If you are concerned about your income on retirement – and to be honest who wouldn’t be with pension cut backs, interest rates remaining low and investment within stocks and shares a risky option – why not join the increasing number of people buying property to rent out to help fund their old age?
A viable option
Whether landlords plan to live off their rental income or sell their properties to release capital either makes a good alternative to a traditional pension. There has never been a better time to get into the buy-to-let property market, as there remains reluctance from many lenders to provide mortgages without a significant deposit, forcing those who would previously have bought their own home to continue to rent. In fact the demand for properties to rent is so strong that often the supply isn’t sufficient, so monthly rents are still rising. Yields currently stand at 5.3%, providing a viable option for investment.
However, it is important to remember that becoming a landlord carries with it responsibilities, so from that perspective it is not an easy option. It isn’t good enough for a property merely to look in good condition, as a landlord you need to prove that it meets various safety standards, so be prepared to show evidence for example of Gas safe and Portable Appliance Testing. Then obviously properties need to be maintained and tenants won’t be understanding if repairs aren’t carried out in a timely manner.
With house prices falling in many areas, investing in property may not yield the same level of capital it once did. Putting all your money within one form of investment isn’t without risk, so you might be best using property investment alongside other schemes.
Areas in which to invest
When purchasing a property to rent out you need to think like a tenant will; they will be looking to rent somewhere close to transport links and are likely to prefer a newer property, as these are less likely to experience problems. It is also advisable to invest in areas with a good employment and economic record to attract tenants such as young professionals; you are more likely to receive your rental payments on time and damage to your property is less likely with tenant groups such as these, but don’t be afraid to request a credit check and references. Additionally don’t forget about ground rent and service charges, as you will be liable to pay these rather than your tenants; consider whether these properties represent such good value for money.
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