Why Property Is the Best Vehicle to Supplement Your Pension

Why Property Is the Best Vehicle to Supplement Your Pension

This is an excerpt from Chapter 3, ‘Why Property Is the Best Vehicle to Supplement Your Pension’ of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

Research from Saga Investment Services (amongst various others that reached the same conclusions) has found that the UK’s over-50s population needs to double the number of pension contributions they are making, if they are to stand any chance of a decent income through their retirement.

The research found that the majority of those over-50s surveyed believed they’d need an average annual income of £15,200 to get them through their retirement (personally I cannot imagine trying to subsist on such an amount in my old age – especially given inflationary factors).

The people surveyed estimated that they could generate this from a pension pot of £143,830 on average. Their estimated figures fall shockingly short of reality.

A pension pot of this size would actually generate just £7,940 guaranteed income a year (for a healthy 65-year-old) for life. That’s nearly a 50% shortfall. Basically, they need double the size of their pension just to make ends meet.

To have a comfortable life, which respondents identified as being defined by holidays, dining out, socialising, and hobbies, it was calculated that they’d need at least £21,630 (clearly they are less profligate than me). That would require a pension pot of nearly £400,000 – double the respondents’ estimate of £194,000 (which would generate just £10,170 guaranteed income a year).

On their estimated required sum, their pension fund would be exhausted within 12 years.

Poor returns, excessive fees and inconsistent annuity rates: a pension sure ain’t what it used to be. It’s no surprise, then, that people are starting to look for alternative ways of generating money for their retirement. Research suggests that property investment is turning out to be twice as popular as any other form of investment with the over-50s.

The younger generation, too, is turning down traditional pension plans, focusing instead on property investments (and now crowdfunding as a means to access the asset class). As mentioned previously, the number of people choosing – or being forced – to rent, due to the difficulty of getting into the property market, or simply because it’s more convenient in many ways, is rising rapidly.

A pension also has the disadvantages of limited (and badly publicised) choice of annuity provider and the fact the money is inaccessible.

When it comes to cashing in, holders are often disappointed to find that they are unable to access their lump sum when they wish to without severe financial penalties. And despite recent changes, one can only access 25% of one’s pension pot without incurring punitive taxation.

Not only that, as far as I know, the benefits of a pension end when the holder dies. That means you could have saved £400,000 in your pension, purchased an annuity with that, at age 65, and receive £21,000 a year thereafter. But if you were to pass away within a few years your spouse and heirs would receive nothing. The pension company keeps everything.

Clearly, this is not the case if you buy a property, which can be inherited; though the Treasury will, no doubt, steal as much of it as they can. Did I say ‘steal’ – how outrageous, that I should accuse our esteemed government of ‘stealing’ money that has already had tax paid on it at least once before – in the form of income tax, stamp duty, tax on savings interest, dividend tax, etc.

I do apologise. Clearly, it’s perfectly fair for them to take whatever they feel like.

Whilst it is important to start saving for retirement as early in life as possible, the younger generations are waiting later and later before considering their retirement planning. This may be in part due to high living costs and stagnating real earnings amongst the young … or, perhaps, their preference for electronic gadgets, dining out, designer clothes and foreign holidays over prudent saving … Just saying!


To read more about supplementing your pension with property, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

 

Performance Statistics: March 2017

Performance Statistics: March 2017

The figures are now in for our performance statistics from last month. You will see below our summary figures from the dividend, interest and capital payments made in March 2017. You can also see our total cumulative returns from 2013, which you may also find helpful to know.

March 2017

  • Projects paid out against = 20
  • Total value of dividends and interest paid = £217,583.03
  • Total value of capital repaid = £2,015,907.39 (1 x development capital, 1 x bridging loan)
  • Total number of investors paid = 694

Total for 2017 So Far

  • Projects paid out against = 64
  • Total value of dividends and interest paid = £374,095.83
  • Total value of capital repaid = £2,881,907.39
  • Total number of investors paid = 1,714

Cumulative (from January 2013)

  • Project paid out against = 498
  • Total value of dividends and interest paid = £1,509,720.83
  • Total value of capital repaid = £7,887,627.39
  • Total number of investors paid = 10,212

To find out more about investing with The House Crowd, you can register with us by clicking on the purple button below. Alternatively, take a look at our current property investment opportunities by clicking the blue button! Either way, we’re always here to answer your questions in any way we can.

