Is buy-to-let property investing better than pension investment?

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Many people are looking at where to invest money to provide an income when they retire. Some claim that investing in property will provide better returns than investing in a pension fund.

Many people will have income from both the state pension and a work pension when they retire. For many the two pensions combined are not enough to fund a comfortable lifestyle. Buy-to-let property is an attractive investment. Property can provide a regular rental income and will usually increase in value over the years.

According to a Telegraph article from this month, John Davis, of online letting agency Upad, has put all his retirement savings into 20 buy-to-let properties and has no other pension investments. He claims:

“For committed landlords with a long-term vision and carefully planned financial management, residential property remains a sound investment strategy.”

Property investment is not for everyone though, as there are costs to consider. A property purchase can be expensive, and there will be a 3% stamp duty charge. Lenders require a large deposit, typically around 25%. There will also be maintenance costs. A commercial mortgage for a buy-to-let investment will require regular monthly payments.

For investors who can afford the costs, property historically has outperformed pension funds. Property is also attractive because property can be sold at any time to release money, though sales may be subject to capital gains tax.

Many financial advisors recommend diversifying by putting some money in investment funds and some in property.

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