Saturday 28 November 2015

Could your Royal Tunbridge Wells property save you from Pension oblivion?

If you were born in the early 1970’s or late 1960’s, if you haven’t started to think about it yet, retirement is closer than you think. In fact the number of years you have left to work is less than the number of years you have worked. The basic state pension is worth £115.95 a week for a single person in 2015/16 (or £6,029 a year) and £231.90 a week for a couple (£12,118 a year) as long as your partner has paid their stamp (although there are certain get of jail cards if they haven’t). 

As a household, could you live on just over £12k a year?

However, could the property you are living in in Royal Tunbridge Wells save you from poverty when you reach retirement? You see, a regular income is vital in retirement, and the bricks and mortar you own in Royal Tunbridge Wells could provide a way for you to finance life when you retire.

If you are in your 30’s, instead of saddling yourself with bigger and bigger mortgages, going from your first time buyer flat, to a terraced, to the semi and then the large detached house, you could instead keep your terraced or small semi, turning it into buy a buy to let property, let the rent pay the mortgage and then rely on capital growth to provide you with a lump sum when you sell the property and retire.  One of the biggest plus points of buy to let is what is known as leverage. Let me explain ... say you have a deposit of 25% and the value of the property rises by 3% a year, your gains in fact multiply to 12%.  However, if property prices drop, 'leverage' can be catastrophic, as losses will also be multiplied. Property values have dropped a number of times in the last 50 years, but they always seem to bounce back ... property must be seen as a long term investment.

Let me explain how leverage could work for you. If you had bought a Royal Tunbridge Wells house in Spring of 1983 for £50,000, using a 75% mortgage and 25% deposit, (meaning your deposit would be £12,500). Today, that Royal Tunbridge Wells property would have risen in value to £361,895, a rise of 623.8%. However, when you look at the growth on just your deposit, the rise is even better ... instead of 623.8%, we see a rise of 2795% (remembering that the mortgage would have been paid off).

However, buy to let is not all about capital growth and in retirement, income is more important than capital growth, as rent is the key to a steady income.

So surely the best strategy is to buy those Royal Tunbridge Wells properties with the high rents (when compared to the value of the property). These are called high yield properties in the buy to let world because the monthly return is so much greater. So surely they are the best in Royal Tunbridge Wells? Possibly, but the properties that offer these higher yields (in the order of 5% to 6% per year) tend to be in such areas as Sherwood in Royal Tunbridge Wells, historically they haven’t offered such good capital growth when compared to the town average, have a higher tendency for void periods and such properties tend to attract tenants that have a greater propensity to be high maintenance.

Therefore, if a high maintenance rental portfolio wasn’t for you, another strategy could be buy a property with relatively smaller rental returns of 3% to 4% per year (i.e. lower yields), but in a more up market area such as Langton Green. Properties such as these tend to suffer from less void periods (i.e. when there is no tenant in the property paying you rent) and they historically have had better long term capital growth when compared to the town average.
Every landlord is different and every property is different. All I suggest to you is do your homework.
As regular readers will know, I am happy to share my knowledge and experience of the Royal Tunbridge Wells property market, high yields, high capital growth, what to buy, what not to buy and where to buy in the Royal Tunbridge Wells Property market can always be found on the Royal Tunbridge Wells Property Blog 


Bottom of Form


4 comments :

  1. Ajnara Ambrosia is the latest housing project at sec 118 of Noida by Ajnara Group offering flats with great features and facilities like pool, gym, club etc.

    ReplyDelete
  2. Logix Blossom Greens is another famous modern-day residential project launched in Noida expressway sector-143 by Logix Group Noida.

    ReplyDelete
  3. Supertech E Square is a wonderful project in Noida best location in sector 96 Expressway mind blow Article about Supertech E Square.

    ReplyDelete
  4. B00KinG @85O6971685 New launch Residential Plot Prime View Sector-166,Noida Expressway. The plots are present in 50, 100, 150, 200, 300, 400, 500 SQ. Yards and you can select your preferred plots as your preliminary need. Call Eight five zero six nine seven one six eight five. The plots price is 20,000 per sq yd. Its negotiable. • Metro Station coming across the road in Sector-143 & 144.

    ReplyDelete