Private landlords view their property portfolios as alternative pension plans and intend to live off the money they generate in retirement.
Rather than diversifying their cash across a range of investments, more than 80% of landlords treat their buy to let businesses as long-term investments for retirement savings.
Nearly two-thirds (61%) plan to live off their rents, according to research for the National Landlords Association by market researchers BDRC Continental.
The study also highlighted nearly 20% of private landlords are relying on rent from their properties to supplement the state pension, while 5% will sell their properties and 40% are taking a view on selling some or all of their buy to let homes depending on the state of the housing market at the time.
One in 10 landlords are so confident that the sector will outperform other assets that they sold other investments as they considered the returns from buy to let were so good.
Other reasons to invest in buy to let include:
- Producing income (19%)
- Retirement savings to set off against other poor investment performance (15%)
- An alternative to a pension (8%)
BDRC Continental director Mark Long, said “Landlords consistently tell us that they see their property portfolio as forming a critical part of their pension provision for the future.
“On average, landlords intend to remain active in the rental sector for another 15 years or so, and see a combination of capital gains and rental income as underpinning their pension strategy.”
Buy to let yields are highest in the North-West, averaging 7.1%, according to letting company LSL Property Services, who operate chains like Reeds Rains and Your Move.
Increasing rents and high house prices in some regions, especially London and the South-East are bringing down yields, while yields are higher in the North with lower home prices triggering better returns.