Could an Ampthill & Flitwick rental property save you from a pension disaster?

Retirement is getting closer if you were born in the early 70’s or late 60’s, even if you haven’t given it much thought yet. The current pension rates are £115.95 per week for singletons, and £231.90 per week for couples (£12,118 a year), and this is providing your national insurance contributions are up to date. Would you be able to survive on those amounts..? It doesn’t fill me with joy looking at them.

So is there a way to try and help you boost this figure?

Buying an investment property in Ampthill or Flitwick could be an answer. A lot of people in their 30’s have a smaller one or two bedroom place, then sell that one and buy a bigger and bigger property as their family or needs grow. However, if these smaller properties could be kept as buy-to-let investments then they could very well be an alternative pension fund.

Let’s look at some historical property prices for Central Bedfordshire:

Flats – the average price for a flat in January 1995 was £34,025. Fast forward 20 years and the average price for a flat in January 2015 was £104,481. This is a 207% increase in value, which works out at 10.3% per year on average. So, if we were to assume the same 207% increase over the next 20 years for the latest data available (September 2015’s value of £118,890) then we have a figure of £364,992 for September 2035.

Semi-detached Houses – using the same data we can take the average price paid for a semi in January 1995 as £64,757. Whereas the same average price in January 2015 was £198,851 – the same 207% increase. So let’s take September 2015’s value of £212,951 and increase that by 207%, making a whopping £653,759 predicted for September 2035 if we follow the same path as the last 20 years.

Let’s now assume you used a 25% deposit to buy a Semi-detached House in January 1995, costing £16,189. If you had a repayment mortgage running for 20 years and that mortgage was paid off in 2015, you get an increase of £16,189 > £212,951 with no mortgage left at the end, making a massive 1215% return!

Of course nothing is plain sailing for us though, there’s maintenance and management costs to bear in mind, interest rates could rise sharply and values could also go down. We can see early 2008 was a peak in the market here (Just before the credit crunch) at £194,463, and average house prices in the region dropped by 17.74% to £159,950 in May 2009. But the latest average price data for September 2015 in our region is now £210,163, meaning an overall 8.07% increase since the 2008 peak.

What can we conclude from all this? History shows property prices have always risen over long periods, and they’re a good solid investment when viewed this way. If you’re looking to make money quickly then buy cheap, add value and sell on as fast as possible. But if you’re looking for really big gains then hold for the long term – the longer the better!

If you'd like a chat about anything property related then give me a call on 01525 838848, send me an email at graham@1st-house-lettings.co.uk, or drop in for a coffee at 1st House Lettings, The Rufus Centre, Steppingley Road, Flitwick, MK45 1AH.

(I must point out that there’s absolutely no guarantee that prices will increase by 207% from 2015 to 2035 – Solicitor told me to write this bit!)