Effect of Pension Release on the BTL Market

Reply to the comment left by "Ian Ringrose" at "18/03/2015 - 10:46":

I dont want to be managing properties either when I am 90. And I may not want the mental burden if you see it as that. Personally I see it as financial freedom and that mental burden is thereby lifted because the worry that lack of money causes is no longer there.

But I wouldnt dream of using that as an excuse not to invest in property in the first place when I`m 55. It gives you a massive 35 years to passively build up millions in equity and cash flow using an effective gearing strategy. Far better returns than an annuity would give. Great gift to the kids and grandkids
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If you cant stand the heat as you get older then yes by all means get out of the kitchen when you are 89 sell the lot and put the million or so you`ve made in a building society. The years 90 - 100 then will be completely hassle free before you finally meet your maker 🙂
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Reply to the comment left by "Mark Alexander" at "18/03/2015 - 10:07":

I'm not sure where you got your anuity figures from.

Current rates (by internet search) give about 2.7% per anum with 3% escalator, or 4.5% flat rate for a 50 year-old.
That gives £4000 to £5700 per anum from anuity.
That does not make the £3000 per anum from being a landlord look so attractive.

Reply to the comment left by "Michael Barnes" at "18/03/2015 - 13:41":

Please post a link to this data
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Reply to the comment left by "Mark Alexander" at "18/03/2015 - 10:07":

Spot on and choice two is easily the most appealing for many who come to me for advice on how to build a portfolio .The new rules really opens up valuable choices and freedom for the 55yr + age group .

Naturally and rightly they will be cautious of those who offer advice . . But so many of these guys are switched on smart professionals in their own right that they can spot the pretenders in their midst.

They are no fools and have made their money just in a different field perhaps. They all need to store their gains somewhere and property offers that lucrative avenue for them.

Many of their skills are transferable and they are more than capable with a bit of initial guidance to bringing those skills to property then go on to maximise their wealth in their latter years but maybe at a quieter less frenetic pace than their day job demands

Many are tired of flying around the world to conference after conference. Burn out kicks in. They want to be flying still but to holiday destinations instead. Property passive income and capital growth offers them that luxury in their retirement
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Reply to the comment left by "Mark Alexander" at "18/03/2015 - 13:45":

http://www.ft.com/personal-finance/annuity-table
http://www.sharingpensions.co.uk/annuity_rates.htm

The issue is that gearing become a lot harder to do as people get older, and the tax hit on getting money out of a pension is high for lots of people unless they have stopped working. This pushes the age above 55 for many people.

There are so few BTL mortgages that will lend to an old person without employment income so any sensible old person will have to assume that they cannot get another mortgage after the fixed rate of their current mortgage ends.

I think Jonathan you will agree that without gearing property loses a lot of its appeal.

I expect that most property “investment” using pension funds will be replaying mortgages on people’s home.

My plan at present is to be mostly mortgage free by the time I am old, having no more than a few simple single lets, by selling some of the properties I am buying now and using some pension money to pay down mortgages.

Money I leave in my pension can be accessed at any time after 55, while growing tax free so in good property years I will not take any pension.

Reply to the comment left by "Michael Barnes" at "18/03/2015 - 13:41":

That`s just 3k on one property though. With 125K in Marks example you could buy say 3 x 125K properties @ 75% LTV . Thats 9K income . Capital growth on your 375K portfolio @ say just 4% pa is 15K

That`s 24K pa which beats annuities hands down.

And that`s before you bought at a discount added value with a refurb and maybe remortgaged to buy more. Property offers all these further options to maximise your returns. Annuities just sit there. You cannot refurb an annuity certificate
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Over the long term rents increase more than inflation, so even an indexed linked annuity will fail to keep up with rental income.

However note how much better the annuity rate are at age 70 then 55!, So if you can live of your properties, (including investing the 25% lamps sum) and selling 1 property every year to use your capital gains allowance to delay buying an annuity you do so much better.

Also be careful that once you take the 25% tax free lamp sum, there are limits on what you or an employer can pay into a pension. If an employer will pay into a pension giving you back the NI savings, it is unbeatable for a lot of people.

Reply to the comment left by "Ian Ringrose" at "18/03/2015 - 14:10":

Hi Ian

I disagree that age is a barrier to obtaining BTL mortgages and have several broker contacts that I refer people too who are unaware of their options.
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I consider age to be barrier obtaining BTL mortgages, but agree that for most people there are ways to climb over that barrier.

A few years ago there were many less option for BTL mortgages; we have no idea what it will be like in 5 or 10 years time.

Experienced landlords have many more option then a 1st time landlord without employment income in their 70s.....