Register Now for more Info

View our Property Investments

 

March Peer To Peer & Development Performance Stats

March 2017 Summary P2P & Development Stats

March 2017 summary and monthly statistics can be seen below.

Bridging Loans 31/03/2017
  Net
Total Amount Lent £14,971,670
Total Returns Paid £458,801
No of Loans 41
No of Loans Repaid 18
Average Loan Period 10
Investor Capital Lost 0%
Average Loan Size £364,658
Average Loan to Value 70%
Average Interest Rate Paid 8.94%

 

Development Loans 31/03/2017
  Net
Total Amount Lent £11,010,571
Total Returns Paid £146,212
No of Loans 16
No of Loans Repaid 5
Average Loan Period 10
Investor Capital Lost 0%
Average Loan Size £688,161
Average Loan to Value N/A
Average Interest Rate Paid 11.69%

You can find all our latest investments by clicking here.


View our Property Investments

How Much Diversification Is Sensible?

How Much Diversification Is Sensible?

This is an excerpt from Chapter Two, ‘How Much Diversification Is Sensible?’ of Frazer’s upcoming book, ‘The Alternative Guide To Property Investment‘. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

In the previous chapter, I mentioned that I go against traditional wisdom as I am not particularly convinced about diversification across different asset classes as one cannot possibly be knowledgeable about all of them and therefore must seek to rely on third-party advisers. If you have no time or inclination to look after your own money this is probably sage advice.

I accept that for most people there are good reasons to do so but, for me, I would point to the fact that one of the wealthiest people I have ever met invests all his money in property. But not just in any property, and not just in one particular area, but in one particular street (in central London). He won’t even consider buying properties on adjoining streets. As far as he is concerned, they are outside his area of expertise. Clearly, specialisation can have its advantages.

Therefore, I am not giving advice, just telling you what I personally think. The consensus of opinion about diversification may be generally sensible for most people but may not be right for everyone, especially for those who are experts in their field. That’s a matter for you to decide.

What I do think is sensible for most people is to diversify and spread your risk (within reason) so all your eggs are not in one basket.

And one reason I believe property crowdfunding is such a beneficial concept is that it allows you to spread whatever available capital you have over a number of different properties so, if a disaster befalls one, you don’t have all your money tied up in it and you still have others to fall back on.

Within the asset class ‘property’ itself, you could, if you wish, diversify your portfolio in a number of different ways. It could include traditional buy-to-let properties, new-build apartments, commercial investments, HMOs (houses in multiple occupation) and ‘fixer-uppers’.

Secured lending and development finance are other options that fall within the property investment umbrella, as you lend out sums to property developers and business owners who own property they can use as security.

Diversification also means a selection of risk profiles. Of course, you should take into account your personal circumstances and lifestyle requirements, as well as your own attitude to risk. Typically, higher risk investments come with the prospect of higher rewards, whilst a safer investment may yield lesser gains.

Buy-to-let has been the most popular option for property investment. Private renting has almost doubled in the period from 2003 to 2015, and in Manchester, it has almost quadrupled, from 6% to 20%.

This means, in theory, that the buy-to-let sector should offer great potential for investment over the coming years. However, as we shall learn later, the traditional way of purchasing single buy-to-let properties may no longer be the best way to capitalise upon this growing market. In fact, it may not be feasible at all for most individuals anymore.

The commercial property market, too, can be a good option.

Investing in commercial real estate can mean:

  • positive leverage (potentially increasing ROI (return on investment);
  • tax benefits (proper structuring can offer an array of benefits tied to interest, depreciation and so on);
  • more control (personal ownership equals control);
  • a hedge against inflation (such property tends to benefit long term from inflation);
  • cash flow and current income (rental income from stable commercial real estate means a potentially steady and predictable income stream);
  • historically strong returns (average annual return: 9.5% sustained over a 20-year period).

You can find out more about commercial property and how it compares with residential property investment later in this book.


To read more about diversification, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

 

The House Crowd Wins Property Wire Awards 2017 Crowdfunding Platform of the Year

The House Crowd Wins Property Wire Awards 2017 Crowdfunding Platform of the Year

Following last week’s news that we had been nominated for the Crowdfunding Platform of the Year in the first annual Property Wire Awards 2017, we are delighted to announce that we won!

