Landlord Knowledge - The Home of Savvy Buy to Let Property Investors

Why buy-to-let is an outstanding wealth-management and retirement income strategy

The concern about adequate retirement income is one of the most important financial issues for those aged 30-50. Today they face a ‘triple whammy’:

  • Pensions that provide income based on your number of years of service and your final salary hardly exist for this group.
  • The returns on the amount of money paid out each year from a lump sum (the sum of money you’ve accrued in your pension pot), are amongst the lowest ever seen. This means most people are unlikely to meet their retirement needs, let alone the expectations of their holders.
  • Investing in the market, either through pensions or in other forms can feel quite uncomfortable for some, given the high level of the markets today and the increasingly uncertain world in which we live.

Many people have made the decision to become a buy-to-let landlord or grow their existing portfolio as they see it as a sensible long-term investment – one that could form an important foundation for their retirement income.  

They find the rental income or returns attractive, and there is the likelihood of significant capital growth. Perhaps most importantly, they feel an element of control, rather than face the uncertainties of the stock markets.   

To show you how you can make retiring on buy-to-let work for you, we’re outlining a few factors landlords need to bear in mind while planning for the future.

It always makes sense to invest in a variety of asset classes, because diversifying investments reduces risk. Think long term as this evens out bumpy years. So, what level of return do typical investment classes provide and how do these compare to buy-to-let?

10-year real returns after inflation with reinvestment of income (Source: Barclays Capital Equity Gilt Study 2016)

  • Equities (Shares) 2.3%
  • Government Bonds 3.0%
  • Corporate Bonds 1.8%
  • Index-linked Bonds 2.5%
  • Cash (savings account) -1.1%


Buy-to-let benefits from strong rental demand arising from a backlog in house building, the challenge first time buyers face in meeting lenders’ strict affordability tests, and the increasing population.

If we compare these returns to buy-to-let, you can make a return both from the rental income, and from capital appreciation.

The rental element will on average yield 4-5% and a good yield in the right area will return 7 to 8%. However, you need to take into account maintenance costs, plus the time spent in managing the rental. This is why many landlords employ a managing agent, but this cost also needs to be factored in. After taking these costs into account you may be left with a yield under 3%, but this compares favourably with other asset classes. You’ll see a worked example in a moment.

In addition, you can expect to make a capital gain as house prices rise over time. Over the last ten years UK residential house prices have risen on average by 18.5% (Source: House Price Index to December 2016). Historically, house prices have been less volatile than other investment classes, and have a low correlation with fluctuations in the stock market making your overall portfolio more stable.

So, let’s look at that worked example:

Comparison of potential costs and returns on property and stock market investment. Basis of buy to let in example below: Purchase Price £200,000, Deposit £50,000. NB: this is an example only and figures will fluctuate depending on different circumstances







Fees and stamp duty     


Annual fund supermarket charge



Annual Fund cost(approx.)


Total Upfront Cost



Total income after 25 years after tax


Total income after 25 years after tax


Profit from house price growth


Capital Growth


Total return after tax


Total return



Now you’ve looked at the benefits, what else does a buy-to-let landlord need to consider?

To maximise your retirement income, as a landlord you’ll need to make sure you’re managing your property portfolio as efficiently as possible. Despite 95% of landlords not considering letting to be their main occupation, managing your property investments can’t afford to take a backseat. Poorly managed properties will underperform, and with finance often the single biggest expense for those in the buy-to-let market, you need to be actively trying to maximise your rental income.

Buy-to-Let mortgages

Buy-to-let mortgages are usually your biggest monthly expense – making it essential to seek out the best deal possible.

This is where you could benefit from using digital mortgage broker Property Master, which evaluates the whole of the market and sources the best mortgages available based on its findings. You can match your funding requirements against every buy-to-let mortgage on the market’s lending criteria to see exactly which mortgages you can apply for and which will save you money.

In the example above, a buy-to-let mortgage interest rate of 3.59% was assumed, but Property Master identified that a mortgage rate of 2.74% was available, reducing annual costs by £1,700 – worth £42,500 over the 25 year comparison.

Buy-to-let means business

Diminishing returns on a property can be costly down the line. That’s why it’s crucial that as a landlord you manage your buy-to-let investments like a business – even if you’re not set up as one. Working out cash projections, rental yield and considering any market fluctuations are all crucial to maximising rental income.

Has a complete financial plan been put in place before expanding your property portfolio? Have all avenues for offsetting rising taxes, such as raising LTV or setting up as a limited company, been fully considered?

For landlords unsure where to start, free online tools such as Property Master can run a variety of scenarios for you, showing you whether you’d save money by setting up as company. In fact, it can even tell you if you should re-mortgage early to take advantage of better deals.

For landlords who want to retain control over their future finances, buy-to-let is certainly a retirement strategy worth considering. With proper management and a little forward planning, savvy property investors could find themselves reaping the rewards in later life.

Property Master are the UK’s first digital mortgage broker for buy-to-let landlords. Allowing landlords to instantly review their entire property portfolio and analyse mortgage options, Property Master enables landlords to evaluate all lending scenarios. For more information, visit Property Master.