Generation Landlord

What are peoples thoughts on this article? is anyone planning to do the same?

http://www.telegraph.co.uk/property/investmentinproperty/10976044/Generation-landlord-is-it-time-to-invest-in-a-buy-to-let.html

Personally BTL property is the cornerstone of my retirement plans supplemented by my private and state pensions.

Cheers

There is one point that I think hits the nail right on the head:

our generation is disillusioned with the pension system

People are worried their pension will cover them in later life, it's all they will have to live on and they are worried it will not be good enough.

They want something tangible, something that they can rely on and that something is usually property.

What are peoples thoughts on this article? is anyone planning to do the same?

 

http://www.telegraph.co.uk/property/investmentinproperty/10976044/Generation-landlord-is-it-time-to-invest-in-a-buy-to-let.html

 

Personally BTL property is the cornerstone of my retirement plans supplemented by my private and state pensions.

 

Cheers

Paywall is blocking it, can you quote some of it?

Here is a copy and paste of the article for you Cyclone.

The great generational divide of the moment is around property wealth.

While the younger generation struggles in the rented sector, many believing they will never be able to buy, their elders fret about the cost of care and the inadequacy of their pensions. As a result, the older generation is piling into the buy-to-let market to create much-needed income for the future.

Generation Landlord is emerging as a whole new property-owning class. At the end of successive house price booms, the older generation has often accumulated swags of property equity. “About 83 per cent of those who own their homes outright are aged over 55 and nearly all the housing debt is owned by the under-55s,” says Johnny Morris, head of research at Hamptons International. “The rise in the older generation buying properties to let is a new phenomenon and is sometimes motivated by helping the younger generation as well.”

Read: Top 10 buy-to-let hot spots

Gerald Herbert, a freelance graphic designer, and his wife, Julia, an estate agent, both in their late 50s, wanted to make up for a predicted shortfall in their pensions. “We hadn’t moved for 23 years, so we had some equity,” says Herbert. So last year they sold their family home in Maidenhead, Berkshire, for £820,000, paid off the mortgage and other bills, and searched the country for a house under £325,000. They came across a pretty cottage in Martock, Somerset.

“We had £200,000 left over, so we are using that as a deposit on two flats in Ocean Village at Southampton and getting buy-to-let mortgages,” he says.

“It is a gamble. But our generation is disillusioned with the pension system and the Government, and we have to be resourceful because no one is going to look after us apart from ourselves.”

This trend is likely to grow. About 78 per cent of landlords see their investment in buy-to-lets as a pension, according to a report by auctioneers and property consultants Allsop and market researchers BDRC Continental. This figure may well rise if proposed changes to the pension system, which would allow the over-55s to take lump sums on retirement, come into force. “Property as a pension takes on a new dynamic given the planned relaxation of maturity options,” says Mark Long, BDRC director.

The survey of 2,203 landlords showed that the private rented sector was the new panacea to the pension gap. It is, said the report, “a viable long-term investment because of stable rents, increased income security, capital gains and long average tenancies”. It found that tenants stayed on average just over two-and-a-half years.

Graham Winn, who works in IT, and his wife, Julie, in their early 50s, are also trying to create their own fund for their retirement. “We looked at our pensions and wondered what we were going to do,” says Winn. “We had £500,000 to £600,000 in the bank, which was not keeping up with inflation.”

The couple started small, by buying a new flat in Bushey, Hertfordshire, about 50 yards from the railway station. “It takes 17 minutes by train into Euston, so we thought it was a good buy. The agents said people were knocking on the door wanting to rent, so we bought a one-bedroom flat and it has been let ever since.”

There is no stopping them now. The flat used up half the money they wanted to spend. With the other half, they have bought a second flat off-plan in London Square, Ruislip. “It has done fantastically well, the builders are local and it is a more ambitious scheme with a fantastic finish, underfloor heating and economic to run,” says Winn. The rental for each flat is £1,000 to £1,100 a month. “We will put the money away and hope to buy another one in the future,” he says.