Our Property Wire Awards 2017 Win!

As the first property crowdfunding platform in the world, offering diverse property investment products and increasing accessibility to the property investment space, the Global Property News service selected The House Crowd as the leading company in the property crowdfunding space.

We were presented with the award at the ceremony on Old Street, London, on Friday night, alongside many other industry leaders. We met a really interesting mix of people from the industry at large – some we knew already, and some new faces. It was a fantastic opportunity for us to find ourselves amongst such similarly forward-thinking property pioneers.

The awards were extremely competitive within each of the categories, which ranged from Best Buy to Let Mortgage Provider to Best Trade Association and many more in between. There was a real dominance of London-based companies up for nomination, so it was a real joy for us to promote the potential of the Northern Powerhouse.

Recognition For Our Work

This announcement comes just as we reach our fifth anniversary, and we are proud to be recognised as trailblazers in property crowdfunding at this point.

The award is also a great opportunity for us to share The House Crowd’s story to becoming the first in an industry now worth £700 million a year in the UK alone.

We have worked hard to provide an alternative means of investment for those who are increasingly finding themselves pushed out of the property market by legislative changes.

Over the last five years, we have evolved from buying £50,000 terraced houses to offering the large range of investment products we do now, from peer to peer-secured lending to property crowdfunding itself.

We are also introducing a specialist bridging finance service, along with the planned launch of HC Finance and HC Investments websites.

Frazer Fearnhead, our founder and CEO, said:

“We’re proud of what we’ve achieved over the past five years, and Property Wire recognising us as the best is testament to the team’s hard work.

“Despite having to fight through reams of red tape to make it happen, property crowdfunding is already worth £700 million a year in the UK with numerous other platforms having followed in our footsteps.”

Our Investment Director, David Roberts, has also added:

“We are a follower of Property Wire as a great source of property news. It is a pleasure to be recognised by these industry leaders for the work we are doing in the property crowdfunding space”.

Why Invest in Property At All?

Why Invest in Property At All?

This is an excerpt from Chapter One, ‘Why Invest In Property At All?’ of Frazer’s upcoming book, The Alternative Guide To Property Investment. You can register your interest in pre-ordering the book by clicking on the button at the bottom of this post.

Fact: almost everybody wants to be able to retire at some point and enjoy the later years of their lives in comfort.

If you think the state pension will allow you to do that, then, sorry, you are living in La La Land. The government will not look after you in your later years. It simply can’t afford to.

The maximum state pension in 2016/17 is £119.30 per week. Can you live comfortably on that? In fact, can you live on that at all?

It is imperative that you do something to supplement that. Your main choices are:

  • savings accounts
  • a private pension
  • shares
  • property

I will dealing with each of these briefly.

Savings Accounts

We are always being told that keeping your money in a bank account is safe and it’s guaranteed – at least up to £75,000. That is provided the government doesn’t also go bankrupt, which is not as ridiculous as it might sound; it would have happened here in the 1970s had the IMF not stepped in, and just take a look at Greece and Italy and Portugal and Spain … oh yes, and France, to see how vulnerable many governments are right now. I do not believe saving your money in a bank account is in any way a sensible manner to provide for your retirement.

The only thing that is guaranteed is that the value of that money is being eroded year on year by inflation, and given the current rates of interest payable the net value is actually decreasing. Even if you had a million pounds saved by the time you retired at, say, 2% interest, that would only provide you with £20,000 a year income – and that’s before tax.

Pensions

So, let’s look at private pensions…

The days of the final salary pension are long gone, and few, if any, private pensions have delivered what clients expected while some, it’s fair to say, have been outright disasters. The returns, whilst clearly considerably better than a savings account, are still negligible and the only people, in my opinion, who seem to really profit are the institutions that provide them.

We’ve seen pension fund after pension fund collapse, leaving thousands with substantial losses, executives ripping off their firms and employees for millions, and major holes appearing in the entire ‘safety-net’ structure. Robert Maxwell and the Mirror Group and British Home Stores are just two of a number of pension funds that spring to mind.

Please read Chapter 3 if you need convincing that the pension most people have is nowhere near enough to generate an annuity that will finance a comfortable retirement.

So whilst you definitely do need a vehicle to provide for your retirement, it definitely does not need to be an institutional or company pension.

