With so many changes happening in the pension market, you might be looking at alternative investments for your future. Letting out a property can be a useful way of gaining a regular income and providing you with a long-term investment that you could use to finance your retirement.
Property is becoming a more popular means of investment, having been boosted by the growing number of private tenants. There are now around ten million people living in private rented properties, which is three times the figure it was two decades ago. This has largely been due to the rising cost of housing, which has priced many areas out of the reach of the average household.
As well as the long-term investment potential, property can provide you with a steady income, especially if you find the right tenants. With interest rates still at record lows, if you have enough of a deposit, you can get a good mortgage deal. This means that your rental income should exceed the monthly payment, but you also need to factor in maintenance costs and any agency fees. It would be beneficial to start an emergency fund with some of the excess rent to cover these and any vacant periods.
The majority of buy to let deals are based on interest only, so you won’t actually be paying off the actual loan. This works out well for tax purposes, as you are able to offset these payments from your taxes. You could invest anything that you receive over the mortgage to help pay off the loan at the end of the term.
What to consider before you let
Before you rent out a property, there are a number of areas that you should consider. It’s important to research the area before you choose a property to buy. It would also be beneficial to talk to a local lettings agent. As well as understanding the local market and rental levels, letting agents will be able to help you find tenants and manage the property.
It’s vital that you check the finances work before you commit to a property. Research the best mortgage deals and consider how much you’re likely to gain in rent, as well as factoring in additional costs. This will ensure that you’re not over committing yourself.
You need to consider the type of tenants you’ll be letting to, as this will have an influence on area, property and renovations. For instance, student, professional and family tenants will all have different requirements. Whoever you are renting to, you need to ensure that the property is renovated to a high standard. This will enable you to attract the right tenants and get the best price for the property.
If you follow the right steps and understand exactly what you’re doing, investing in property can be a good move for you financially. The sector is an ideal way of maintaining your income, as well as providing you with a strong investment that you can cash in at a later date.