With the average public sector pension currently paying out £5,600 a year (BBC 10/05/2014 Public and private sector pensions compared), it has made it difficult for us not to concentrate on our future plans for when we all hit retirement age. When Suemori wrote in The Sunday Times article ‘Who needs a pension’ (11/05/2014), she uses Adam Myeroff as an example to show how investing in property can provide a secure alternative pension for when he and his wife retire. Myeroff currently owns two Buy-to-Let properties and is aiming to build a ten property portfolio over the next 25 years to ensure his retirement funds are secure. He originally started by purchasing a £135,000 property in Hertfordshire and receives £750 each month from tenants. This works out at 6.5% annual rental yield after mortgage, monthly service charges and agent fees are deducted.
Myeroff provides a clear example as to how investing in property can provide a safe and secure pension alternative. David Hollingworth, of the mortgage broker London and Country, further adds that property investment is seen as a long term investment rather than a quick cash scenario. Similar to a pension, as an investor you will receive monthly rental income from tenants who rent properties from you.
At Embrace we echo these thoughts and are currently experiencing high yields and high Returns on Investment (ROI) through our property investments. For a secure monthly cash flow from a property it is essential that care and time is taken when finding the ‘right’ property. By finding a specific ‘Gold Mine’ area with high rental demand for your investment, it would ensure that your monthly income from tenants will be secure. For this reason, it is important to remember to fully research for a ‘Gold Mine’ rental hot spot area. You can do this by researching into things such as the re-generation of your chosen area to ascertain any future planning that could increase demand for rental accommodation.
If you are focusing on student accommodation, for example, and you find out that the local universities are building their own student accommodation then this is something to be wary of. A way to combat this would be to make sure you buy properties that can house more than one specific tenant type, e.g. white collar workers, blue collar workers, LHA/DSS and students. This will minimise your risk of voids and allow you to have a solid property investment into retirement, meaning you can enjoy these years with financial security.
- Peter Iwaniszewski