Investing in Shares

Clearly, fortunes can be made in the stock market – if you know what you are doing. If you don’t, then picking the best tracker fund you can find would seem the most sensible option. I would not advocate against investing in the stock market but in my opinion, it is considerably more volatile than property and there are many more factors beyond your control that make it harder to invest in successfully.

Property

Of all the investment options available, I believe property is the one people most easily understand and, therefore, are most likely to be successful with.

I mean, let’s face it, even Goldman Sachs didn’t really understand what they were peddling in the noughties. The more complicated something is, the more likely it is that investors don’t really know what they are doing or what the risks are. They don’t even know what it is they don’t know, so how can they possibly evaluate the risks?


To read more about why to invest in property, you can click below to register your interest in the book. Fill in your details, and once the book is released, we will send you more information.

I'm Interested!

Should You Judge A Book By Its Cover?

Do you think you should judge a book by its cover? Whether it’s fair to do so or not, it’s a fact that people do – literally and metaphorically speaking.

Whether it’s fair to do so or not, it’s a fact that people do – literally and metaphorically speaking.

Designing the right cover for a book is therefore important, and we would love to get your feedback, before making a final decision on which cover to choose for Frazer’s book.

We have narrowed it down to two choices and would be very grateful for your input.

Chose your favourite cover here


To find out more about investing with The House Crowd, you can register with us by clicking on the purple button below. Alternatively, take a look at our current property investment opportunities by clicking the blue button! Either way, we’re always here to answer your questions in any way we can.

Register Now for more Info

View our Property Investments

 

The House Crowd Shortlisted for Crowdfunding Platform of the Year

The House Crowd Shortlisted for Property Wire Awards Crowdfunding Platform of the Year

We are very pleased to announce the news this week that we have been shortlisted in the Property Wire Awards 2017 for the Crowdfunding Platform of the Year.

Property Industry Innovation

There are so many changes going on in property these days. Property crowdfunding (thanks to us, the first platform ever!) is currently worth £700 million in the UK alone, and we are proud to be at the forefront of this great alternative finance innovation. But property is also coming on leaps and bounds across the board, with adoption of exciting new technologies and business models.

About Property Wire

The premier global property news service, Property Wire, holds this annual awards ceremony to recognise companies who are embracing the current changes within the property industry. The awards are designed to champion companies who not only innovate and evolve into the new PropTech era, but also push the boundaries towards a new and exciting future for real estate.

Property Wire focuses on global news from both the residential and commercial property sectors. The website boasts an audience of 70,000 readers, encapsulating everyone from estate agents, property developers and surveyors, to architects and, of course, property crowdfunding platforms!

On The Property Wire Awards Shortlist!

We are thrilled to have been shortlisted this year. It is an honour to be recognised for all the hard work we put into democratising property investment and boosting the supply of high-quality homes in the Greater Manchester area.

We’re shortlisted alongside both Homegrown and Landlord Invest. Both are great platforms themselves, so it’s fantastic to be against such stiff competition!

The awards ceremony is set to take place on 24th March at M by Montcalm on Old Street in London. It’s set to be a good night to get together with fellow property industry innovators, explore other developments within the property industry as a whole, and (hopefully!) pick up an award for our contribution to the property crowdfunding space.


To find out more about property crowdfunding, register on our site for further information (no need to invest straightaway!) by clicking the purple button.

Register Now for more Info

Alternatively, why not browse our current property investment opportunities? That’ll be this button:

View our Property Investments

The Dire Housing Crisis Needs The Help of Property Crowdfunding

The Dire Housing Crisis Needs The Help of Property Crowdfunding

The housing crisis in the UK doesn’t just restrict our ability to provide the much-needed homes the country’s population needs. It’s also, according to Katja Hall, the Deputy Director-General of CBI, costing UK households £4bn a year.

Of this figure, £3.2bn is down to increased housing costs, and the remaining £770m is due to higher transport costs, as inability to live near work drives more people to commute expensive distances from work. This is, of course, exacerbated by soaring fuel prices and train fares.

Housing shortages are also pushing up market rent at a time when, for the majority of households, disposable income remains weak.  The high cost of moving home and lack of decent and affordable housing also deprives businesses of the flexible and mobile workforce necessary for them to grow and thrive. In short, people and businesses are paying the price for our lack of new homes.

