Property funds Property Partnership Individual purchase Solicitors Property funds A collective investment fund gathers together money from individual investors to create a large fund of money. Property funds are usually invested in commercial property, property-related assets and will sometimes hold substantial amounts in cash. The funds are managed by a team of experts to maximise the potential for growth and spread the risk. The average pension property fund is valued at £785 million and has produced an annual growth rate of 10.8% over the last 5 years. Source Money Management April 2006. REITs will be introduced in 2006 expanding the investments available and residential property funds will become more popular. For our recommended property funds with discounts on charges please use our the enquiry form.   Property Partnership Property partnerships were developed to enable the private investor to have a direct investment in prime commercial property. Most individual investors lack the necessary funds to purchase prime commercial property and professionals and institutions dominate the market. A property partnership will usually comprise of investments made by many individuals and finance from a bank or building society. This has the effect of gearing your investment and providing a greater exposure to the potential growth in the property’s value. Therefore a cash investment of £25,000 could provide exposure to growth on £100,000 of property value. The downside is limited to your initial investment although with a first class tenant and prime commercial property the chance of complete failure is unlikely. Risk can be managed and rewards optimised by arranging finance on a fixed rate basis and having professional property management. Unlike collective investment funds partnerships will usually be highly geared and will invest in single properties or small portfolios. For register your interest, please use the enquiry form. Individual purchase A popular use of SIPPs is to purchase individual commercial property. The SIPP can borrow up to 50% of the net pension fund value and use the rental income to repay the loan. There is no tax on the rent paid to the SIPP. The investment from your SIPP can be made up of new pension contributions or transfers from existing schemes. Either way you will have received tax relief, reducing the effective cost by as much as 40%. If your own business or professional partnership occupies the premises the rent will be an allowable business expense and will accumulate free of tax within the SIPP (or SIPPs in the case of a joint purchase). Using funds held within your SIPP to buy property will minimise the effect on your business's cash flow. When your SIPP sells the property, any gains will be free from capital gains tax. Summary of the tax advantages: Your existing fund will have been built up with the benefit of tax relief, which may have been as high as 40% of your contribution. All rent is paid without the deduction of tax into the SIPP You can borrow 50% of the pension fund value  All legal costs and disbursements can be paid from the fund  There is no capital gains tax when you sell the property  The SIPP can reclaim VAT on property improvements  When you take your pension the income can be paid from rental income  There is no limit on the number of properties which can be purchased  When you take benefits from the SIPP 25% can be taken as a tax-free lump sum Your SIPP can purchase a share of a property For advice on property purchase and assistance locating commercial property, please use the enquiry form. Solicitors The solicitor will normally act for both you and the SIPP trustees. They will ensure that the title of the property is sound and that it is not subject to restrictions or covenants that may affect the value or cause problems later.