The property pension plan
Pensions are in the news again – and not in a good way. According to the Financial Times the Government is being a teensy bit cagey about its commitment to ensuring that pensions would continue to rise higher than the cost of living. Until now pensions have always risen in line with inflation, earnings or £2.5% – whichever is the highest, aka the “triple lock guarantee”.
But with the economy the way it is, should we be looking around for other ways to fund our old age? Well yes, says Vicki Wusche, a self-made businesswoman who believes that the way to prosperity is paved in bricks and mortar.
Vicki, a former college lecturer, began her property business by pooling together her own savings with those of her partner, sister and brother-in-law in 2008 – just before property prices crashed. Between them they bought a three-bedroomed house in Liverpool for £75,000, which they spent £4,500 doing up then rented for £550 a month – a 13% return on their investment. And that was while they were learning and still making mistakes, she said.
Since then she has not stopped buying property – and though she is loath to bandy figures about she and her family now own 22 properties, bringing in an annual rental income in six figures.
She is so passionate about her business that she now spends much of her time advising other people to follow her footsteps and has written ‘Property for the next Generation’ to show people how to get started. “I always say that if you spend a pound you have lost it forever – if you invest a pound you put it towards the goose that lays the golden egg.” she says. “Once you’ve seen how you can create an income from property you won’t want to spend money on clothes and shoes any more, you’ll want to start saving for your next house.”
It’s time we started looking at property in a different way, she believes, especially as so many people are struggling to buy their first home. Rather than trying – and often failing – to buy property where we want to live, she advises buying where we can afford and renting it out.
Tempted? Here are Vicki’s top five tips for getting started with your own property portfolio.
1. You don’t have to live where you own and you don’t have to own where you live.
If you can’t afford to buy your dream home in your dream area then how about buying a property in a cheaper area that you can afford and then using the income to help you rent your dream home in the perfect location. Who says you have to live in the property you own?
2. Never sell a house – convert the mortgage and rent it out for a profit.
If you need (or want) to move – don’t sell your property. Instead, explore the cost benefit of renting your property and moving to a more suitable property that fits your needs that maybe you don’t actually buy – you just rent.
3. Property investment is a sensible business decision that can help your family become more financially secure.
Property investment is a professional and profitable business if undertaken with care and expert guidance. There is a lot of legislation and it changes all the time, however there are organisations like the National Landlords Association and the Landlord Accreditation Scheme that can offer advice, guidance and education.
When you work out the interest you are earning on your savings compared to the interest that can be earned though property investment, especially if you buy outside London where return on investment (ROI) can reach 10-20% (depending on the investment strategies used), it makes sense to explore what property investment can do for your family and your financial security.
4. Save your family money and buy smaller properties outside London for rental purposes and use the income to create the lifestyle you want.
Research by Santander states that four out of five young people can’t afford to buy without help from their parents. Don’t let your children remain trapped at home. Rather than encouraging them to buy their own home, encourage them to buy an affordable rental property that will give an income so they can get on the property ladder that will take them to their dream home via income-supported rent along the way.
5. Start preparing now – don’t wait.
Vicki worked out that £150,000 in a pension (after 10 years’ of contributions) is only going to provide her family with £7,200 per annum. But by investing £150,000 wisely in property she can get between £1,400 and £2,400 net income per month. The income will start now and every month until retirement and then for years beyond, providing the properties are well managed.