Property Portfolio – Who Needs a Pension Scheme?

April 8, 2008 by

pension plan real estate investingDo you have enough in your pension scheme to comfortably retire? Will you have by the time retirement looms? How much do you need to retire? Does around £25,000 a year sound about right — this means you will need a retirement pot of around £500,000!

Various Friends and Family members have pensions through work, they pay in around £300 per month and this gives you a pension of around £108,000 of your own money if you work there 30 years. Now say the company you work for matches that money, that’s £216,000, after 30 years of work and an annual pension of just £10,800!

Ok, say I can show you how to have a decent sized pension and you needn’t put anymore than around £300 in… interested? The Answer is Property Investment, more specifically Buy to Let.

Take a £200,000 flat in Manchester. Buy at a 15% discount (lots of these deals around!)

Rent at £1000 pcm.
Management fee of £100 pcm
Take home £900 pcm.
Buy to Let Mortgage at 5.8% of £200,000 = £1,185 repayment pcm.

This will cost you £285 per month.

Say property goes up a conservative 5% per annum over the next 30 years. In 2037 that same property should be worth £864,388 and you will own it outright! As far as rental income is concerned. Taking a rental increase of 5% per annum you should receive around £4321 pcm or £51,852 per year.

Now I know that your pension scheme will also increase in value, however, the actual monthly or annual return is not what interests me. The point that interests me is that your retirement fund will decrease as time goes on. Say you manage to save up £500,000, in 20 years time, taking an annual income of £25,000 all the money is gone!

Using Buy to Let Property as your pension, the property retains its value and you get your income from the rental of that property. So not only do you have a property worth £864,388 which you can draw on whenever you need, you also have a yearly income of £51,852.

Saying that, I would like to end up with a balanced portfolio, I have some money in Shares and would like to add to my portfolio as well, perhaps the secret is not to put all of your eggs in one basket?

In conclusion, the safer bet would seem to be a pension scheme, but I will point out that over a historical average, property has doubled every seven years, this is around 5% per annum. The same goes for rentals.

A friend of mine recently bought his first house and was amazed a year later when he came to remortgage, that it had risen £30,000. He pointed out that this was more than he made in a year, to which I pointed out….imagine if you had 2!

This guest post was written by Dan Chamberlain. If you have any questions or responses to this article, please post a comment below.

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7 Responses to “Property Portfolio – Who Needs a Pension Scheme?”

  1. sara on April 8th, 2008 10:13 am

    Thanks for an interesting article. I think the most difficult thing for most people is getting on the property ladder. But having a variety of wise investments will ensure a financially secure retirement.

  2. condo philippines on April 20th, 2009 6:37 pm

    Nice post.. Now I have an idea about the Pension scheme.. Thanks a lot for this nice article…

    -david

  3. krishna on July 6th, 2009 11:46 pm

    This was a rare article.
    These days everyone discusses about the current gains and losses in the market, but thinking about the future security was an interesting thought..
    Idaho Real Estate

  4. Staten Island Real Estate Agent on August 14th, 2009 10:13 am

    As an investor, its always a good idea too think about your future. You have to consider it every time you invest. One should always prepare for their retirement. Creating a plan and investing accordingly is just smart business.

  5. Real Estate Expert on July 26th, 2010 9:25 pm

    Very informative post about pensions, keep up the good work mr realestatewe blogger

  6. Real Estate Investor on July 9th, 2011 9:56 am

    Informative post, great for those new to real estate!

  7. Cash From Pension Plan on October 5th, 2011 1:54 am

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