13th April 2015 by Select Property
Select Property Group discusses what to think about before investing pension money in property in this sponsored article.
Landmark pension reforms came into effect this week, and those with a pension will now be able to access more of the money they’ve saved during their working lives. So, now you no longer have to automatically buy an inflexible, low returning annuity, what investment option will you choose?
Around 16% of over 55s are expected to use some of their savings to fund a buy-to-let property investment. Like any other asset type, considerable thought is needed before any hard-earned money is ploughed into bricks and mortar. If you’re a first time investor thinking about using your pension to fund a property investment, here are four things to consider:
1. Think yields, not capital gains
When it comes to a buy-to-let property, the emphasis first and foremost should be on the potential returns rather than how much you can expect to make by selling the property. The Director of Research and Insight at Hometrack, Richard Donnell, said recently that investors should scour the market to find a property that can deliver “a stable and robust income stream”, particularly important when replacing the regular income an annuity would provide.
2. Location, location, location
Key to an investment that will deliver those regular yields is ensuring you choose a property in the best location.
Although London is often the go-to destination, particularly with overseas investors, it’s regional UK property that is currently enjoying the best rental growth, with monthly rates in Manchester in 2014 growing 13 times faster than they did in the capital.
There is also a need amongst tenants for property close to transport links. Savills research found that, in 2014, 52% of UK tenants live within five minutes of their nearest transport links, with just under half of respondents to the survey stating that being near to work or university is important when looking for a new rental property.
3. Don’t forget student property
Speaking of universities, it’s also worth seriously considering a student property investment. Knight Frank recently highlighted it as the UK’s best performing asset class, with more than £6 billion invested in the sector in the last three years.
Growing domestic and international student numbers and an undersupply of the kind of quality purpose-built student accommodation that scholars are looking for have helped to drive yields for investors, as investment in student property was estimated to have hit a record £3.3 billion in the first three months of 2015
4. Be cautious
Unfortunately, there will be some unscrupulous property developers and agents out there that may be looking to capitalise on the wave of first-time investors created by the pension reforms.
If you choose to go down the fully-managed property route, ensure that you comprehensively research the company providing the property. Do those enticing annual return claims stack up, or are they just too good to be true? Have they got a track record of delivering fully tenanted properties that generate strong returns for their customers?
Select Property Group has published a guide for savers considering a buy-to-let investment following the pension reforms, ensuring that it is right for their personal circumstances. Click here to download Pensions, Buy-to-Let and Planning Your Retirement guide.
– See more at: http://www.mindfulmoney.co.uk/retirement-planning/pensions-four-things-to-consider-before-investing-in-property/#sthash.hivMrgqT.dpuf