Purchasing property (buy to let) with pension funds

[matrixworld]

Hey folks, hope everyone had a good Christmas. Have a question for you.

Has anyone invested in property through their pension funds? I'm thinking of contributing more AVCs in the coming years and may purchase a property (buy to let) via the fund with 50% down. Currently have 80k in the pension so will likely need at least 150k.

Can't link it but if you search YouTube for "PensionProperty.ie" there is more information on their channel.

Not sure how legitimate this is as i haven't heard much about it among the general population.

Age: 33
Spouse’s/Partner's age: n/a

Annual gross income from employment or profession: 95k

Income from rent-a-room: 14k

Monthly take-home pay:
From employment: 4,700e (200e to ESSP, 150e AVC)
From rental: 1,100e

Type of employment: e.g. Civil Servant, self-employed: Private

In general are you:
saving: 2.5k
1,250e towards extra mortgage payment
1,250e investments

Rough estimate of value of home: 345k

Amount outstanding on your mortgage: 138k

What interest rate are you paying: 2.1%

Other borrowings – car loans/personal loans etc: No

Do you pay off your full credit card balance each month? No credit cards

Savings and investments: 60k

Company stock: 15k
cash: 5.5k
Crypto: 20k
Stocks: 10k (mix of SP500, commodities etc)

Do you have a pension scheme: Yes, Zurich, 80k so far

Do you own any investment or other property?
No but this ties into my question, not sure whether to invest in Ireland or abroad

Ages of children: 3.5

Life insurance: Mortgage protection

What specific question do you have or what issues are of concern to you?

Is it a good idea to use pension funds to purchase property for retirement?

 

[matrixworld]

Also planning on renovating my current house at the cost of at roughly 130k possibly in 3 or 4 years, how should i fund this, would i need to remortgage or get a CU loan? Thanks

 

[Brendan Burgess]

In general, it's not a good idea to buy a property through an investment fund.

1. Your pension fund should be diversified rather than concentrated in one asset class or even just one asset as you propose.
2. Managing property is difficult with bad tenants, regulation etc. I can only imagine that adding a layer of bureaucracy to it would give you a lot more traps to fall into.
3. You should not be increasing your risk by borrowing within a pension fund.
4. Borrowing within a pension fund is higher than direct borrowing.

Brendan

 

[Brendan Burgess]

Savings and investments: 60k

Company stock: 15k
cash: 5.5k
Crypto: 20k
Stocks: 10k (mix of SP500, commodities etc)

Also planning on renovating my current house at the cost of at roughly 130k possibly in 3 or 4 years,

Fund it from your savings and investments.

When you get closer to doing the renovation, you should convert your savings to cash just in case a sudden stockmarket fall hinders your ability to do the work without borrowing.

You should also open a credit union account, so that if you do need to borrow, you can get the money relatively easily.

Brendan

 

[Brendan Burgess]

I'm thinking of contributing more AVCs in the coming years

Given that you intend to renovate, you should stop making AVCs and conserve your cash for the renovation job.

When the renovation is done and any borrowing paid off, then max your AVCs.

Brendan

 

[time to plan]

In general, it's not a good idea to buy a property through an investment fund.

...

2. Managing property is difficult with bad tenants, regulation etc. I can only imagine that adding a layer of bureaucracy to it would give you a lot more traps to fall into..



Brendan

How would this even work? Does the pension fund even have sufficient standing as a legal entity to enter into a contract as landlord with a tenant and to get the necessary insurances and pay for all the running costs etc? Would there meed to he a Ltd Company that owns the property with the pension fund as company owner? Does anyone do this?

 

[matrixworld]

Fund it from your savings and investments.

When you get closer to doing the renovation, you should convert your savings to cash just in case a sudden stockmarket fall hinders your ability to do the work without borrowing.

You should also open a credit union account, so that if you do need to borrow, you can get the money relatively easily.

Brendan

Thanks for the advice, will take heed and hold off maxing the AVCs and focus on cash. With the Credit Union 20 years and save a very small amount every month so hopefully no issues getting the money if needed.

There's very poor rates on savings still with most places but have heard good things about Trade Republic offering 4% on savings, has anyone any experience with them?

 

[Brendan Burgess]

Does the pension fund even have sufficient standing as a legal entity to enter into a contract as landlord with a tenant and to get the necessary insurances and pay for all the running costs etc?

Yes. Pension funds frequently own property.

But it just adds an extra layer of difficulty when tenants are trying to avoid paying or avoid having their leases terminated.