“Would I be better off buying another property and using the rent to give me an income?”
It’s a question that comes up regularly in conversations with clients, particularly when someone has built up a lump sum or is approaching retirement and wants their money to start working for them.
And I completely understand why. Property is familiar. It’s tangible. You can see it, rent it out and receive an income from it.
But before looking at where someone should invest their money, I think there’s a much more important conversation to have first:
What do you actually need your money to do for you?
Do you need an income now?
Do you want the potential for long-term growth?
How important is being able to access your money?
And perhaps most importantly, once tax and costs are taken into account, how much of the return are you actually going to keep?
The headline return doesn’t tell the whole story
Let’s take a second property as an example.
You might look at the potential rental income and think it represents an attractive return on your money.
But that figure doesn’t necessarily represent what ends up in your pocket.
Rental profits may be subject to Income Tax. Individual residential landlords also face restrictions on tax relief for mortgage finance costs, and when a second property is eventually sold, there may be Capital Gains Tax to consider.
Then there are the other costs associated with owning property, purchasing costs, maintenance, insurance, letting fees and periods where the property may be empty.
None of that automatically makes property a bad investment.
It simply means we need to look beyond the headline number.
Then there’s accessibility
This is something I think can easily be overlooked.
Imagine you’ve invested a significant proportion of your available capital into a second property and, a few years later, life changes.
Perhaps you want to help your children, make a large purchase or simply have more money available to enjoy your retirement.
You can’t sell 10% of a house. Property can be a relatively illiquid investment, and that matters when we’re building a financial plan around someone’s life rather than simply chasing a return.
So, what are the alternatives?
This is where financial planning becomes interesting, because there isn’t one answer that works for everybody.
For some clients, we might explore building a diversified investment portfolio and making use of tax-efficient wrappers over time.
An ISA is an obvious example. Investments held within an ISA can grow free from UK Income Tax and Capital Gains Tax, and so are very tax efficient.
If someone has a larger lump sum, we can potentially invest appropriately outside an ISA and then make use of their available ISA allowance each tax year, gradually increasing the amount held within that tax-efficient environment.
Depending on their circumstances and objectives, pensions, investment bonds and other solutions may also form part of the wider plan. Of course, investments come with their own risks. Their value can go down as well as up, which means you could get back less than you originally invested and returns aren’t guaranteed.
The important word there is plan.
Start with the person, not the product
I don’t think the first question should ever be:
“Which investment will give me the highest return?”
I’d much rather start with:
“What do you want this money to enable you to do?”
From there, we can look at growth, income, tax, risk, accessibility and flexibility together.
For one person, owning another property may fit perfectly with their wider financial position and what they’re trying to achieve.
For somebody else, having a diversified portfolio that they can access more flexibly and structure tax-efficiently may make far more sense.
And for another client, the answer might be a combination of several different approaches. That’s why financial planning is personal.
It’s not just what you make. It’s what you keep.
A higher headline return doesn’t necessarily leave you financially better off.
Tax, costs, accessibility and flexibility all matter.
So, if you’re approaching retirement, have received a lump sum or are simply wondering what the next step should be for money you’ve accumulated, try changing the question.
Instead of asking:
“Where could I get the best return?”
Ask:
“What do I need this money to do for me, and what’s the most appropriate way of achieving it?”
That’s a much better place to start.
And ultimately, that’s what we believe good financial planning should be about: understanding you, understanding what matters to you and helping you make informed decisions about the future you want to create.
SJP Approved 21/10/2026
