Since the government changed the rules on how people can access their pensions, there has been a rush of advice to those who have taken advantage of this change on how they should use their any disposable cash.

pension money for rental property

There have been some horror stories of people being fleeced and cheated out of their money by fraudulent so-called financial advisors and investment consultants. Thankfully any cases of fraud are few and far between. But many of those who have taken out a lump sum from their pensions will be looking for advice on what to do with their money.  

The majority will be looking for ways to make their money work for them, and many of them will be thinking of investing this money in property, specifically in the buy-to-rent area. But is this the best option for those who want to invest their pension?

Your financial situation 

If you are thinking of investing some of your pension in a buy-to-let property, there are many things you need to consider.

Will you require a mortgage? 

If you do intend to take out a mortgage you should be aware of the changes in mortgage tax relief and stamp duty. 

Tax relief on mortgages will drop to 20% of the basic tax by 2021. However, if you are fortunate enough to have enough money to buy a property without a mortgage, you will still have to pay the extra 3% stamp duty on a property purchase. 

The increased stamp duty means an extra £15,000 on a house with a price of £500,000. And with or without a mortgage, there are many responsibilities you will take on when you become a landlord. For example, you will be responsible for all drains and sanitary fittings, heating appliances and ventilation, along with any damage caused by tenants. You must also allow for times when your property remains vacant, and make the effort to find suitable tenants. 

Although the above information may paint a slightly negative picture of investing your pension into a buy-to-let property, there is a positive side to the picture.

Property prices 

Property prices in England and Wales have increased, and although prices may fluctuate over the years, bricks and mortar have proved to be a very good investment. Although you may pay more taxes on your income from a buy-to-let, the increase in its value may well outweigh these disadvantages. However, this underlines another thing you must consider before becoming a buy-to -let landlord: investing in property is a long-term project.

Take advice 

Because investing in property is like any other financial investment, it is vital you take expert advice. People who know all of the pros and cons of investing in buy-to-let properties will be able to advise you as to whether it is the right thing to do, and advise you on the property for you to buy if they believe it is the right thing for you to invest some of your pension in. 

If you require buy-to-let investment advice, why not contact us? We can also assist should you want to invest in property in the Wimbledon Village, Wimbledon, Kingston Hill or Coombe Hill areas. 

About the author

Nicolas Holmes

Nick joined Robert Holmes to inject fresh ideas and help grow the New Homes department of Robert Holmes as well as helping to inject technology into the business and to grow its client base. Together with one of the Directors Nick is in charge of all Development opportunities that Robert Holmes deals with along with sales. Aged 40, he provides succession together with the two existing directors. Nick has always been focused on building client relationships and sales. He built up his own gallery in Chelsea, where he had a loyal following of customers and artists.

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