If you spend enough time around successful professionals, property comes up.
Again and again.
Especially buy-to-let.
It feels solid. Familiar. Understandable.
And for some, it’s been a lucrative ride. But that doesn’t mean it’s the right vehicle for everyone’s future.
Let's be honest: it's easy to see why buy-to-let became the go-to.
You hear the same success stories over and over - but rarely the headaches that came with them.
There's also the comfort of tangibility.
You can walk past a house. You can touch it.
You can imagine it paying you rent every month.
Much harder to do that with a global equity fund.
On top of this, taking on high levels of debt, as some do, doesn’t feel that risky.
Many people are already used to having a mortgage on their home. It feels normal. Manageable. Even safe. As Anthony Trollope apparently once said:
“It is a comfortable feeling to know that you stand on your own ground. Land is about the only thing that can’t fly away.”
But dig below the surface, and the numbers often don’t stack up the way you think they might.
Plenty of people say, "I don’t need a pension. I’ve got property."
It sounds smart at first. But it's not really a fair comparison.
First, let me say it's also to see why pensions have come in for such a bashing, not least because of the mis-selling scandals of the past that tainted their image.
Comments like ‘ pensions aren’t worth it’ or ‘pensions don’t work’ - are misguided.
After all, a pension is just a tax wrapper. What matters is what you put inside it. And when you invest those funds properly—globally diversified, low-cost, long-term—you access thousands of companies in dozens of countries.
In fact, over the past 20 years the broad global markets have returned around 10% per year on average. That does not sound much, but it equates to doubling your money every 7 years (using the Rule of 72), which by extension means quadrupling your money over 14 years.
Not bad!
Surprising perhaps, but that's the reality.
A well-structured portfolio, as I'll show soon, did a remarkable job during an emotionally tough period for investors, that included three major equity market falls.
Some think of buy-to-let as a way to get more than cash savings offer.
And who can blame them?
Deposit rates have been dreadful, and inflation eats away at uninvested cash.
But the leap from cash to property isn’t small. It’s a jump from one end of the risk spectrum to the other.
Especially if you’re borrowing.
You’re not just investing - you’re starting a business. A geared, tax-reporting, labour-intensive business. And like any business, it comes with operational risk.
It might pay off.
But if you're going into it with just a headline gross yield, a bit of optimism, and some borrowed cash, you're not investing. You're speculating.
Imagine walking into your bank and saying, "I'd like to borrow 3x my portfolio value and stick it in one illiquid asset."
They'd show you the door.
But property investors do it all the time.
Buy a £200,000 flat. Put down £50,000. Borrow the rest. That’s leverage. And if the market goes up 20%, you make £40,000 - an 80% return on your capital.
But if it drops 20%?
You lose £40,000. That’s 80% of your capital wiped out.
And if it drops more than 25%, your equity is gone.
History tells us this isn’t just theory. UK house prices for example - adjusted for inflation - dropped around 30% after both the 1989 and 2007 peaks. Those who were highly geared lost more than their deposit. Some faced years in negative equity.
Let’s talk rent.
The average gross yield on UK buy-to-let in 2025 is around 6%. Sounds decent. The average rental amount is around £1,300 pcm, which in turn implies an average property value of around £260,000 (ONS © Private rent and house prices, UK: April 2025).
But gross yield is not what you actually earn.
Start with stamp duty, legal fees, repairs, furniture, inspections, certificates. That's just to get started.
I covered the hidden costs of property ownership here.
Then come the annual costs: insurance, service charges (if leasehold), ground rent, maintenance, and agents' fees (typically 10-15%).
Boilers break. Roofs leak.
Kitchens age. It adds up.
Add void periods. Add mortgage interest (currently around 4.5% on a 75% LTV). Then deduct tax.
Scour online forums, and you’ll find most seasoned landlords suggest budgeting 30-35% of gross income for running costs - before tax and mortgage.
Once it’s all said and done, the net yield, even without a mortgage, might be around 3%. With a mortgage, it's often lower.
And if interest rates rise? That yield can vanish. Fast.
Many investors rely on property appreciation to make the maths work.
Because the income, after costs, often isn’t enough.
But house prices don’t always go up.
And when they go down, leveraged investors feel it most.
If interest rates increase by just 0.5%, some landlords are looking at break-even or worse. And tenants won’t always stomach rent increases to cover your rising costs.
In the early 90s, landlords were putting money into their investments each month to meet mortgage payments. Some eventually had to sell at a loss.
It took over five years from the 1993 bottom for prices to reach their old highs again.
Longer still after inflation.
Let’s step back.
What do you really want?
If it’s a return on your capital, you should be looking at total return: yield plus capital growth.
Buy-to-let might deliver 2% net yield (post-tax) and hope for 3-4% capital growth.
Meanwhile, a global portfolio of equities and bonds - held within a pension, with annual costs of under 1% - might get you a similar or better return, without the hassle, the tenant calls, or the concentration risk.
Buy-to-let versus traditional portfolios – simulated strategies after inflation 1981-2024
Global equities Albion World Stock Market Index (AWSMI). Balanced (60/40) = 60% ‘Global equities’, 40% Albion 2.5Y UK Constant Maturity Bond Index. Costs of 1% have been deducted from the ‘traditional’ portfolios and portfolios were rebalanced back to the original mix once a year. UK house prices = Nationwide House Price Index.
And with a pension, you start with a huge advantage: tax relief.
A £50,000 pension contribution grossed up to £66,667? That’s not available on your buy-to-let deposit.
Buy-to-let is inherently concentrated.
One house.
One zip code.
One market.
A pension portfolio is global by design. It owns thousands of companies, across sectors and regions. If one fails, the rest carry on.
You also get liquidity.
Simplicity.
And, critically, time back.
You can earn more money. You can't earn more time.
Buy-to-let has worked well for some. Especially those who bought decades ago, leveraged at low rates, and rode a rising market.
But the environment today is different.
Yields are tighter. Costs are higher.
And the risks?
They haven’t gone anywhere.
It’s not a bad idea.
But it’s no sure thing.
And it certainly isn’t passive.
If you enjoy it, great. Just go in with eyes wide open.
Treat it like a business, with a clear plan and plenty of buffer.
But for most people? A diversified, low-cost pension portfolio offers better risk-adjusted returns, more flexibility, and far fewer headaches.
And maybe more importantly, it frees you up to focus on the things that really matter.
Because your wealth shouldn’t just buy you more money.
It should buy you more life.