Home owners throughout the country are getting in on the act. Strutt & Parker has had a sharp increase in buy-to-let in the past two years. In spring 2012, 2.3 per cent of its buyers in Chelsea went for properties to let; this year, the figure is 26.2 per cent. “There has been a real surge among older people wanting to buy to let, not looking for the increases in capital value but driven by the need for rental income or cash flow,” says Zoe Rose, head of lettings.

Peter Ford, chairman of developer Rangeford Holdings, says home owners should think about their income after they retire. “Traditional pension saving is less popular since final-salary pensions are no longer available, and as the value of property rises it is hardly surprising that more people are investing in it,” he says. “Savvy 40- and 50-somethings should be looking to buy-to-let investments that they can rent out until they are ready to move in and start a new phase of life themselves.”

His company has developed Wadswick Green, a group of slick city-style flats with floor-to-ceiling windows, near Corsham in Wiltshire, to suit the aspirations of these mature buyers. He believes those who buy to let now and move in later when age catches up with them will be ahead of the game.

It's also well worth mentioning that the interest rate has been held at record low levels now for quite a few years.

There is absolutely no point putting your money in savings at the moment, the returns are so small it's just a waste.

With the interest rate so low it's only natural that people will be investing in property rather than in savings.

And the BTL mortgages that are mentioned in most of the anecdotes in that article are pretty cheap, also due to the low interest rates (although a large deposit is required, thus only suitable for the older generation who have some cash available or can release equity from their family home).

Really the economic policy is geared towards encouraging those who've got pots of cash saved up to get it out and invest in something, which it seems people have been doing.

It hasn't stimulated the house building a great deal tho, just stoked the fire for a property bubble down south.

There must be other reasons why house building is still fairly flat, while house purchasing is ticking along quite nicely.

Articles like this are misleading. Investment in the stock market or whatever requires some, but not a lot of effort from the investor. BTL is a whole different ball game because it is primarily a job with all the attendant (and not inconsiderable) responsibilities. Fine if you leave it all to an agent but then you have to pay a proportion of the income from it thus reducing the profit. Added to this is the debt that the landlord takes on when remortgaging and buying more properties. Other potential problems with BTL - bad tenants, no tenants at all so you end up paying the mortgage yourself, servicing the properties, negative equity, financial management (income tax and so forth). This kind of thing makes renting property look like a piece of cake - you sit back and rake in the money. That might be the case for some unscrupulous landlords but not if you are going to do the job properly.

I would just like to say you can do the job properly and make money out of it at the same time. I have done this with my own personal portfolio (my tenants stay for protracted periods, I have no void periods and very few maintenance issues) You also don't needs pots of cash to get started, i'm 25 and once I got up and running it pretty much funded its self from there.

As an agency we only take on high quality properties with landlords that are willing to work with their tenants. All of our landlords turn a healthy profit even after paying our fees to manage the property. (most prefer it this way as we do all the hard work for them)

That being said if you use a national agency or franchise you can expect to pay through the nose for their service.

As with everything its all about research, taking advice where required and setting things up correctly in the first instance.

Cheers

I'm currently considering whether to find new tenants when the current ones leave or put the house on the market.

I've made a small profit on letting the house for the past 18 months, but I didn't really want to be a landlord and the profit is not worth the effort to be honest.

Compared to my day job, we're probably talking about profit for a year on the house being no more than 1 weeks income.

I haven't added up the time I've had to spend, but it's got to be close to approaching that week, advertising, doing checks, doing inspections, sorting out problems, contacting tradesmen and so on.

The housing market seems to have picked up, I couldn't sell the house originally, so maybe this is the time to do that.

I think that may now be an option for you Cyclone, We have seen a lot activity recently, maybe get some valuations done and see what the estate agents think.

@Cyclone - thanks for describing the reality of letting out property. This is what I was trying to get across. The notion of it being retirement income has some merit but it is a job, albeit a service one. At 25 years old it's fine, but when you are in your senior years it may be more than you bargained for.