With the recent budget allowing people from April 2015 to draw down up to £30,000 from their pension, there is much talk of this being invested in “buy to let”. But be warned, investing in buy to let versus financial products, especially pensions, is high risk.
Buy to let tends to do well when compared with other investments at building up capital sums. This is because you can borrow money which allows you to ‘gear’ your investment. Unlike investing in stocks or shares or other financial investments, you can buy a property with say 25% of your own money and borrow the rest. If prices go up and rental income at least covers the costs of running the buy to let, then the returns can be great.
Imagine investing £30,000 in buying a £100,000 property – not too difficult in Lincoln. The property goes up by 10% in value, then you sell it for £110,000, take off £3,000 for buying/selling costs and then you net £27,000 + £10,000 = £37,000. So you secure a 23% return: £7,000/£30,000. If you invest £30,000 in shares and they go up by 10%, you will just get £3,000, minus buying/selling costs.
But the risk of buy to let is in the following two statements from above:
If prices go up
If rental income covers your costs
Many a landlord has got themselves into huge financial trouble investing in property. We know from the latest Land Registry data, average prices in Lincoln are well down versus 2007. We also know that rents, typically, don’t keep up with inflation. So if you buy with cash, the rent you receive is likely to fund less and less of your costs of living each year.
The risk is if prices don’t rise and rents don’t keep up with inflation, cashing in your pension for poor returns isn’t necessarily going to work for you.
Worst still, things can go seriously wrong in buy to let. What if the boiler breaks down and needs fixing? This could wipe out £2,000 from one year’s rental income. On average in Lincoln, according to Belvoir Lettings, rents are just over £600 per month, so a new boiler would take away 30% of your annual rental income. And what if the tenant doesn’t pay their rent? What if they trash the place, or worse still, cause tens of thousands of pounds of damage running a Cannabis factory from your rented home – it happens a lot!
Don’t forget, your income will be taxed – may be 20 or 40% now, but what if the government change it to a flat fee of 40% for all?
Why you might wonder is a property expert so anti-investing in buy to let versus a pension or other financial investments? Mainly because I have seen so many people go bust and lose all their money, especially since the credit crunch.
Very few people when investing in property take good, independent financial and buy to let advice. Few agents, lenders, legal companies offer bespoke buy to let services which analyse the pros and cons of investing in buy to let for you. They just take your money. Few run the returns and compare them to what you could get from a pension. I have with Chase de Vere and here are the results.
Buy to let can be a great way to invest your money, but it’s risky. Pension income needs to be less risky and more assured as you can’t typically keep working if your investment goes wrong and make up losses.
It doesn’t mean it can’t work, you just need to see a financial advisor who understands the pros and cons of property versus pensions and before you do that. Why not read my article on pension versus property?
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Kate Faulkner is Managing Director of propertychecklists.co.uk. The site gives free advice to consumers on how to measure their local market and an understanding of how to buy their first home or trade up. Kate’s background stretches from self-build to part exchange to buy to let and renovation. She is the author of the Which? property books and regularly appears on local and national media.
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A 22-year-old man has been arrested on suspicion of murder after a 46-year-old man was fatally injured in Lincoln.
Emergency services were called to a flat on Carr Street in Lincoln, off Carholme Road, at 12.18am on Sunday, July 25.
There they found the victim with a serious head injury. He was taken to hospital for treatment but could not be saved.
Another man, aged 22, from Lincoln, was arrested on suspicion of murder. He remains in police custody for questioning.
A police cordon is in place at the property this morning and officers remain on scene while enquiries continue.
Detective Chief Inspector Richard Myszczyszyn, of East Midlands Special Operations Unit (EMSOU), said:
“I know this is a concerning incident and people living in this area of Lincoln, or indeed anyone further afield, may well feel worried about what has happened.
“We are working through the exact details of the circumstances to establish what’s happened and have a number of officers dedicated to the investigation.
“We are working closely with the family of the man who has lost his life and doing our best to support them.
“I can confirm that we’re not looking for anyone else in connection with this incident and this morning we continue to question a man who has been arrested on suspicion of murder.
“I would like to appeal for information from the public. Were you in the St Mary’s Road area of Lincoln around 10pm last night and saw a disturbance between a man or a woman?
“Or did you see anything that looked suspicious in that area/the Carr Street area, or have any dashcam footage? If so, please get in touch with us because that information could prove vital.”
If you have any information that could be useful, contact police via one of the following ways:
Call 101, quoting Incident 12 of 25th July;
Email [email protected] putting “Incident 12 of 25th July” in the Subject line;
A man has been arrested in connection with a sexual assault that took place on Tritton Road in Lincoln near the Co-op funeral home last week.
The 30-year-old man from Lincoln was arrested on Friday on suspicion of sexual assault, Lincolnshire Police said on Saturday, July 24.
He has been interviewed and bailed without charges, pending further enquiries.
The victim was assaulted at around 10.20pm on Saturday, July 17.
Lincolnshire Police said: “Our investigation is ongoing into this incident and if you have any information and have not yet spoken to us we would urge you to get in touch.”
If you’ve been the victim of crime, support is available, whether you have reported the crime to the police or not. Victim Lincs provide free, confidential advice and guidance, as well as access to specialist emotional support services. Visit victimlincs.co.uk or call 01522 947510 Monday – Friday 8am – 4pm.
Two men have died after a van crashed with a lorry on the A17 near Boston on Friday afternoon.
It happened shortly after midday on July 23, on the A17 between Bicker Bar and Wigtoft. The collision involved an HGV and a van.
A 46-year-old man and a 31-year-old man travelling in the van were pronounced dead at the scene, despite efforts from emergency services. Their families have been informed.
The driver of the HGV suffered minor injuries.
The road has been closed in both directions and will remain closed until at least 10pm on July 23, while officers carry out an initial investigation and recover the vehicles.
Lincolnshire Police are appealing for anyone who was in the area and may have witnessed the collision to contact officers as soon as possible.
Officers are particularly keen to see any dashcam footage which might have captured the vehicles prior to the collision, or the collision itself.
Detective Sergeant James Kirk from the Serious Collision Investigation Unit said: “This is a devastating incident for all involved and our thoughts are with the families of both men at this time.
“We are in the very early stages of our investigation, and we would be very grateful for any assistance that the public can offer us in piecing together what happened.
“Any information, no matter how small you think it might be, will be a great help.
“We would be keen to see any relevant dashcam footage or speak to anyone who witnessed the collision.”
If you think you can help with the investigations please contact police in the following ways:
By clicking on the email link [email protected] with incident 212 of July 23 in the subject
Via our non-emergency number 101, quoting incident 212 of July 23
Through the independent charity Crimestoppers anonymously on 0800 555 111 or online at crimestoppers-uk.org
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