Unlock a Safer Retirement with Smart Property Investments
With the rising cost of living and inflation, your pension contributions may not add up to much when you reach retirement. Could property investment be the answer to protect your income in your later years? Find out in this article.
As we get older, the prospect of retirement looms, and we might start to consider our pension options. Retirement sounds idyllic - wake up when you want, no rush hour commute or hours spent in the office. You can grow vegetables, take a round-the-world cruise, or take up a new hobby. You might move to the country or look closer to the family so you can be hands-on with your grandchildren. Your days will be your own; the world is your oyster. No more clocking in or answering to a boss - freedom!
But, before we all rush to hand in our notice and plan to live life on our own terms, consider for a moment what your life would be like without your salary. How will you support yourself and your family? If you are retiring, you might have a healthy pension to rely on, but what will you do if retirement is still a distant prospect for you or you won't have a generous pension to rely on?
Pension schemes are great, but you might save cash your whole career and then have your pension pot decimated by inflation. With the cost of living increasing and, therefore, the relative value of your pension decreasing, many are opting out of the pension schemes and preparing for their retirement on their own terms. One way to do this is through property investments. Here's why:-
- The property rental market has been buoyant for a few years, with high demand leading to increased monthly rental prices.
- Owning property means you will benefit from both the monthly rental income and the property's capital growth over time.
- If you need to access your cash investment, there are ways to release equity with mortgages, or you can sell the property at any point. Although it will take time to complete a transaction, you can access your funds at any age, which is not usually possible if your money is all tied up in a pension. This flexibility can give you a sense of control over your financial future.
But it's not all sunshine and rainbows. There are some things to consider when becoming a landlord.
- There are obligations and legal responsibilities involved in being a landlord. Although it is possible to employ a letting agent to manage the tenancy for you, which will relieve many of the headaches, there is a cost involved.
- The property market fluctuates for both selling and renting, so the return on your investment might change from one year to the next.
- There may be times when the property is not tenanted, meaning that not only is there no income being generated, but there will still be expenses whilst the property is empty that you must cover.
- There are likely to be repairs and maintenance at the property that will need to be dealt with, the cost of which will need to be borne by you. You can purchase insurance policies to help with repairs so that there are no surprise bills if this is a concern.
- You may have tax implications from the income that the property generates and capital gains tax liabilities if you sell the property in the future. For instance, rental income is subject to income tax, and if the property's value increases, you may have to pay capital gains tax when you sell. It is advisable to seek professional advice for your personal circumstances.
There is no need to wait until you are retiring to make investments in property. In fact, it could be helpful if you get started sooner rather than later.
Building a portfolio at a younger age may mean you have more financing options available to you. You will have longer to pay down the loans so that, in an ideal world, you will own the properties outright by the time you come to retirement, meaning you can benefit from a higher portion of the rental income. And you will still have the assets to sell up and live off the investment or leave the properties to your family when the financing is paid off.
It is advisable to seek professional guidance before buying a property to ensure that you have set things up in the best way for you and your circumstances. This professional support can give you the confidence to make informed decisions about your investments.
If you are interested in learning more about how using property as an investment could help you build long-term wealth for you and your family, get in touch with our team of experts to advise on how you can get started.