Pension versus property: Kate Faulkner looks into the pros and cons of investing in “buy to let” properties.
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?
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.
Fewer cases but more deaths this week
There have been 1,643 new coronavirus cases and 83 COVID-related deaths in Greater Lincolnshire this week – compared to 1,670 cases and 71 deaths last week.
Some 304 new cases and 17 deaths were reported in Greater Lincolnshire on Friday – the third day in a row with 17 deaths.
The government’s COVID-19 dashboard recorded 252 new cases in Lincolnshire, 28 in North Lincolnshire and 24 in North East Lincolnshire.
On Friday, 14 deaths were registered in Lincolnshire, two in North East Lincolnshire and one in North Lincolnshire. These figures include deaths both in and out of hospitals, as well as residents in hospitals outside the county.
NHS England reported six new local hospital deaths at United Lincolnshire Hospitals Trust, four at Northern Lincolnshire and Goole NHS Foundation Trust (NLAG) and one at Lincolnshire Community Health Service hospitals. Some 51 hospital deaths have been recorded this week, compared to 48 last week.
On Friday, national cases increased by 40,261 to 3,583,907, while deaths rose by 1,401 to 95,981.
Lincolnshire health bosses estimate that 80-90% of new coronavirus cases in the county are now a mutant, more infectious strain of COVID.
Figures earlier this week said that by January 8, 59.2% of cases had confirmed the new virus — up from 36% by the end of 2020 — and now county leaders estimate the number to be even higher.
The COVID mutation that has taken over most new cases in Lincolnshire is not only more infectious, but also more deadly, it has been revealed.
NHS bosses are hoping to offer all care homes in Lincolnshire the first COVID vaccine dose by the end of the week. This comes as almost 5.4 million people have received jabs nationally.
Director of Nursing at Lincolnshire CCG Martin Fahy told BBC Radio Lincolnshire that about three quarters has been completed so far.
A single week in December saw Lincolnshire deaths reach 13 times the yearly average, explained local health bosses frustrated with COVID deniers.
Lincolnshire County Council’s Director of Public Health Professor Derek Ward explained that the week including December 14 would usually see an average of 23 deaths, but 2020 say 301 deaths that week.
In national news, there are no plans to pay everyone in England who tests positive for COVID-19 £500 to self-isolate, No 10 has said.
The PM’s official spokesman said there was already a £500 payment available for those on low incomes who could not work from home and had to isolate.
The coronavirus R number in the UK has fallen sharply since last week, suggesting the lockdown is slowing the spread of coronavirus.
The R, which refers to the number of people that an infected person will pass COVID-19 on to, is between 0.8 and 1 across the UK, according to the figures released by the Government Office for Science and the Scientific Advisory Group for Emergencies (SAGE).
This means for every 10 people infected with COVID-19, they will pass the virus on to between eight and 10 others.
Lincoln City has taken the top spot with the highest infection rate in Greater Lincolnshire.
This week saw South Holland at the top which was put down to two outbreaks in care homes with up to 100 cases. South Holland has now dropped to third place in the region.
Greater Lincolnshire still remains way below the national average infection rate of 472.9, with just 217.3 per 100,000 of the population.
Here’s Greater Lincolnshire’s infection rate over the last seven days up to January 22 according to the government dashboard:
Greater Lincolnshire’s infection rates from Jan 15 to Jan 22. | Data: Gov UK / Table: James Mayer for The Lincolnite
Greater Lincolnshire includes Lincolnshire and the unitary authorities of North and North East (Northern) Lincolnshire.
45,645 cases (up 304)
1,760 deaths (up 17)
of which 1,047 hospital deaths (up 11)
3,583,907 UK cases, 95,981 deaths
The charity project turned into a business
A Lincoln couple will reopen their independent pizzeria at a new location on Friday night, with an array of main and signature pizzas and Belgian waffles.
Weirdough’s Pizza Emporium will open at Tap & Spile on Hungate from 5pm on Friday, January 22, but it initially started out as a charity project making Neo-Neapolitan pizzas.
Husband and wife team Matt and Rachel Barnes have lived in Lincoln for around five years and last year they wanted to do something to raise money for the NHS.
Matt starting to prepare a pizza. | Photo: Steve Smailes for The Lincolnite
Kneading the dough. | Photo: Steve Smailes for The Lincolnite
Matt used to work at a Lincoln school, but they were closed to most pupils for a few weeks in March, so he started working on a project and Weirdoughs Pizza Emporium was born.
It was initially run from The West End Tap from the end of last summer, but in January the pub announced it would not reopen again under its current management, so Weirdoughs had to find a new premises.
The base ready for the next stage of the pizza making. | Photo: Steve Smailes for The Lincolnite
Matt putting the pizza into the oven. | Photo: Steve Smailes for The Lincolnite
The tasty pizza in the oven. | Photo: Steve Smailes for The Lincolnite
Adding the finishing touches to the pizza. | Photo: Steve Smailes for The Lincolnite
All profits made from the food sold – just under £2,000 – went to the NHS. The couple also did some drop offs at the coronavirus ward at Lincoln County Hospital.
Matt was made redundant at the end of May and Rachel was due to give birth four weeks after that.
It was a hectic time for the couple as Rachel, who works at a primary school in Peterborough, would be on maternity leave and Matt would soon have no income.
The Margz main pizza – San Marzano tomatoes, mozzarella and basil. | Photo: Steve Smailes for The Lincolnite
The Weirdough – San Marzano tomatoes, parmesan, Emmental, mozzarella, red onions, roasted red peppers, mushrooms, spicy Nduja sausage, rocket, balsamic glaze and garlic drizzle. | Photo: Steve Smailes for The Lincolnite
As the pizzas were working so well and following feedback from customers, the couple decided to turn it into a business.
Dan Neale, who previously ran the West End Tap, has joined the Weirdoughs team of four as a pizza chef.
Or why not try a Create Your Own Weirdoughs Waffle? | Photo: Steve Smailes for The Lincolnite
The dough is homemade 24 hours ahead to make their special main and signature pizzas, while customers can also order a create your own Weirdoughs waffle.
The Belgian waffles come with a variety of toppings such as Kinder Bueno, Crunchie, and Galaxy Caramel, with sauces including white and milk chocolate, salted caramel and toffee, with ice cream.
Weirdoughs will open Friday to Sunday 5pm-9pm and Wednesday to Thursday 5pm-8pm for takeaway or delivery.
Pre-ordering is advised via Facebook or Instagram or by calling 07734 297 035, with the latter option preferred if it is after 4.30pm.
Owner Matt Barnes will help meet your pizza needs. | Photo: Steve Smailes for The Lincolnite
Delivery is available to the following areas: Ermine, St Giles, Monks Road, High Street, Bailgate, Boultham, West End and the city centre.
Weirdoughs will try and accommodate other areas too, but it may incur additional charges, while the takeaway will also be joining Uber Eats in the near future.
Weirdoughs will be based inside the Tap & Spile pub in Lincoln. | Photo: Steve Smailes for The Lincolnite
Once pubs are allowed to reopen again, customers at the Tap & Spile will able to order Weirdoughs food straight to their table and Matt said he can’t wait for people to able to experience it that way.
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