Why pension holders are considering buy to let

Why pension-holders are asking, ‘Should I buy to let?’

By DJ Alexander Lettings and Jane Guaschi, Business Manager for Direct Line for Business.

If you’re aged between 45-64 and have a pension, then you might be thinking about investing in a buy-to-let property. Find out more.

So should I invest in buy to let?

There are a number of reasons why those approaching pension age may choose to invest in a buy-to-let property. Our research showed that foremost a rental property being a regular source of income was why respondents considered buy to let. Secondly, just under one in five people believe buy to let is a secure and safe investment.

Others felt investing in a property was the best way for capital to appreciate, while some felt that it would make a sound inheritance for children.

Becoming a buy-to-let landlord means becoming familiar with new pension regulations that came into law in April 2015. The changes mean that those approaching retirement age and existing pensioners will be able to access as much or as little as they want from their pension pots without being forced to buy annuity.

So if you’ve asked yourself ‘should I buy to let?’ then you might be one of roughly a third of people aged 45-64 asking the same question. This is perhaps not surprising as potential property price rises can deliver good capital returns and buy-to-lets can offer a regular monthly income.

Why choose buy-to-let as an investment?

If you’ve found yourself asking ‘is buy to let a good investment?’ then you’re in good company. With the potential to deliver strong returns over 15-20 years buy to let is an increasingly attractive option for investors.

Those surveyed approaching pension age anticipate an average (median) yield of between 10% and 14% on their investment. Buy-to-let property investments can be flexible too, providing an immediate source of income as well as being a long term asset.

With the increase in public interest in buy-to-let as an investment, landlords need to seek expert financial advice and make sure they understand the returns that their property can deliver. They especially need to consider the tax implications that could impact those returns.

First time buy-to-let advice

Prospective landlords should understand that buy-to-let doesn’t come without financial risk. Legal expenses for repossessions and potential damage to property are but a few of the costs that can take significant chunks out of a landlord’s annual yield.

Taking the necessary precautions such as carrying out full reference checks on prospective tenants, inspecting your rental property regularly, and taking out landlord insurance can help to minimise some of the risks faced by landlords.

If you’re looking for first time buy-to-let advice, then we have gathered our most helpful articles together in our Knowledge Centre.

Visit our knowledge centre for more buy-to-let guidance

Before you make any significant investment it’s worth doing your research. We’ve gathered together some helpful advice on buy-to-let and the things you need to know about becoming a landlord in the following articles:

It’s worth noting that home insurance may not properly insure your buy-to-let property. However, landlord insurance is designed for the risks you face renting out a property.

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Jane Guaschi

Jane Guaschi
Last Updated: 09 Nov 2016