Have your cake and eat it: Choose commercial property and a pension to plan for your retirement

Property has long been a popular investment choice for both the asset savvy and the investment shy alike.  Those who understand a broad section of the financial markets know that property, given time, only goes up.  Few things rival it for consistent growth over time and the potential to deliver great returns, irrespective of what the other markets are up to.  Those who feel a bit less confident about these things at least feel comfortable with property.  It’s an asset class that is familiar to all home owners and it’s bricks and mortar so you can touch it.

But, it’s getting a lot tougher for existing landlords to rely solely on property and more specifically, buy to let agreements, to accumulate wealth and build their retirement nest eggs.  Recent, successive changes to existing legislation and the introduction of new laws and rules have served to discourage investment in second homes.  Largely promoted as initiatives to ‘free up’ up more housing for those struggling to get onto the property ladder.

The changes made to legislation affect all areas of the buy to let process including increases in stamp duty as well as costs for borrowing.  Therefore, regardless of your view on this, one thing that’s beyond dispute is that it’s taken some of the shine off this everygender class of investment.

So what’s next for these landlords and for the very idea of property ownership as an investment?  Well, our view is that generous rental yields still look pretty attractive and at least property will always have that comforting familiarity about it.  But, maybe it’s time for those already in this sector, as well as those toying with the idea of getting involved to tweak their thinking.  Perhaps there’s a better, smarter way to invest in property, build a portfolio and prepare for retirement: Commercial Property is the new Residential Property and comes with the massive advantage of being compatible with a pension scheme.

Legislative changes that came into effect last year have removed many of the less attractive features of this option, leaving it largely free of limitations in terms of access to capital and the ability to factor in other beneficiaries.

And because a pension scheme is just so much more efficient from a tax perspective, there is likely to be greater uplift on the value of the underlying asset and increased power to pay down debt.

There are numerous reasons why property investors, formerly and currently enthral to the residential sector should take an open-minded look at the commercial sector and we’ll be rolling out more thoughts, missives and facts on this over the next few months.


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