Why consider investing property in long term?
When pensions were introduced in 1909, the qualifying age was 70 years old, even though in 1900 the average age people would live to was 47 for men and 50 for women. In 2015, men were expected to live to 79, and women to 83.
The difficulty moving forward for people and the government is how to fund retirement from the age of 65, for what could be another 20 years. This is particularly important if you fall ill and want quality care as a decent home could cost you around £1,000 a week.
Currently you can help to fund your retirement with pension investment and the government will give you tax relief for doing so, but the difficulty arises if your key cost of living during retirement rises more than pension fund does.
The key costs you need to cover in retirement are:
If you want to give up working earlier than the currently designated 65+ years, you’ll need funds to cover your retirement lifestyle from the day you want, rather than the day you are ‘allowed’.
One way to help ensure you can cover your costs in retirement and stop working when you want to is covering the housing costs early on. This ensures you will always be able to afford a roof over your head.
In addition, property can allow you to earn money housing other people, potentially providing you with an income which helps ensure you can cover all your retirement costs.
There are three ways of considering investing in a property long term:
1. Buy a home you want to retire to now
2. Pay off your current mortgage as fast as you can and retain your existing home in the future
3. Buy other properties to help generate enough cash, or income, to cover your retirement costs