For many of us, financial uncertainty seems to be a key feature of life; saving and investing for the future in a time of low interest rates has become immensely challenging.
Many people who have accumulated savings, inherited money or wound up with a significant sum to invest, look instead to the buy to let property market in order provide for their futures.
In this blog post we will explore the best ways of ensuring that buy to let properties can provide for you and your family in retirement.
The golden years
In the decade between 1997 and 2007, property seemed to be all anyone was talking about. The TV stations were bursting at the seams with programmes about property ladders, property fortunes and property presenters.
It was clear, in hindsight, that the property bubble was about to burst.
The moment that a critical mass of people enter the market in one go, assuming that property is a licence to print money, the count down to a crash begins.
In 2008, an era of cheap borrowing, available credit and rising property prices came to an abrupt end and so did the dreams of many who hoped to become property millionaires overnight.
All is not lost, however
Get rich quick schemes aside, property can still be a great way of investing for the future; the rental sector is growing rapidly and predicted to continue expanding over the next decade.
Unless housing is built at a similar pace in order to meet demand, it is likely that rents and therefore rental income will continue to rise.
Most private landlords who own a buy to let property are small time property investors with one or two properties.
These days, the more risk averse banks are reluctant to lend to landlords with dozens of properties, recognising that they represent unacceptable default risk levels.
Banks have to lend money to someone, however, or they cease being banks, so you might find you can get a buy to let mortgage by presenting yourself as a low risk borrower with few liabilities.
Helping the next generation
Housing costs in London and other major cities have sky rocketed in recent years and even affluent young professionals find themselves priced out of the housing market.
If you have grown up children and dependents who are unable to buy, you might be able to provide for them and find an investment opportunity at the same time.
You will need landlords’ home insurance if you choose to become a buy to let landlord, as regular insurance policies will not be considered valid and the first concern of any new landlord is ‘insuring my property against possible damage or loss.’
The government’s pension reforms in the past year have left many retirees with a lump sum of cash that they can invest as they see fit, no longer having to purchase an annuity.
By investing in buy to let properties, retirees may be able to use rental incomes to supplement their pensions, and have a property to leave to the next generation in their will.
No such thing as a risk free investment
The property market, like any market, can rise and fall. If you buy as the market peaks, you may well pay over the odds for a property that is worth significantly less than the amount you parted with.
In addition to this, becoming a rental landlord is quite a learning curve. Your tenants will expect high standards for their rent.
You will have to decide whether you will manage the property yourself, paying for tradesmen to fix boilers and roofs, or whether you will go to the added expense of paying for a managed service.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Buy to let mortgages are not regulated by the Financial Conduct Authority