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Use rental market to keep hold of family home in retirement, says ARLA
15th December 2011
Those looking to downsize following their retirement but eager not to sell their family home may want to consider putting the property on the lettings market, the Association of Residential Letting Agents (ARLA) has suggested.
According to the organisation, with rents hitting record highs, it is becoming increasingly feasible for those entering retirement to rent out the family home rather than selling it in order to downsize.
They can then use the income to rent out a smaller property for themselves as well as supplement pensions.
"With many potential buyers struggling to secure a mortgage, letting your family home rather than selling offers a strong alternative," said ARLA president Tim Hyatt.
"Rental returns stand at an average of 6.1 per cent this year, according to research from Knight Frank. This substantially beats the returns on many other current investment opportunities."
ARLA has published a number of tips for retirees who may be thinking about putting their home on the lettings market.
One of the first things they will need to consider is their buildings and contents insurance cover, said ARLA, as their current package may not cover the use of the property by tenants.
They will also need to inform their mortgage provider, as letting out a property requires a different form of mortgage from owner-occupation, as well as sign up to a deposit protection scheme.
According to ARLA research, an increasing number of people are using the private rented market to fund their retirement, with more than two fifths (42 per cent) of today's landlords having originally invested with a view to creating a retirement nest-egg.
"ARLA members also report that achievable rent levels are increasing, while demand for good quality rental properties remains high," added Mr Hyatt.
"While market conditions remain so inclined, it could be prudent to let out the family home, and use the monthly rental income to invest in renting a smaller retirement home."
Posted by Lisa Evans