Can BTL really deliver better returns than a pension?

Can BTL really deliver better returns than a pension?

Despite the government’s recent tax hikes and tougher criteria for mortgage lending, over the long term, the right property investment can provide an enviable pension pot.

According to Armistead Property, there are plenty of reliable surveys that show that despite the property market being more risky than pensions, property is nevertheless, king.

Though pensions will beat a portfolio of just one property, those investors who are willing to take more risk, by taking out a mortgage and managing multiple properties, have the potential to exceed a pension pot.

Data from AJ Bell reveals how much £100,000 would grow (in capital and returns) over 10 and 20 years in three scenarios. Using historic and housing stats, the projections compare investing in a pension (assuming a basic rate taxpayer) with someone buying a single buy-to-let property without a mortgage and with someone buying three properties with a total mortgage borrowing of £300,000.  The original £100,000 is split into three where each third becomes a 25% deposit on a property. Stamp duty, tax and other costs are factored in with the property investments.


Value of Investment Over 10 Years

Annual Income Over Period (Pre-Tax)

Value of Investment Over Another 10 Years

Buy-to-Let (1 x property)




Buy-to-Let (3 x properties)




Pension drawdown after first 10 years




Peter Armistead, Director of Armistead Property comments: “The research shows that three buy-to-let properties produce £42,000 more than a pension over the 10 years.  However, property investment comes with greater risks such as fluctuating house prices and capital growth; void periods; fluctuating rents, maintenance issues, tenant management issues etc.  Property is definitely a long term investment and does have many drawbacks as an asset class which a pension doesn’t, the most notable one being lack of liquidity.

In an ideal world, people should be investing in both a pension and property from as early an age as possible and ideally from your 30’s.  It is advisable to spread the risk and have investments for the future in more than one pot.

In my 20s, I had a normal day job before becoming a full time property investor in my 30s. During my 20s, I managed to save up the deposit for my first house.  I lived in that for a few years, then remortgaged it and took the cash and bought a second place.  I kept the first property, rented it and lived in the second.  Two years later, I did the same again.  After six years of doing this I had four properties worth over a million with £300,000 of equity.  All of this came from an initial £30,000 which I had saved up. That was the 1990s, but the general principles still hold true today.

I would definitely advise having both a pension fund and investing in real estate, but it’s important to consider the two in separate terms.  If you are using a managed pension fund then you don’t need to be hands on with that investment.  Property on the other hand, requires you to actively manage it and treat it like a business not just an asset class.  If you don’t want to take up the day-to-day issues with the property, then you can (as most investors do) instruct a lettings agent to do all of this work for you, but you will still need to manage the lettings agent.”

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Tony Gimple
Tony Gimple 09 Dec 2017

Linking professionalism to limited company borrowing is a flawed concept. Despite S24 etc., limited companies are the most tax inefficient way of running a property business and leave borrowers seriously...

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

It's normal. If you plan to buy a house in one of the most beautiful spots in the country you should pay a high price.

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Evelyn Attwood
Evelyn Attwood 01 Dec 2017

I think that the situation will be the same at December.

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Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

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richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

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Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

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maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

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maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

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zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

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Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

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Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

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RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

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