Granlords get set for buy-to-let bonanza

There are just eight days to go until “pension freedom day” when the over 55s will be allowed to draw cash from their retirement funds – and all the signs point to a buy-to- let spending spree.

Sales and letting agency Linley & Simpson, which has one of Yorkshire’s largest portfolios of managed rental properties, has been inundated with enquiries. The company has even set up a buy-to-let service and an investment property search on its website to help the army of would-be “granlords” keen to put their pension savings into bricks and mortar.

Linley & Simpson Director Will Linley says: “We were braced for a surge in interest among older people wanting to explore the buy-to-let option but the actual numbers have surpassed all our expectations.

“Low interest rates and easier access to funding has heralded a resurgence in this market generally in recent months and the changes to pension rules are adding further impetus. As many as one in four investment inquiries is from savers over 55 looking to take advantage of the pension reforms and we expect this ratio to increase in the weeks to come.”

Will adds that calls have come from London, Wales and even Hong Kong thanks to Yorkshire’s reputation as a promising place to invest. Lower than average property prices and good yields are part of the attraction. Average rental yields in Yorkshire are 5.7 per cent, while the national average is 4.1 per cent

“The Chancellor’s vote of confidence in Yorkshire in the recent budget, singling us out as an excellent place to live and work, has added to its growing profile and magnetism,” says Will, who says there is no immediate danger of over-supply despite a possible buy-to-let boom.

“In many areas, rental demand is outstripping supply,” he says. Seasoned property investor and chief executive of Eddisons Residential, Graham Bates, agrees that there will be no shortage of tenant demand in the short-term but he adds a note of caution.

“I think the number of buy-to-let landlords will increase over the next few years, supported by the new pension rules, but I do not believe we will see a noticeable increase in the number of individual buy-to-let properties in the short term as you also have to offset those landlords planning to come out of the market.

“Plus there is a significant lack of supply in Leeds city centre and other major centres, so it is unlikely we will see over-supply any time soon.

“However, my word of warning to potential landlords is be certain of what you are buying and take advice as you would for any investment. Institutional investors are committing heavily to the private rental market and future competition for tenants is going to be fierce.”

Would-be landlords should also be advised that letting is not easy money. There are many pitfalls, including problem tenants and fluctuations in the market. The recent recession, when property values plummeted, is a prime example.

Edward Stoyle, partner at the York office of Carter Jonas, believes location is key. “My shrewder clients are carefully choosing the very best locations they can afford, even if that means a smaller property. You can pick up a compact studio flat in York’s BIBA House for as little as £105,000 and know that you’ll find an instant tenant at a good rent. The prospects for capital growth are good, too.

“The best property has outperformed the stock market in recent years. If you assume a net yield of five per cent on a buy-to-let, then add on the 10 per cent annual capital growth currently seen in central York, you land yourself a whopping 15 per cent per annum.”

While the gains can be good, you will have to spend money on your investment. Graham Bates says: “When you plan, put some cash aside to make sure your rental investment has great decor and furnishing to maximise the appeal. After 25 years as an investor, my number one tip is to make sure your property is good enough for you to move into yourself.”

*www.pensionsadvisoryservice.org.uk; www.scottishwidows.co.uk/retirementexplained