The pension freedoms given to retired people with defined contribution (DC) pension pots at the beginning of this month and the further loosening of the rules for annuity holders next year, will affect the rental property market.
The extent of the effects is still unknown the majority of those affected are most likely to be first-time landlords, according to specialist lender Shawbrook Bank’s managing director Stephen Johnson.
The new freedoms give access to people aged over 55 to their entire pension pots and next year further five million people who have purchased an annuity will also be able to access their pension in cash. Recent surveys suggest that there is a number of retirees mulling over potential property investments.
Johnson comments: “The majority of those affected by the pension rule changes are likely to be first-time landlords. They will be looking for simple, single properties, which will be straightforward to manage, but no buy-to-let endeavour should be underestimated.
“Successful property investment is a specialist skill – not only the ongoing management and maintenance of a property, but also finding them and getting the right deal. Although these new landlords will increase competition in the market, the experienced investors will always have the advantage. Ultimately the disruption to the market will be limited.”
Expert advice for investing in buy-to-let
Those who aspire to become a landlord for the first time should prepare well and be careful about the way they proceed.
Lisa Williams, founder of mortgage brokerage Keys Mortgages, shares her top tips:
1. Do your research
There is plentiful advice available on becoming a property investor and much of it can be obtained free, for example on forums or by attending events or reading books. There’s no need to spend thousands.
2. Don’t rush in
It’s better to wait for the right property and deal than fall down on your first. If you are underprepared you may not achieve the best outcome.
3. Don’t be afraid to sell
You should sell regularly rather than retain your property at all costs. Having liquidity is essential for any business and in this case equity is vanity. I recommend a keep one, sell one strategy.
4. Do value your team – your solicitor, broker and accountant in particular.
Do not try to do it yourself and do not chop and change. You should take your time to build the right team, pay them on time and talk to them regularly and in unison – the overlap between all three should not be underestimated. Between them they can and should save you far more than they cost you.
5. Don’t worry about what anyone else is doing
Most of what people say is not true and you should stick to your own plan. It is your money and life after all and your strategy should aim to fulfill your hopes and dreams, rather than anyone else’s.
