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Are SSAS pensions really the golden chalice when investing in commercial property?Watch the following video and let's discuss your thoughts about small self administered schemes.
Kind regards,Cyril Thomas
M: +44 (0)7949 440 089 T: +44 (0)1206 705 555
I believe so too very strongly.
With a big caveat though: Commercial properties are usually high yielding/rewarding and open to a lot of creativity if you know what you are doing. However, higher the yield = higher the risk. I can produce evidence of people losing as much as 50-75% of the capital value in commercial property due to market going down or, their Grade A tenant leaving or businesses going down, competition from a new out of town shopping center, a flagship retailer closing, legislation, planning law changes etc. etc., so many reasons.
Additionally, I have met some SSAS pensioners who are putting (or considering to put) their money in this new buzzword called 'commercial to residential' developments which is very risky to my mind (unless it is being sold at the planning stage itself). This is because SSAS can not invest in resi properties and if they did, the tax penalties are 55%! The idea they seem to have somehow bitten into is that they believe, they will get their money back before the resi units are ready. There are two things with that:
a) It is very hard to get a mid-build project funded, therefore, if the developers fail to get alternate funding to return investors money in time, investors are at risk of paying this 55% penalty.
b) The new build resi units do not necessarily have to be occupied to be classed as Resi properties from an HMRC point of view in this case. Even if the property is 'habitable', (i.e. as soon as they are ready) it will be classed as a resi property and HMRC can come to you with a tax bill!
So need to be aware of that.
Furthermore, a lot of people are led to believe that commercial property investments are handsfree investments, just let it and forget it - FRI lease! Nopes, they require strong asset management skills just like one does for stocks and shares. You need to know when to enter, what your tenant is thinking, how they are financially doing as a business, in that store etc. etc. so that you can decide when to EXIT! Because just like stocks and shares, no one wants to buy a badly performing commercial property (think business rates!)! So timing is everything. It is serious business!
Therefore, yes generally speaking commercial properties are great for SSAS but as any higher return investment, comes with a higher risk. As a general rule, people perceive properties as a low-risk passive investment as they come from resi background/investment experience normally where it is almost true. But not at all with the commercial properties. And on top, pension money for anyone is a highly valuable and important money so they do need to be very careful with what they are doing with the money which is likely to help them in most needy times of their lives!
Pension holders need to be super careful as people have started smelling money in their pots! I want to add: seek professional advice but unfortunately, there are no IFAs for commercial properties so you need to be a self expert in what you do!
PS: My comments are very generic. I have not even watched the above video so these are not in relation to that at all. Additionally, even though I have never dealt with Kevin Whelan before but have heard in one of the conferences recently and he seems to know what he is talking about. So I do not at all believe that he will mis-advise his clients so my comments are not targetted to him/WealthBuilders or anyone in general.
These are my personal opinion issued in the interest of the community in general.
Hope it is helpful for someone.