Buy-to-let landlords investing to enhance their retirement funds

The attraction of a steady monthly income from rental properties reinforces the appeal of this sector

Many people decide to become buy-to-let landlords to enhance their retirement funds. With the UK rental market proving consistently solid, this investment strategy continues to attract countless individuals and families, according to the English Private Landlord Survey commissioned by the Ministry of Housing, Communities and Local Government (MHCLG). Rental yields across much of the UK remain strong, with the North West and North East standing out for particularly high returns. Many investors are enjoying a steady monthly income from their rental properties, reinforcing the appeal of this sector.

Beyond monthly income, the prospect of capital appreciation further strengthens the appeal of property investment. UK property prices are projected to increase significantly—by an estimated 23.4% between 2024 and 2029. For landlords planning to sell their properties upon retirement, this offers a promising opportunity to maximise returns. Additionally, 42% of landlords cite capital appreciation as the main reason for investing in property.

A long-term investment for retirement

Furthermore, 56% of landlords identified their buy-to-let investments as a long-term strategy to boost their pension pots. These investors focus less on immediate returns and more on building wealth steadily over time. For them, property ownership is not just about capital growth but also diversification and financial security for the future.

However, rental yields are not being overlooked. Presently, 48% of landlords prioritise monthly rental income over long-term capital growth. This is particularly evident in regions like northern England, where higher yields make buy-to-let a lucrative proposition for investors seeking reliable returns before eventual resale.

The rise of accidental landlords

Interestingly, not all buy-to-let landlords set out with this goal in mind. A significant portion of the sector is made up of ‘accidental’ landlords—individuals who find themselves renting out property without having planned to do so. This happens for various reasons, such as inheriting a property or moving home but choosing to retain ownership of their previous residence as a form of financial security.

Despite these circumstances, many accidental landlords eventually come to see the value of this investment. Among survey respondents, 37% had initially bought their first rental property to live in, while 6% inherited theirs. These figures reflect the diverse journeys into property investment within the UK housing market.

Employment trends among landlords

The English Private Landlord Survey also shed light on who Britain’s landlords are. The largest group—36%—are retired individuals, followed by 29% who are employed full-time and 11% working part-time. For retirees, rental income offers a vital supplement to their pensions. Meanwhile, for full-time workers, it may serve as a secondary income stream or an asset they can rely on in the future.

Rental income figures bear testament to its importance. Over the past year, the median gross rental income for landlords has risen to £19,200, compared with £15,000 in 2018. Depending on portfolio size and property locations, this income can vary significantly. While around half of landlords earn less than £20,000 annually from rent, 17% are generating upwards of £50,000.

Financing plays a critical role

Differences in financing also play a critical role in determining returns. With recent rises in interest rates, the choice between purchasing a property with cash or taking out a mortgage has become especially relevant. Over the last few years, more investors have been choosing to buy in cash, which not only allows them to negotiate discounts on property prices but also saves them the long-term expense of interest payments.

Among surveyed landlords, 41% reported having no outstanding borrowings on any of their properties. Conversely, 30% had a mortgage on one investment, while another 30% carried mortgages across multiple properties. Fixed-rate buy-to-let mortgages remain popular, chosen by 69% of landlords, helping to shield them from unpredictable market fluctuations.

Enduring appeal of buy-to-let

Ultimately, buy-to-let investment remains a pillar of wealth-building in the UK, driven by a combination of high rental yields, growing property values, and flexible financing options. For some, it’s a carefully considered strategy for securing retirement while for others, it begins as an unexpected opportunity that proves its worth. Monthly rental income and long-term capital growth continue to motivate investors, particularly in regions where yields are strongest.

Whether you’re considering entering the market as an investor or have found yourself an accidental landlord, it’s clear that the buy-to-let sector has something to offer.