Tuesday 16 May 2017

Top 5 reasons an Edinburgh property beats a pension

I regularly chat with Edinburgh people who have money to invest to discuss how they could put this to work in the Edinburgh property market. Whilst for some this forms part of a larger investment portfolio, for many property has become an alternative to a private pension.

I believe there are many good reasons that people are making this choice. Here’s a few of them:

5) Accountability to yourself

Frankly I, and many others, would rather keep their money where they can see it. I don’t like giving it away to a faceless fund manager to play with (whilst paying them fees, often regardless of performance).

I can touch my properties, I know the market and can make an informed decision as to what property I buy and how it is managed. It’s far easier to track how my properties are performing rather than relying on a pension scheme to ride the right waves to keep up with or outperform the market.

4) Short term income

Property can pay me straight away. Yields in Edinburgh for sensible buy to let properties average five to seven percent which is far better than I can get from a savings account and eventually from an annuity, whilst rent normally increases over time in line with inflation. Hargreaves Lansdown suggest a 55 year old would now receive just 1.9% + inflation or 3.9% fixed for life from their pension fund.  And on top of yields there are long term investment returns ..... see 3) below.

3) Long term investment returns

Property has outperformed all the other main asset classes (which pension funds will track) over the long-term. Monies invested in 1996 would have grown two decades later by 292% in government bonds, 308% in the stock market, 479% in property and 1,305% in property leveraged with mortgage borrowing.

2) Flexibility

Owning property gives flexibility as to whether you use some of the income or equity at any time you need it, rather than it being locked away in a pension scheme with set rules as to when you can access your money.

1) Benefits on death

This is the big one for me and has really hit home as I wade through my late father’s financial affairs.

Many pensions pay outs stop on death whilst some transfer to a spouse at 50% of their original value until their death when they then stop completely. 

Property meanwhile will continue to yield rental payments even on the owner’s death. And perhaps more importantly, it can be passed down to the next generation, rather than vanishing into the pension provider’s coffers instead.

If you think there might be a better future for your money in property and you would like to discuss your options whilst using my knowledge and experience of investing in the local property market, please get in touch.

1 comment:

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