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Valuation – Property vs Pension

20th September 2019

Your retirement should give you the opportunity to kick back and enjoy a well-earned rest, so

ensuring your finances match up with your ambitions is important. Retirement planning is something many of us put off however, with the right strategy in place, you can plan for the future confidently and look forward to a comfortable life.

There are many retirement investment options. Whilst most use pensions to guarantee an income after retirement, investing in property provides a lucrative alternative for those looking for capital growth and regular income. As experienced Commercial Property Estate Agents for Staffordshire, Cheshire and Shropshire, we have been helping people realise property investment opportunities since we opened our doors.

Is buying a property right for me?

There are advantages and disadvantages associated with buying a property versus taking out a pension for retirement planning. Due to volatility in the stock market and other assets that most pension funds invest in, property has been seen by many as a more stable alternative.

If you are interested in commercial property, there are various ways of buying a commercial property that need to be considered from a taxation point of view. Some investors will simply buy a property in their own personal name, others will acquire the asset through a Limited company, and many will buy through a SIPP.

What is a SIPP?

By using a Self-Invested Personal Pension (SIPP), you can make commercial property work for you when planning for retirement. A SIPP is a special financial product or tax wrapper that affords you greater freedom and flexibility when handling and cashing in on your commercial property investment.

Unlike a standalone commercial property investment, a commercial property investment held in a SIPP is eligible for tax relief and is also exempt from capital gains tax when sold. If you want to hang onto your commercial property into your retirement, a SIPP ensures any rent you receive is exempt from income tax allowing you to keep more of the profits.

What type of property should I buy and what else do I need to consider?

There are many different types of property that an investor could buy. In the broadest sense there is the choice between residential and commercial. Residential property tends to produce a slightly lower return on investment (ROI) but this will often be balanced by greater capital growth over time. Residential property cannot be brought through a SIPP though, so there are some tax disadvantages which need to be considered.

There are many different types of commercial property that you could invest in. On a most basic level there are shops, offices and industrial buildings, but there are many other types of property to include leisure facilities, hotels, medical centres to name but a few. The type of property you choose will be influenced by many variables like price, ROI, how long the lease is for, the prospect of re-letting the property, its age and so on. All these factors need to be taken into consideration and will influence the price that an investor will be prepared to pay. This is where the assistance of a local surveyor can prove invaluable as they will be able to advise on many aspects regarding the viability of the property and in turn what you should pay of it.

You will also need to consider who is going to manage the property and deal with the collection of rent and carrying out periodic checks to ensure that the tenant is looking after the property. This is another area that a surveyor can assist with and as well as helping to manage the property they will also be able to advise on matters such as rent reviews, lease renewals and what to do when a tenant wants to leave.

Many people are also attracted to commercial and residential property as it represents a tangible asset. Something you can see and touch and isn’t just a balance on a sheet of paper. The value of property is also less volatile during changing economic climates as opposed to stocks and shares, although values can of course go down, which happened during the last recession, especially with residential property.

How can I get started?

Once you have sought independent financial advice and decided what type of property you want to buy you would be wise to seek the assistance of a local surveyor. Someone who understands property investment, will be able to advise on values and the inevitable pros and cons of the property you are interested in. A local agent will also be able to help you find a property that meets your criteria and negotiate the purchase price on your behalf if you prefer. If you don’t want to deal with the day to day management of the property the surveyor will be able to deal with this aspect too, enabling you to concentrate on other matters.

For advice and guidance on all of the above and many more aspects regarding buying and managing commercial and residential property please contact us today to discuss your requirements.