Investing your Pension 1st Jul 2016
Last year the percentage of retired landlords entering the buy-to-let market doubled, according to mortgage broker Commercial Trust. Figures show applications from individuals aged 55 to 59 grew to 18.5 per cent in the third quarter of 2015, up 11.5 per cent from the first three months of the year. Those aged 55 to 70 now make up 31 per cent of applications, with the broker predicting this trend is set to continue.
This is maybe not surprising given the pension reforms that came into effect in April 2015, giving people aged over 55 the freedom to withdraw all or part of their pension pot and spend it as they wish.
Further research has revealed that there has been a turnaround in pensioner wealth, with septuagenarians now earning more per week than their younger counterparts, most of whom are in full-time employment. Experts believe that this is down to generous final-salary pensions, better state support and the diligence of the baby boomer generation in paying off mortgages
If the predictions are right, then the surge of silver haired landlords is set to continue, in spite of the introduction of the 3% LBTT and the other challenges facing buy to let landlords.
The Key Place answers a lot of questions from landlords asking if buy to let is the right investment choice for their pension pot. It is always wise to seek advice from a financial adviser as buy to let may not be the best route to take for all. For those who do decide to take the plunge, there are of course a number of considerations, including:
• How important is capital growth versus likely yield? An annual capital return of 4% is realistic, with yields as high as 10-12% in some areas. Consider what you want to buy and where. What sort of tenants do you want? What size of property do you want to buy?
• Consider costs - remember you need to factor in retaining money to cover unexpected bills and void periods.
• Are you a cash buyer? The cut to mortgage interest tax relief which comes into play in 2017 can be avoided for cash buyers.
• Consider investing in areas you may not be familiar with. Most buy to let investors choose to buy property in the area in which they live, however looking further afield may provide a better opportunity and a higher yield.
• Have you got the time to properly deal with your investment property? This includes keeping fully abreast of all current and forthcoming legislation. If the answer is no, use a reputable letting agent.
Lifestyles of retired landlords will certainly differ from the lifestyles of working landlords, in as much as many want to enjoy retiral, perhaps see a bit of the world, become involved in looking after grandchildren etc. They may therefore want to be bothered even less than your average landlord by demanding tenants wanting a tap washer fixed immediately, or worse still at 3am. Indeed, many may not be contactable at all.
This is where the need for a good, reputable letting agent becomes invaluable, who can offer a fully managed service, dealing with everything from advertising the property, to finding fantastic tenants, to doing all of the legal paperwork, collecting deposits and rents, dealing with repairs and inspections; generally looking after your investment for you.
The Key Place gathers monthly data on the local rental market, which provides information such as average rents by town, number of properties for rent by town, and type of properties for rent by town. This unique information can help inform your buy to let investment decisions. Furthermore, The Key Place offers a full buy to let service. We can source high yield properties, find the best mortgage, complete the acquisition and then fully manage your property for you. Sit back and relax, knowing your investment is in safe hands with The Key Place.