I think your employer's contribution counts towards that so don't just go off what you put in.

Even then no-one can give an answer as the yields for your area are specific to that. You would need to speak to letting agents in your area to understand the art of the possible.

You would need to decide what level of risk you are willing to take - and consider how that might change in future and when?