I have been thinking recently about how I should probably start planning for the future - because the sooner you start planning for it, the less likely it is to be a problem for you in the future. I have read up on things like pension plans, however I am now wondering whether I would simply be better off investing the money that I save in property instead, and perhaps renting that out to fund my retirement, and selling it for a lump sum later in life (or if I didn't need to do this, I could at the very least leave it to my family as inheritance). I feel that, whereas my pension may pay in less than I saved because of the fees, property can only continue to earn for me for a lot longer, and owning bricks and mortar would be a much better level of financial security for me. What do you think about it? Would you consider doing the same thing and not bothering with a pension plan at all, or do you think that it is a bit of a risky strategy?
I personally think that relying on buying property especially considering the growth in house prices and lucrative buy-to-let yields are making this an appealing option for many, particularly as paltry annuity rates and excessive charges continue to undermine the chances of getting a decent income from pensions. An exclusive poll of 1,500 people by market research company Consumer Intelligence for The Observer found that one in three is relying on property to help provide an income in retirement. A third said they plan to receive retirement income from one or more buy-to-let properties, while more than half, 55%, said they would sell their own home and use the money to pay for retirement. One advantage of property investing is that you can buy an asset worth £150,000 with a 25% deposit and borrow the rest. If the value increases by 3% a year, your gains effectively quadruple. Bear in mind, however, that if property prices fall, the losses can be catastrophic. There are pitfalls to relying on returns from property. Prices aren't rising everywhere and transaction costs to buy are very high, including stamp duty, legal fees and estate agents' fees. Vacancy rates can eat away at returns and some tenants can be a headache. Owning a second or third property is also not tax efficient. You have to pay capital gains tax on any increase in value when you sell, and income tax on the rental income, although some of these expenses can be offset. Thats mostly all I have to say on the subject. Ow and remeber that the big advantages of a pension though are employer contributions and tax relief. You get initial tax relief, so your investment is given an immediate boost.
I believe that buying property in located in a good place where you can rent it out would be a good investment. Good thing is after making the down payment and acquiring the property, you could get a tenant and the rent they pay can be used as your monthly mortgage payments. That would free up the rest of your cash which you could save up and buy more property and in retirement you'd live off the money your property makes. You won't have to sell it unless someone makes an offer you can't refuse.
In my opinion, buying property and renting it out is a very good move. Just make sure not to miss paying your mortgage in order for it not to be taken away from you. Good luck !
I believe in diversifying investments and certainly, investment in a real estate property is a smart investment if you know your way about it. It's a big risk and that is why you must only take it after making a careful study of the market, the location, and the source of funding among other things. I've never invested on a pension plan because I realized that those being offered by stable companies have very conservative returns that they don't justify keeping the money out of my control. I am contributing a monthly mandatory amount which is matched by my employer to the government's social security agency and that's all the pension I am relying upon at my retirement age.
