|Thanks to changes in pension regulations coming into effect in April people aged 55 and over will be able to access part or all of their pension pot. At a time when stocks remain volatile and interest rates are low, the prospect of owning a rental property that provides both a regular income and appreciates in value has much appeal. It’s no surprise that the upcoming changes are encouraging a new breed of landlord. Recent research revealed that 1 in 3 people aged 45 to 64 with a pension would consider using some or all of their pension to fund a buy to let property as an alternative to a more traditional pension fund.These potential landlords – popularly labelled as ‘silver landlords’ have quite widely varying reasons for investing in property with nearly 43% interested in a regular income. Some 23% are attracted by the perceived security of the investment and 17% by the expected capital appreciation[i]
The UK private rented sector (PRS) has seen significant growth in the last two decades, having doubled since 1996. There are now an estimated two million private landlords in the UK who own and rent out 4.4 million homes – that’s almost one in five homes across the country.[ii]
Here at Northwood we are seeing a lot of interest from potential silver landlords looking for an appropriate Buy to Let investment. In response to the new legislation the opportunity for those approaching retirement to invest in property are opening up in a way that has never been possible before.Encouraged by both steady gains in capital appreciation of property and increasing tenant demand, it’s easy to understand why Buy to Let is considered an attractive alternative to the more traditional pension funds. However, whilst many potential silver landlords will appreciate the basic concept of investing in bricks and mortar, it is vital to understand that any property purchased for rental purposes needs to be treated as the investment it is.
The key to successfully letting out a property is to find the tenant demand first and then the property that will meet that demand. This is where the expertise of an experienced, knowledgeable local agent is invaluable. They should be able to guide you on locations that are worth investing in, find appropriate properties and give you an estimate of the rental income you could achieve.
For those looking to invest in Buy to Let, we have 4 top tips to help you with your search:
Be clear on your strategy: Consider whether you are investing for the medium or long term and therefore if you are more interested in capital appreciation or yields.
Do your sums: Before you buy, make sure that the figures add up. As well as mortgage repayments, you will need to consider costs such as landlord insurance, maintenance, letting agent fees etc. It is important to understand that the net annual rental income will not be 12 times the monthly rent.
Always find the market first: As a local property expert Northwood can advise on rental hotspots and help guide your choice of property that meets potential tenant’s needs. Factors such as school catchments, transport links and local development plans will impact on the attractiveness of a rental property.
Decide how involved you want to be: Buy to let is not a passive investment. You need to be clear on how much responsibility you want to have versus appointing a letting agent. For those approaching retirement the option of a fully managed service is likely to have great appeal and the agent will take on the responsibility of managing the tenancy.
Northwood goes one step further than the fully managed service by providing the option of Guaranteed Rent, whereby the landlord is paid the rent each and every month regardless of whether there is a tenant in the property or not and even if the tenant doesn’t pay their rent. We remove the dreaded void periods which can drain a landlords resources very quickly.
In response to a growing demand for BTL investment properties Northwood has a specialist Investor page featuring Buy To Let properties for sale and projected yields based on current market prices. Many of the properties already have good tenants in situ paying rent, so a new landlord’s investment is already providing a return as soon as they become the legal owner.
Anyone considering a BTL investment should always first seek independent financial advice and ensure that they understand the returns that property can deliver.
[i] 2013 / 2014 English Housing Survey, March 2015
[ii] Direct Line for Business (DL4B) survey, Jan 2015