Land-Lording - A Retirement Goal?

Years ago, I would speak to people who were perhaps around 55-60 in age and they would often say things like;

'When we retire we'll have an income from our rentals'

'Oh we are retiring early as we have property'

'Our Children will take over the portfolio and we will be the other side of the world sipping champers!'

Recently, I have noticed a culture of fear. Many landlords who are approaching retirement are selling up! But why?

I believe that the biggest issue at this very moment in time is the Buy to Let Mortgage rates. They have risen and they have left many landlords who were previously comfortable accepting market value rents in a seemingly difficult position. Residential Landlords are being almost forced from the market or forced to raise rents to unaffordable prices. Don't get me wrong, you could say 'well there is always someone able to pay a much higher rent' and you would be right however, a huge percentage of landlords are looking to provide secure housing to regular folk not bankrupt them in what is already a very tough time.

Lets take Landlord H for example.

H came to me and said that they would need to increase rent on their 2 bedroom property from £850pcm to £1,100 as the mortgage had gone from £630 up to £1,050 per month. That would leave H just £50 per month for insurance, boiler cover and it meant that he could no longer afford our management fees. The few hundred he would set aside each month for the general maintenance or the planned work to relay the driveway were to be no longer possible. It also meant that his excellent long term tenants may have to vacate as they may not be able to afford an increase. Landlord H was also very reluctant to have to put the tenants in this position as he felt that £850 was a reasonable offering for the property perhaps even a small increase to £900 would have sufficed. With a full time job, he also did not have the time to dedicate to self managing the tenancy and would need to work more hours to pay for the additional work. Alas, as a business it can no longer work.

Four months later and the property is currently on the market. Landlord H is sad that he has to give up his 'retirement plan' and that the tenants face an uncertain future as to whether an investor will buy. I have lost an exceptional client who I have shared many wonderful experiences with housing families who were truly in need of a home and a chance to get back on their feet following hardship.

From my recent experiences with my own clients, Landlord H is not an exception. They are the product of a somewhat broken system. With lenders controlling the rental market, rent hikes are becoming the norm. Many landlords are not able to provide the affordable and secure housing that they had set out to do maybe 10-20 years ago.

In essence, having a rental property is fast becoming unviable for landlords as a retirement plan. With the added pressures on landlords to get it right, the additional costs and licenses needed to operate and the need for high quality housing there doesn't seem much wiggle room left in the bag.