Regulation changes to pensions could drive a boost in the buy-to-let sector, as so-called silver landlords look to invest in the market.
Direct Line for Business (DL4B) have conducted research revealing that 32% of people aged 45-64 with a pension would consider using some or all of their pension to buy a buy-to-let home as an alternative investment.1
Buy-to-Let Could see Boost from Pension Changes
The amount of silver landlords could rise substantially after the pension regulation changes come into force from April 2015, meaning that those reaching retirement and pensioners can access as much or as little of their pensions as possible.
As property prices and rents rise, buy-to-let is becoming an appealing option for many, says letting expert Kate Faulkner, who claims that strong returns can be seen over 15 to 20 years.
Faulkner says: “Given the recent pension liberation announcement, for some it could be good to diversify their investments when approaching retirement, but landlords need to seek financial, or expert advice and ensure they understand the returns that property can deliver and especially the tax implications.”1
Buy-to-let can provide a regular income, and also offer the opportunity for capital appreciation. Research indicates that 43% of would-be silver landlords would consider this option based on the regular income provided.1
23% aspiring investors are attracted to the supposed security of buy-to-let, 17% by the anticipated capital appreciation, and 9% would like to leave an inheritance for their children.1
Those nearing retirement predicated the high returns possible for landlords at an average of 10%-14%.1
Jazz Gakhal, Head of DL4B says: “Buy-to-let can be a flexible investment, providing an immediate source of income as well as being a long-term asset. As such, it is understandable that people approaching retirement age are considering investing their pension pots in property.
“However, prospective landlords should understand that buy-to-let does not come without financial risk. Legal expenses for repossessions and potential damage to property are but just a few of the costs that can take significant chunks out of landlords’ 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.”1