There was an interesting article in The Irish Times last week and the age old debate of buying an investment property or investing in a pension . With the Irish obsession with property now back in full swing (after the prices have risen again!), it is a well timed article. I am not a big fan of people buying investment properties, mainly because people put all their money into this one asset which results in a highly concentrated investment portfolio.
In The Irish Times article, they compared the cost of the property and put that money into a pension instead. What they forgot to include was the interest paid to the banks which I calculate at €119,904 over the 25 years. The total cost was €322,810 for a €250,000 property.
I always say to clients that I don’t care what they use for a pension as long as they have something to live off in retirement. The same applies to investment property. They can be a great source of regular income. But before you commit to borrowing and committing funds to an illquid asset, you should build up other liquid assets first, so not all your eggs are in one basket.
What do you think? Do investment properties represent good value over pensions or other investments?