With the massive gains through the early noughties, buy-to-let property investment has been the best thing a lot of people have ever done financially. Many of those who did invest at this time were of the age when they had paid off their own mortgage, and looking for somewhere to invest their surplus income. Because house prices shot up, investors made large capital gains as well as increasing rental incomes, proving to be one of the best investments of that time. Now some of those people are coming to retirement, they need to ask themselves if being a landlord is still right for them, and weather it is time to cash in on those gains they have already made.
I know when I come to retire, I dream of an easy life, going on holidays, relaxing in the garden, socialising with friends, just doing what I want, when I want, with no stress or worry about money. But the thing with being a landlord, is that it’s like still having a part-time job still, and if you don’t have the right tenants, it can be a nightmare.
If you knew the rent was going to come in, the tenants would stay put for years and years, and the housing market crept up nicely by a few percent every year, then it would be perfect. But life’s not that simple. Rents don’t always get paid, tenants move home and the housing market is up and down. Maybe when your younger, you can deal with unruly tenants who cause problems, but as you grow older it can become more stressful for some.
Additional problems can occur when you are using the rental income to live off, but still have a mortgage to pay. If the tenant doesn’t pay their rent, not only do you have to tighten your belt, but you have to find the money to pay the mortgage, as well as your insurance company and, unfortunately even when your not getting the rent, repairs to the house.
On the positive side, rental yields can be relatively high compared to other investments, and if you’ve got some reliable tenants that have always paid their rent, and bit of cash in the bank in case of a rainy day, you might be quite happy to just let that carry on and take the risks that come. Maybe then the time to the ask questions comes when those reliable tenants move out, and you need to find new ones who you don’t yet know or trust.
Overall, I think it could be a bad idea to rely on buy-to-let property as your main source of income for the long term, without having either a big enough rainy day fund to fall back on. Either way, the alternatives should be explored to make sure you aren’t missing out on something which you would much prefer, and help avoid those possible headaches in the future.
Kieron Bassett Financial Services has two Independent Financial Advisers who specialise in mortgages and investment advice. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Jason Hinde DipPFS
1st October 2012
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