Buying Property To Put Into A SIPP Or A REIT
You can buy a tax liens property which is then transferred to a trust and ‘wrapped up’ in a pension scheme which will yield you, with any luck, an excellent return when you retire.
Pros: When buying tax liens in this manner, such investments are protected from the taxman and thus, as tax-free vehicles, yield far more money than they would if you had to pay tax on them. Investments put into SIPPs can be bought and sold in the same way as other properties, and rents can be received from buy-to-let investments – all tax free.
You can bequeath these investments to your heirs, thus creating the famous, or notorious, ‘trustafarians’. You can also avoid paying inheritance tax, or your executors can, when you die.
(PRWEB) May 26, 2005
Property Investment: One of the Biggest Business in the World
FACT: More than 1,800.000 Europeans will buy a second residence in the next five years; 1,300.000 of them will be experienced investors.
FACT: In the next five years 52 million baby boomers will be looking for a retirement spot, requiring sun, sea and a relaxed lifestyle. Only one problem: high demand means high prices.
FACT: The three most popular retirement destinations world-wide are California, Florida, the Spanish Costa del Sol.
Due to bad or non-performing stocks and shares, ever decreasing pension funds and low saving rates, people have increasingly been looking for alternatives to invest in their future. Properties are rapidly becoming the new pension. With the recent rises in properties, people have had a lot of equity in their current properties to invest with. Not just content with investing in the future, many people are investing for the present.
Peter Gordon, Prestige Management PLC Managing Director, reports that the bonanza in property investment continues to rise at least until 2010. The highest returns (25%-30% per year depending on location), can be gained by buying off plan; getting in at this stage ensures rock bottom prices with the certainty of making a profit before completion of the building.
Given this, Prestige Management PLC is proud to announce its latest investment and advisory service for the Spanish property market.
Prestige Management PLC is a global real estate investment management company that provides services worldwide to a diversified client base...
Cons: By ‘wrapping up’ your investments, you are not only protecting them from the taxman, but also from yourself and your heirs! The point about putting property – or indeed, any other type of investment – into a SIPP is that you can never yourself get at the bulk of the capital.
The reason for this is that the investment does not belong to you any more, but to a trust you have created. You can administer the trust, but you remain a trustee, not the owner. As such, you only benefit from the interest or yield received.
Also, these vehicles for buying tax liens need professional management and you will have to pay a (usually not inconsiderable) fee to fund managers. Another aspect is that, really, you need to be quite rich to invest in a SIPP There are also upper limits to the amount and type of property you can put into a SIPP Because there are many rules, it is imperative to take professional advice, and you need to know that your adviser is completely trustworthy.
REITs – Real Estate Investment Trusts – introduced into the UK in January 2007, are companies which own and manage income-producing property. This can be commercial or residential and the idea is that the bulk of the income is distributed to investors.
Instead of investing directly in property, you put your money into a REIT which buys, manages and lets out property on behalf of the investors. REITs were first established in the United States, then migrated to Australia and finally to the Netherlands as a means of investing in a property portfolio.
REITs are closely linked to buy-to-let, and – so property experts maintain – are set to change the face of property investment in the UK. As you invest in the company rather than the property itself, REITs are an indirect means of property investment, rather like stocks and shares, although there are several important differences.
As REITs get going, they will probably appeal most to those who feel they understand bricks and mortar, but don’t want all the hassle of dealing with it directly.