Pay mortgage or buy rental property

pinthetail
pinthetail Posts: 17 Forumite
First Post First Anniversary Combo Breaker
in Savings & investments
Hello, I've been on MSE for a while but only just created an account.
I have just received £30000 that I want to use to help provide me and my family a secure future and hopefully in time a bigger house. I have been paying extra off my mortgage for four out of the last five years and consequently have reduced my mortgage term from 25 years to 12.

Before me and my husband bought this house we always had a dream of owning a BTL to help fund our retirements (we're in our 30' now) Things seem to be changing a lot and my gut is that BTL is not such a good thing to be doing now. Any thoughts on this?

Even though I know paying my mortgage off is a great thing to do, our pension provisions are not great. I can't see how a pension can provide us with a good retirement income. My last pension statement when I was working (before having my daughter) stated that I would get the same in pension and my wages were, and only if the investment came out very good. But surely time will make that amount worth much less?

I'd like some opinions on if I should pay as much as possible off my mortgage or get a BTL or invest in some other way. My knowledge on investments is somewhat limited. For the record my mortgage is £66000.

Thanks for taking the time to read this :)

Comments

  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    First Anniversary Combo Breaker
    pinthetail wrote: »
    our pension provisions are not great. I can't see how a pension can provide us with a good retirement income.

    Any reason you're not contributing to a pension now? Even if you're not a tax payer you can contribute £2880 per year and gain tax relief. A pension can provide you with a very good retirement income... if you contribute enough to it. You're not going to be able to invent money out of thin air, a single investment property is not going to fund a good retirement for you.

    Your problem doesn't seem to be mortgage or rental property, it's "what do we do about retirement?". If you're in your 30s with minimal retirement provisions you need to start planning for retirement now.
  • pinthetail
    pinthetail Posts: 17 Forumite
    First Post First Anniversary Combo Breaker
    From the information I have been given by my pension provider the money I have paid in does not give me a good amount to live off in the future. I am hoping to return to work once my daughter is in school, freeing more money to invest/save on a monthly basis but until then it is unlikely that I can find the monthly cash to pay into a pension. Most of my mortgage reduction has been by renegotiating interest rates and paying extra before my daughter was born.

    I am aware that one rental property won't see me for retirement but the idea is for it to be part of our provisions. In the future I hope to be able to have more investment opportunities.

    What I really want is to use this money to nudge us in the right direction but I cannot decide if I am better off with more immediate results of paying my mortgage of the longer term benefit of a BTL or other investments
  • greenglide
    greenglide Posts: 3,301 Forumite
    First Anniversary Combo Breaker Hung up my suit!
    BTL should be treated as a business. Even a single property tends to require management. You can, of course, get an agent to manage it but this costs. You have to do repairs (or pay to have them done). You have to find new tenants when existing ones move out etc etc.

    Many people start in BTL when they "acquire" a property from parents etc when they die or from when they initially become a couple.

    Not for the faint hearted!
  • bigadaj
    bigadaj Posts: 11,531 Forumite
    Name Dropper First Post First Anniversary
    Btl is definitely a business with consequent work involved, unless you want to pay agents and others which takes most of your profit, and risk in terms of voids, nightmare tenants etc, not probable but certainly not impossible.

    My partners btl has been empty for over 2 months before finding a new tenant and she is un pressured by having a small mortgage and excess income form elsewhere.

    I was speaking to a guy at work today, let a flat which was losing him money so he turned into an HMO, with individuals taking rooms on housing benefit. He got a call today from one tenant stating that she hadn't seen another guy for three days, his room was locked but there was a bad smell coming form the room, so he's potentially going to have to break into a room to find a dead guy and deal with all that, not pleasant.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Name Dropper Photogenic First Anniversary First Post
    pinthetail wrote: »
    From the information I have been given by my pension provider the money I have paid in does not give me a good amount to live off in the future.

    As with any saving. What you get out depends on what you pay in. As inflation is constantly eroding the buying power. There's no magic solution to achieving a decent retirement income. Just a good level of saving over many many years often at the expense of spending today.
  • traineepensioner
    traineepensioner Posts: 329 Forumite
    First Post First Anniversary
    "I'd like some opinions on if I should pay as much as possible off my mortgage or get a BTL or invest in some other way. My knowledge on investments is somewhat limited. For the record my mortgage is £66000."

    .....Would you be able to service your existing mortgage & an additional BTL mortgage if the interest rate rises? Would you still be able to do the same during any rental voids or heavy maintenance charges? Don't forget that, unlike investments in stocks & shares, you can't sell off part of a house if you're a bit short.:o

    Good luck with whatever you decide.
    No longer trainee :o
    Retired in 2012 (54) :)
    State pension due 2024 (66) :(
  • jimjames
    jimjames Posts: 17,596 Forumite
    Photogenic Name Dropper First Anniversary First Post
    pinthetail wrote: »
    From the information I have been given by my pension provider the money I have paid in does not give me a good amount to live off in the future. I am hoping to return to work once my daughter is in school, freeing more money to invest/save on a monthly basis but until then it is unlikely that I can find the monthly cash to pay into a pension. Most of my mortgage reduction has been by renegotiating interest rates and paying extra before my daughter was born.

    Does that prediction from your pension provider include any future payments into your pension or assuming it grows "as is" now? It probably would be low if you've only paid in a few years but BTL isn't an automatic alternative - you still need to pay off the mortgage for it.

    Bear in mind that with BTL you are gearing up by borrowing. You could do exactly the same by not paying off your mortgage faster and putting that into your pension instead. The latest budget changes make pensions in many cases an even better option as you get tax relief on payments in and more flexibility when you want to draw it.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Onawingandaprayer
    Onawingandaprayer Posts: 642 Forumite
    First Post First Anniversary Combo Breaker
    Some interesting stuff in here...

    http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10743997/Could-now-be-the-worst-possible-time-to-buy-to-let.html
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