Pension Pot Landlords: What Are the Risks of Becoming One

Posted on October 25, 2018 by in Real Estate

Pension Pot Landlords_ What Are the Risks of Becoming One

You start thinking about retirement early on, while still being employed, and consider various types of investing: from Forex, to stock market investing, buying gold bullion and real estate investing.

This is how a new type of investors emerged: the pension pot landlord.

What is a Pension pot Landlord?

A pension pot landlord is someone, over 45 years of age who buys a property or properties and sees their portfolio as a long term investment towards retirement.

Your Move, the network estate agency, conducted a survey with outstanding results: over 4 in 10 home owners in the buy to let sector see their property as a pension.

There are two ways for a pension pot landlord to earn money from their real estate investment: they can sell the property and use the proceedings for their pension funds or they can let the property and earn a monthly income to fund retirement.

Why has this become so popular?

In the past years investing in real estate to fund pension has become quite popular as a result of the volatility of the stock market.  The real estate market is generally easier to understand and there is significant flexibility to managing your investments.

If you want to sell your real estate property, it’s a simple process, easier than withdrawing funds from your pension plan. In this case you’ll also incur penalties and a lot of paperwork.

Selling your properties, on the other hand, is way easier: just find a willing buyer and you are all set.

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What are the risks of becoming a pension pot landlord

Buying to let for retirement is indeed appealing; however, any wrong investment decision taken could cost you your entire pension.

You might want to consider these risks before going ahead:

Landlord life might not suit your retirement style

If you’ll take up the responsibility of being a landlord, this means you’ll almost have another job during retirement. Managing a rental property takes time and effort and, if you wanted to just sit back and relax during your golden years, it might not be the best fit.

You might not get such a great income after all

Real estate prices differ and so does rental income. If your property is located into an area with small real estate value, your income might not be as big as to fund your pension.

This is why you should always look for properties in great areas, even if they are pricier, you’ll also get a better income afterwards.

You might find yourself in the middle of a property slump

Should you plan to sell your property at retirement to fund your pension, you could get caught in a property slump.

For a lot of people, a pension is about having assets in retirement which you can rely on, but the value of your real estate investment can decrease dramatically and leave you with less than expected.

Having a real estate investment unit can get costly

Owing a property can also sometimes be costly. Your tenant’s guest who injures himself on your property could sue you and engage you in a costly legal claim.

Your property itself can also be damaged in a natural disaster of any kind, leaving you lost as to how to reclaim your investment.

But it does not have all risky

Be sure to take individualized expert advice before investing in a pension pot property. The expert would give you important advice that could save you from headache in the future.

Take for example; taking a residential landlord insurance policy is an excellent move that could help you protect your investment.

Becoming a property landlord can be worthwhile if you take your time to study the market whilst ensuring that you have enough buffer to withstand any unforeseen circumstances.

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