We know that we need to double the number of new homes we provide every year to meet demand, and have been falling shockingly short for years.

House Builders’ Hands Are Tied

Combined with difficulty accessing available land for building on, despite only 10% of the UK’s land being developed, access to finance continues to pose a major barrier for small and medium sized house builders, further exacerbating the housing crisis. The government needs to focus its spending on capital investment in housing stock, but house builders also need access to alternative forms of finance in order to make a dent in the provision of new housing.

Secured peer-to-peer lending to house builders offers a marked solution to the problem. Provided house builders can secure planning permission, access to finance through the property crowdfunding industry has the potential to keep house builders afloat, whilst simultaneously assisting with the provision of these desperately needed new homes.

Register Now for more Info

Property Developers Need Finance

Along with the problem of providing new builds, there are also an estimated 650,000 empty properties in the UK, over 200,000 of which have been left empty for over six months. Whilst house builders take care of the situation of building new accommodation altogether, there is also much scope for developers.

Many of the empty homes in the UK require significant renovation, and one of the barriers for developers who would do so is the un-mortgageability of these properties. Properties come up for sale by auction all the time, but without ready access to funding, there is no way for most people to take up the investment.

Bridging finance, again offered within the property crowdfunding model, can tide investors over so that they may make those time-sensitive investments. Peer-to-peer funding for renovation work also opens the doors to small and medium-sized property developers to work their magic and provide modern, high-quality homes.

Equally, straight-up crowdfunded investment projects do the same job of bringing high-quality housing to market.

The Government’s See-Saw Success

Government investment in build-to-rent is promising, with a £45m cash injection for 2,000 new homes in the North being announced late in 2016. However, optimistic news back in October of government promises for 225,000 new homes by 2020 was shadowed by the mention that only 15,000 of these would be ready for habitation by then.

Realising their inability to cope with the housing crisis themselves, the government has recognised the solution that the property crowdfunding industry is offering to the crisis, and has provided significant investment in the model.

We are confident that the property crowdfunding industry will be instrumental in helping to alleviate at least some of the problems with UK housing stock, whilst also offering an alternative investment option for those seeking to invest in the property market themselves.

View our Property Investments

Baby Doomers: A Bleak Retirement Outlook For The Over 55s

Baby Doomers: A Bleak Retirement Outlook For The Over 55s

The House Crowd has conducted a survey of the over 55 age group to ascertain their plans for retirement. The results make for decidedly depressing reading.

Baby Doomers

Those nearing the end of their working years reported a pessimistic outlook for their retirement. 78% of those surveyed said that they are financially unprepared for their retirement, with over a quarter saying that they think it’s too late to change plans and save more.

Just 16% of respondents were confident that their lifestyle will improve once they retire, whilst 37% expected their lives to be worse. The financially secure retirement that we all hope for was considered no longer possible for a full 41%.

State Pension Shocker

Shockingly, it seems that a significant proportion of over 55s will be reliant on their state pension to support them through their later years.

Over half of respondents do not have a personal pension and have no plans to put one in place. Over a quarter have no workplace pension, and – once again – no plans to put one in place.

Once retired, respondents said they’d like £18,235 to live off, but expected just £14,180.

And who’s to blame? 20%, on average, blame the government.

Well, 23% of women do, anyway. Only 18% of men thought the government was at fault for their retirement woes.

Perhaps this has something to do with the fact that fewer women reported being financially prepared for retirement than men. Just 17% of women thought they were on track, compared with 28% of men. Regardless of gender, the results are far lower than anybody would hope.

A Silver Lining

It all looks pretty dismal, but there could be a solution. Frazer had this to say after seeing the survey results:

“These results paint a miserable picture for our Baby Doomers – but it’s not too late for people approaching retirement to improve their situation. By exploring newer investment options, like property crowdfunding, over 55s can benefit from solid rates of return to help make retirement more comfortable.”

The property crowdfunding industry has been around since 2012, and is now worth billions worldwide. Though, as with any investment, there are risks to capital, the potential returns of this method of property investment could mean the difference between a rotten or a relaxing retirement.

Find out more about property crowdfunding as a potential investment choice for your retirement by registering on our site using the purple button below. Alternatively, click the blue button to see our current range of property investment options:

Register Now for more Info

View our Property Investments