Retired investors look set to give the buy-to-let market a boost with new research revealing that more than one in 10 over 50s want to buy an investment property when they retire.
According to analysis from retirement income and equity release specialist Retirement Advantage, this would create 1.3 million new landlords.
Half of potential landlords said they were drawn to the combination of potential capital growth and regular income while 44% said it would boost their retirement income. A third thought it was a safer bet than stock market investment, while another third believed it would generate better returns than keeping money invested in a pension or putting cash in the bank.
A fifth (22%) have already had successful experiences of buy to let and 18% thought they would enjoy managing property.
The findings come despite new tax rules that are making it more difficult for investors to make money from property, including higher rates of capital gains tax and stamp duty for landlords.
Commenting on the findings, Andrew Tully, pensions technical director at Retirement Advantage says: “There are a number of things to consider before embarking on a career as a landlord. First and foremost, a pension is designed to provide an income in retirement, which is usually done either through drawdown or an annuity. People will need to think long and hard before withdrawing significant sums of cash from their pension as any withdrawal over the first 25% is subject to income tax.”
He adds: “If your main priority is to generate an income then the rental yield from the property may not provide the income you expect. Don’t forget you will also have to manage the property, or pay someone to do so on your behalf.”
Potential landlords should also consider whether they will end up having too much of their wealth tied up in property. Mr Tully says: “With most people’s main asset being their home, the old adage of having all of your eggs in one basket has never been truer when it comes to pensions and property. Most experts will advise that a diversified investment portfolio is more likely to deliver the retirement outcome you planned.
“As ever, seeking professional financial advice is key to avoid potential bear traps and make the most of the pension freedoms.”