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  • Buy-to-Let

    BTL - Only worth investing for capital growth



    I have just finished the book "Pension Magic" and I found it interesting

    I would like to share some intresting facts

    I am not recommending anyone should follow my lead and I will not be factoring in Tax relief  on the money going in

    But If a Landlord is getting tax relief it even makes more sense to use a pension

    I will keep this very simple if I can

    Let's say a Landlord is setting aside £2000 a month in there business and they will use the funds to buy a 3 bed house in the NE with a rental income of £595 per month and they are a higher rate tax payer and they are using a company to purchase the investment property

    I worked out that the Gross Profit is around £275 per month which is without voids and repairs £3300

    Now let's see what can be achieved with a pension be

    The landlord puts gross into the pension for six years - I am using six years because that the time I take my OAP pension

    and I will be using a growth rate of 8%  in the past 3 years.  I have achieved more than 8% but I will use this as my bench mark

    £2000 a month over 6 years would generate a Pension fund of £184,0000 and the Landlord only decides you take the tax free income of £46000 and doesn't take a pension from the rest and leaves the fund for their family - Tax Free from IHT

    Now let's look at the comparison after tax - the Landlord would have purchase six house over the six year each one making a  profit of £275 per month and £3300 per year x 6 £19800

    But the Landlord has to withdraw the profits and they are a Higher Rate Tax payer via a company via salary or Dividend would be a tax rate of 50% ish so net the Landlord would have £9900 a year

    If the Landlord only took the Tax free Lump sum of and divided it by the net amount the landlord could fund each year for 4.6 years - the same they would have had profit from the BTL

    The reason I would only touch the Tax Free lump sum before the age of 75 is I could still fund the pension at £2000 a month for a further 5 years and do the same exercise again

    The point I am making here is I can make the same net income with a lot less work than buying a BTL property and I have given my family a route to avoid IHT

    I also do not irritate the S24 problem because I am taking tax free pension

    I know some of you would say "ah yes but what about capital growth?"

    My own feeling is Capital growth will be weak in the future years so I discount it in my plans

    Once you understand pensions and the power they have it makes since for older Landlords who are paying higher rate tax an avenue which they may have put aside

    If you have questions I will be happy to answer them but I am not authorised  to give advice and I will give you the information that I have learned via Pension Magic

    The above is fag packet stuff but its working for me.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    All looks good on paper. But you are entering a economic slow down even recession lasting for 2/3 years. Stocks markets will lose you 20/30% . Inflation will run away and interest rates will be forced up. Try that in the equation and you come out bankrupt.

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    You can decide where you invest your pension Douglas

    its doesn't have to be stocks and shares you can invest in cash via a pension or you can purchase commercial property via a pension

    and don't forget pensions are ring fenced from debts too

    lots of good things.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Commercial property is good if its your own building for your business etc. Otherwise leave well alone. Many brought into smaller properties and retail properties now try and get out even at a  loss- no takers.

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    ``You can decide where you invest your pension ``

    You can also decide where you invest in your BTL `s

    If you invested  in the NE in 2006 crashes 50% and still has recovered  only 25% - Poor decision 

    If you invested in the SE in 2006 dips 25% and has recovered a healthy 100% - Astute decision 

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    Jonathan Clarke. http://www.buytoletmk.com


    Its a Marathon not a sprint JC

    The NE is doing ok for me your only looking at a very small period in my investing time scale

    what I think you forget is a Doubled the size of my bussiness after the crash of 2007

    all of the property I purchased from that date at low prices have done well

    Yes I I did lose on property between 2004 and 2007

    But it was a paper loss and every mortgage went to a tracker rate of around 2%

    the property I purchased 2004 to 2007 is now near the purchase price again

    This blog is about how I invest my money now since s24 I just prefer to use what money I would have used as deposits to be directed into

    My pension you can see why I have taken this route because I pay a lot less tax and I have a totally hands off investment

    and if you read my latest blog on the power of pensions and IHT it makes even more sense

    I use ever tool I can to make money BTL is only one aspect of my investments today


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    ``Its a Marathon not a sprint JC``

    Its a marathon for the most part I agree if a mile say represents a year .

    26 years is the long game - But that is in the background though

    But in 8 years i doubled some investments through CG because of the geography I chose to invest in

    In that 8 years some would lose 25% because they picked the wrong geography

    So maybe not a sprint - but  not exactly a marathon

    The sprint was when I doubled my money in 1 mth with a total refurb job

    Property allows that , pensions don`t

    This is why its hard to truly compare pensions with property in my view

    You should factor in the individual and their talents / skill / knowledge

    Your knowledge of pensions far exceeds mine  - Can you double your money in 1 mth though

    Maybe an average  BTL investor would indeed match the returns of an average pension investor

    BTL though  gives me ( and others) a chance to beat the averages significantly

    What i dont understand though is in the past you advocated investing in BTL just for yield not CG

    I say invest for both btw

    Your thread though appears to say BTL is only worth investing now for CG

    The inference is if no CG growth then pensions will outshine BTL as an investment vehicle

    That begs the question -

    Should you have ever invested in BTL with the healthy starting  pot you had

    Shouldn`t you have just invested in pensions

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    Jonathan Clarke. http://www.buytoletmk.com


    I invest now on pensions because the rules have changed JC

    pensions were not flexible in the past now they are

    on the other hand BTL has become a tax liability

    I discount capital growth because I can’t depend on it

    it’s nice to have but it’s just a cream on the deal

    as I never sell Property it’s only a fig on a balance sheet


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Fair enough . I agree pensions are better looking these days

    You cant really depend on stock market growth though any more than you can on CG

    I say its more of an educated guess for both investments

    About a year ago we both thought  property would double  in value in about 20 years

    That`s a significant factor I feel in any investment decision so I personally wouldn't discount it

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    Jonathan Clarke. http://www.buytoletmk.com


    You have fallen into a bit of a Trap There JC

    an Investor via Pensions doesn't have to invest the  stock market unless they want too

    You can still buy Bricks and Mortar if that's your choice or invest direct in to property funds or infrastructure funds

    Pension is the wrapper not the asset


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Yes - But you see the death of BTL and a property crash DL so surely property funds is not a good move?

    Talking of traps -

    You are trapped for 4 years now with your Build to Rent projects spawning into Buy to Let

    Not perfect timing for your 1 mil me thinks if you see the death of BTL and a property crash coming ?



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    Jonathan Clarke. http://www.buytoletmk.com