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Pension regulation changes in the UK could boost the buy to let market as so called silver landlords decide to invest in the sector, it is claimed. Some 32% of people aged 45 to 64 with a pension would consider using some or all of their pension pot to fund a buy to let property as an alternative to a more traditional pension fund, according to research by Direct Line for Business (DL4B). It highlights that the number of 'silver landlords' could increase significantly given the changes in pension regulation which mean that from April 2015, people approaching retirement and pensioners will be able to access as much or as little as they want from their pension pots. Buy to let is becoming an attractive option for people, especially while property and rents rise, according to property lettings expert, Kate Faulkner, as it can deliver some great returns over 15 to 20 years. ‘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/expert advice and ensure they understand the returns that property can deliver and especially the tax implications,’ she said. As property and rental prices continue to rise, buy to let can provide a regular income flow while also offering the opportunity for capital appreciation. The research shows that 43% of potential 'silver landlords' would consider it on the basis that it produces regular income. Some 23% are attracted by the perceived security of the investment, 17% by the expected capital appreciation and 9% of potential buy to let investors favour the investment because they would like to invest in something that will allow them to leave an inheritance to their children. The research highlighted the perceived high returns available for landlords as those approaching retirement anticipate an average (median) yield of between 10% and 14% on their investment. ‘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,’ said Jazz Gakhal, head of Direct Line for Business. ‘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,’ he pointed out. ‘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,’ he added. Continue reading →
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