Effect of Pension Release on the BTL Market

Reply to the comment left by "Ian Ringrose" at "19/03/2015 - 14:25":

Just dropping in to get any comments on the following:-

1. Gearing up to 75% on a B2L portfolio. I recall many "professional" landlords" going bust in the mid 2000's when interest rate rises caught them out. Rates are low now but I'm in property for the long term and wouldn't like to lose everything by gambling on interest rates.

2. Pension monies can be put to a lot more use other than equities, annuities etc. Carefully selected peer to peer lending investments inside a SIPP are yielding 10% in a tax free environment. Hard to get that kind of income return from property investing, and without the hassle of tenants.

Reply to the comment left by "Mark Bennett" at "21/03/2015 - 08:49":

This is a property form though. I'm not at all against diversification of investments and we have several recommended IFA members too. Nevertheless, discussion here is centred around property and related issues faced by landlords, tenants, agents and homeowners.
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Reply to the comment left by "Mark Alexander" at "21/03/2015 - 09:32":

Hi Mark, the title of ther thread is "Effect of Pension Release on the BTL Market". My point is that most people with a reasonable pension pot will be reasonably savvy in what they do with their money and in the age range of post 55 may not want to take on the responsibilites of being a landlord compared to other alternatives. The other area where I'm looking for input from others is the whole issue of gearing up a property portfolio. I did it some years ago and it nearly pushed me over financially. Therefore, over the last 10 years or so I've managed my debt down to almost zero. That said, I still hear of other investors that suggest that borrowing is still an intrinsict part of their strategy. Is there a gearing model than can be safely accommodated in todays uncertain climate? I don't know.

Reply to the comment left by "Mark Bennett" at "21/03/2015 - 09:53":

Hi Mark

There are several discussions here for you to read in respect of gearing, please see >>> http://www.property118.com/?s=gearing&submit=Search+Articles

I entered financial services in 1987 and became a landlord in 1989 - both very famous years in economic terms but for all the wrong reasons. Here's my story and advice with regards to investing in property >>> http://www.property118.com/how-to-become-a-respected-profitable-landlord/60765/
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Reply to the comment left by "Mark Bennett" at "21/03/2015 - 08:49":

Gearing is fine its the way that you structure it that is key. Thats down to the individual and how much they understand its power. There are 1000`s of food shops out there. Some make shed loads of cash some scrape by. some go bust . Selling food isn't inherently a bad way to make money. It just that you need to be good at it and recognise the risks and deal with them, same with any business, property is no different.

Gearing is not the problem. Gearing can vastly increase your wealth. If you are caught out by interest rates then you are not stress testing your portfolio as you gear. Why would one not do that? We all know they go up and down. It would be very strange in fact if they remained the same for 25 years.

Likewise, if you do not have a contingency fund and your powder runs dry then again that`s basic business sense. 10 % in a SIPP is nice, yes, but I would aim to make between 20% and 40% through property. If you structure it right you can in fact get infinite returns. When I learnt how that occurs it was mesmerising

Property offers so much more than anything else I know or looked at. I don't deny it's harder work sometimes maybe, but if you enjoy investing in property then it's more of a hobby than work. Best of all worlds. Aim for Top Gear 😀
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Having been a pensioner since 1999 I have already been through this cycle. I realised that the opportunity to invest in property was a good way of getting a better return than the stock market and properly not such a gamble so I bought a couple of flats back then. I held them until the beginning of 2007 when I felt the market was getting too hot and was likely to tumble as it has before in the late 70's and again in the early 90's so I sold up paid the CGT and moved the cash into bonds which were paying around 6.5% and 7% for 5 year periods.

It was easy, no problems with tenants and the cash was guaranteed by the governments £38k limit but it was difficult having to spread the money around so many providers, but once it was all invested it was just a question of sitting back and getting the interest.

But after about 2012 when they started to mature, even 4 and 5 year bonds were at best 3.5% to 4% so to get better return I had to return again to the property market and in that year I bought 3 properties, 2 flats and 1 house all for cash and since then I have got a return of between 6.5 to 7% without any tenant problems as I no longer self manage but use a fully managed national company to manage at a rate of 6%.

I have added another property since but over the last year have been beaten on price by new entrants into the market at the last minute on another couple of properties.

I think that many more properties will be bought by people like myself for the extra income and also the possibility of the price increase aspect. I have already made a considerable sum from the rise in prices over the past 3 years on all my properties.

So good luck to those pensioners who decide to cash in all or part of their pensions, I hope they succeed.

Regards, Malcolm Hill

Reply to the comment left by "Jonathan Clarke" at "21/03/2015 - 10:41":

As a mathematician, I would be interested in further details of your infinite returns.