Buy-to-let investment will double your income in retirement

Property It’s better than any pension plan I know

Many property investors have the ultimate goal of funding their retirement. Most don’t realise just how much better off than their neighbour their property investment is going to make them, especially using the 3+1 plan for property investment.

What is 3+1 property investment?

Let’s say that your ultimate goal is to fund your current lifestyle through property investment. All you need is four properties to do this, and one of those is your home. In most countries around the world including the UK, we tend to spend one-third of our income on tax, one-third on living, and one-third on rent or mortgage.

Let’s say you retire without a traditional pension, but instead, own three investment properties that now have no mortgages on them. Plus, of course, you’ve finished paying your home mortgage. Before retirement, and before you paid your mortgage, your finances may have looked something like this:

  • Gross income: £2,100 per month
  • Taxes: £700 per month
  • Home Mortgage: £700 per month
  • Living: £700 per month

On retirement, your tenants will pay, say, £700 per month each in rent. Your financial position will now look like this:

  • Gross rental income: £2,100 per month
  • Taxes: £700 per month
  • Living: £1,400 per month (remember you no longer have a home mortgage)

Your disposable income may double. That’s better than almost any employee pension going. It’s also better than any private pension I know. In fact, to produce the same amount of income from a private pension, you’d need to have a pension pot of more than £330,000 when you retire.

When you consider that the average pension pot in the UK is just £91,000, you begin to realise why buy-to-rent investment is the new pension planning. The average person simply can’t afford to save towards their retirement (unless they put away all the income they spend on living). Buy-to-let investment is self-funding – the tenant pays the mortgage.

In retirement, buy-to-let investment doubles your income again

Having seen how buy-to-let investment will allow you to double your disposable income at retirement, now let’s look at what happens through retirement.

If you had saved a pension pot of £330,000, you’d probably buy an annuity as the vehicle to pay your income in retirement. If you’re lucky, you’ll get a 5% return (around £1,400 per month). The problem is that your income won’t grow. It remains at £1,400 per month until you die. And when you die, anything remaining in the annuity pot is gone – the life company keeps it. You can have special terms written into an annuity, such as indexation of income and a spouse’s pension; but to do so your starting income will be lower.

Buy-to-let investment doesn’t work like this. Average rents are increasing each year by around 3% in the UK. This means that in 20 years, the income amount will have doubled.

Plus, the value of the properties is still there, to be passed on to your children and grandchildren.

When you invest with the 3+1 plan property investment strategy, you’ll probably double your disposable income when you retire, and then probably double your disposable income through retirement. And your investment is likely to have been self-funding.

Ask your financial advisor if they can show you an investment that does the same. When they tell you this is impossible (or tell you it is but then they start explaining the risks), give us a call on +44 (0)207 923 6100, and we’ll prove it is not only possible but being achieved by our clients every day.

Live with passion and fun, 

Brett Alegre-Wood

Brett Alegre-Wood
July 27, 2016

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