Property: The secrets of the buy-to-let pension pot
One canny investor is putting her cash into property rather than a pension.
Fiona Brown already owns her own home but recently decided to buy a property to rent. ‘Rather than put money into a pension fund, as interest rates are so low I thought it best to put it into bricks and mortar as a nest egg for my future,’ she says.
Brown, 36, isn’t new to buy-to-let. Having moved from Hertfordshire to Lincolnshire to run the family motorsport engineering business, she now rents her Hertfordshire property. ‘It’s a Victorian terrace and I’ve never had a problem renting it out but last year I did have to spend quite a lot of money on some little niggles there,’ she says.
This time, Brown wanted a brand new, maintenance-free apartment. When a friend who lives in Cambridge told her about the city’s rising property prices, she researched the market and decided buying there made sense.
‘It’s easy for me to get to and there’s a captive rentals market,’ she says, ‘because many companies, such as biopharmaceutical company AstraZeneca, are now based there. I could have bought an apartment in London or Hertfordshire and made more in rent but it’s the growth I’m more interested in.’
Cambridge prices are predicted to rise by around 23 per cent in the next five years, according to a recent report by estate agency Savills. Brown took out a mortgage and paid £315,000 for a two-bedroom apartment at Kaleidoscope, the new Crest Nicholson development in the city.
‘It’s well located, an easy walk to the station and I think today’s tenants expect a certain standard and prefer to live in a brand-new property,’ she says, adding that she likes the development’s ‘feel’. ‘It’s right in the heart of the city yet it’s got a certain tranquillity, which I thought tenants would appreciate. This, plus the apartment’s high-spec finish, helped me make my mind up.’
Before renting out her flat, Brown decided to give it a test drive for a night. ‘I only had an airbed but the bathroom was more luxurious than the one I have at home. I loved it there!’ she says.
A lettings agent manages the flat, which is now rented out for the next 12 months to a professional couple for £1,300 per month. ‘I’m pleased with that amount, as it covers the mortgage, but you must factor in maintenance charges,’ warns Brown.
Does she feel there are risks involved? ‘Hopefully not,’ she says, ‘but I can always sell if things go wrong. The hard thing with buy-to-let is finding the right property – but I think I’ve done that.’
She plans on keeping the flat for around five years. ‘The rentals market is a competitive one and if it starts to look shoddy, I might sell and buy a new property. Today’s tenants have high standards.’