Boom in student lets snapped up by silver landlords as pensions fall short

There has been huge growth in older workers buying up student rental properties to boost their retirement income, according to The Mistoria Group, which has seen seen a 35 per cent increase in over 50s investing in student property.

Mistoria, along with banks and mortgage brokers have seen a surge in buyers in their fifties and sixties taking out buy-to-let mortgages, as a number of institutions scrap upper age limits for borrowers. 

This growth in ‘silver’ landlords is fuelled by low-cost mortgage rates and reforms from Chancellor George Osborne that allow savers to take all their pension cash at retirement.

Instead of having to buy an annuity, or income for life, pensioners can use their cash however they see fit from next April. Living off rental income will sustain their living in retirement, boosted by the fact that an average buy-to-let property returns around 5.1 per cent in the current market.

Banks are handing out more than £2 billion a month in buy-to-let deals — a rise of 60 per cent more than last year, according to the Council of Mortgage Lenders.

Mish Liyanage, Managing Director of The Mistoria Group has seen a massive increase in older workers investing in student property.

"The majority of our first time HMO clients are over 55 and looking for a safe place to put their funds to benefit themselves and their children.

Fresh in people’s minds are the stock market Black Friday, Icelandic bank crash, Lloyds and RBS scandals and the retirement age being raised to compensate for underperforming pensions.  There is a general lack of understanding for most pension products and many people rely on financial advisors to steer them on a right course.  But as the mass media has stated time and time again, mistakes are frequently made and pensions are a big thing to be gambling with.

By choosing the right property and the right agent, investors can sit back and after years of working for their money, can finally see their money working for them. So to illustrate this, if we look at someone who takes £50,000 from their pension pot, they could currently get an income of £253 a month by converting this in to an annuity — an annual income of £3,036.  However, if they used this £50,000 as a deposit for a six bed student property with a HMO license worth £200,000, they would pay interest of £705 a month which they could deduct from gross rental income of £2,210.

With age restrictions on mortgages being changed, many older landlords can now borrow funds to finance their purchase, with a view to building up an income-producing portfolio for their children, instead of leaving them cash.

Property in the UK has always been a safe investment and although house prices occasionally go down on a year on year, they never decline over a 7-10 year cycle. Regardless of capital appreciation, rental income has always gone up, ensuring a better yield, year after year.”

Recent estimates suggest the Chancellor’s reforms could see an extra £10 billion annual boost, if just one in five well-off pensioners decides to invest 10 per cent of their pension pots in buy-to-let.