Tips for in­vest­ing in a buy-to-let prop­erty

Macclesfield Express - - HOMES -

NOW that re­tirees can ac­cess their pen­sion funds as cash, many are look­ing at buy-to-let as a way to get the most from their sav­ings.

Good re­turns, a long history of strong per­for­mance and tan­gi­bil­ity make prop­erty an at­trac­tive in­vest­ment, par­tic­u­larly com­pared with the volatil­ity of the stock mar­ket and low in­ter­est rates on sav­ings.

Al­li­son Thompson, let­tings di­rec­tor at UK prop­erty spe­cial­ist Lead­ers, said: “De­mand for rented ac­com­mo­da­tion has been strong for many years, and is still in­creas­ing, with more peo­ple rent­ing than ever be­fore. In many ar­eas there is not enough rental prop­erty to sat­isfy de­mand, rents are ris­ing, ten­an­cies are get­ting longer and good qual­ity prop­er­ties do not stay empty for long.

“All this paints a very sta­ble pic­ture for land­lords and is ap­peal­ing to older in­vestors who can now use their pen­sion sav­ings to be­come ‘grand­lords’. Like any in­vest­ment, buy-to-let comes with no guar­an­tees, but, done with proper care and plan­ning, the ben­e­fits are com­pelling.”

Here, Al­li­son high­lights the top five ben­e­fits of in­vest­ing a pen­sion in prop­erty: ●● Good re­turns in in­come and growth

Buy-to-let can de­liver great re­turns over the medium to long-term, giv­ing in­vestors the op­por­tu­nity to earn a reg­u­lar monthly in­come while also achiev­ing cap­i­tal growth. Longert­erm house price growth is around six per cent per year, ac­cord­ing to most re­li­able mea­sures, and in most good buy-to-let ar­eas, rental yields of five per cent or more are achiev­able. ●● Ben­e­fits not of­fered by an­nu­ities

An­nu­ity rates are at his­toric lows – around four per cent – mak­ing this tra­di­tional op­tion for re­tirees in­creas­ingly unattrac­tive. If you buy an an­nu­ity you give up any fur­ther growth from your pen­sion whereas in­vest­ing in prop­erty gives you a rental in­come and the op­por­tu­nity to grow your cap­i­tal. ●● Save on fees to max­imise pen­sion pot

Many pen­sion funds charge sig­nif­i­cant fees for man­ag­ing your in­vest­ments, even when they per­form badly, which fur­ther re­duces the value of your pen­sion pot. If you used an in­de­pen­dent fi­nan­cial ad­viser to set up your pen­sion you may also have to pay com­mis­sion to them on an on­go­ing ba­sis. In­vest­ing your pen­sion in prop­erty gives you con­trol of it, en­abling you to po­ten­tially make more of your pen­sion pot and at the same time avoid those erod­ing pen­sion man­age­ment fees. ●● Bor­row to boost your in­vest­ment po­ten­tial

In­vest­ing in prop­erty means you could take out a mort­gage, to be paid off by your rental in­come, while you en­joy the po­ten­tial cap­i­tal growth. Most buy-to-let mort­gages are done on an in­tere­stonly ba­sis, so the amount bor­rowed will not be paid off over time. This is tax ef­fi­cient, as you can off­set mort­gage in­ter­est pay­ments against your in­come tax bill. If you se­cure the right buy-to-let prop­erty and mort­gage deal, your rental re­turn could still be sub­stan­tially higher than your mort­gage pay­ments, giv­ing you the op­tion to save the ex­tra cash to sup­ple­ment your life, in­vest in another buy-to­let or use it to pay off the mort­gage at the end of its term. ●● Take con­trol over your in­vest­ment and limit the risks

No in­vest­ment is risk-free, but with buy-to-let there are a num­ber of prac­ti­cal steps you can take to limit the risks.

Con­sult­ing a let­ting ex­pert to guide you on where and what to buy for max­i­mum re­turn is the best first step for a solid in­vest­ment. A good let­ting agent will also find you a re­li­able ten­ant, en­sure you stay on the right side of the law, take care of your prop­erty and pro­tect your in­ter­ests at all times.

●● Cal­cu­lat­ing the bud­get

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