dark mode light mode Search

Beginners Guide To Property Investing For Retirement

Beginners Guide To Property Investing For Retirement

Alena Darmel from Pexels

Retirement is a catalyst for property investment for several reasons. Firstly, because people leaving their jobs tend to turn to bricks and mortar as a nest egg for their golden years. And secondly, some might consider a new home where they can live happily ever after, while others might consider moving abroad or getting a second holiday home somewhere lovely and sunny. 

Not only this but the number of retirees who are developing buy-to-let portfolios after retirement has steadily been increasing in recent years. 

However, if you are considering investing in property for retirement, it can be tricky to know where to start, especially if you’re hoping to start a buy-to-let portfolio for yourself. 

And that’s where this guide comes in. 

Below, we’re going to take a look at the things you need to consider if you are thinking of investing in a property for retirement, no matter what your reason for doing so. 

Why do people consider investing in property as part of their retirement plans?

Let’s first take a look at why you might be considering investing in property as you retire – and if you’re not, why you should. 

For lots of people, the most attractive part of investing in property is having and seeing the physical asset. It’s not like having money tied up in a pension or savings account. 

It can also be a great way to supplement your income if you’re about to stop or have already stopped working. This is if you decide to rent out the property rather than live in it yourself.

What are the best properties to invest in if you’re retiring? 

We have already briefly touched on the different types of retirement property you might consider, but we’re now going to look at the best properties in more detail.

Although ultimately the best property for you will depend on your individual circumstances and preferences, as well as what you’re hoping to get from your investment, we’re here to offer some advice. 

Buying a home for yourself 

Firstly, you might be looking to invest in a property that is all your own, saving you from having to pay out on rent or a mortgage each month. While this can be a great way to save money, you will need other savings or a pension to be able to live as this will not generate any money in the short term. 

Holiday rentals 

The second option is that you buy a holiday rental or second home in a nice destination and then rent this out during peak seasons. You could then use this for your own holidays as and when you wanted. This might be great in the early stages of retirement, but it is a lot more work for you in the long run. 

Buying and selling 

Thirdly, you might be looking to invest in a property for capital gain, buying and selling quite quickly. In this case, you need to make sure that you’re choosing properties that are going to appreciate in value and that holds more appeal. 

Aim for houses that are already in great condition, unless you have the means to do the property up, otherwise, you could be creating a lot of work for yourself. 

Monthly rental income 

Finally, more mature investors might prefer to secure a regular rental income, having long-term tenants that rent out their property. In this case, it can be a good idea to invest in properties that are in good condition, have good transport links and are near to important amenities like hospitals, schools, supermarkets, etc.

If you do not plan to live there yourself, you can afford to buy a higher-demand property that perhaps isn’t in your ideal location but is more appealing to tenants. For example, being closer to the city centre or perhaps even a university. 

 Beginners Guide To Property Investing For Retirement

How will you fund your investment? 

One of the most important things you need to consider when investing in a property for retirement is how you’re going to fund it. You may well have enough money saved or perhaps you’re selling an existing property and downsizing. In this case, you may be covered. 

However, if you require a mortgage, you need to make sure that you get a buy-to-let agreement if you plan on renting your property out. In this case, be sure to shop around a bit and check out the different interest rates; this will ensure you get the best possible mortgage and are able to make the most money each month. 

If you plan to build up a portfolio of properties, you might find that you’re able to buy and sell quickly enough and with enough profit to pay off your mortgages as you go. 

You might also be able to take advantage of your 25% tax-free lump sum that can be released from your pension. This might be able to partially or fully fund your property. 

But before you do anything, if you’re considering investing in a property (or several) for retirement, it’s a good idea to seek out some financial advice first, so you get the most from your investment. 

What tax considerations should you be aware of?

In this final section, we’re going to take a look at the different tax considerations you need to be aware of if you plan to invest in property. Again, you should be able to talk through this with a financial advisor if you get one, but we’re here to share the basics. 

We’ve already mentioned buy-to-let mortgages, but there are some other tax-related considerations you need to know about. In 2016, new rules were put in place regarding stamp duty on second properties. This is around a 3% increase on standard stamp duty, so you may need to factor this into your costs depending on the price of the property. 

What’s more, if you have other income streams as an investor, taxation on your rented property will need to be worked out accordingly. Therefore, you need to think about all your earnings when investing in a property.