Buy-to-let - a good investment for pensioners?

glynnadams

Hello - am hoping i can get some thoughts on my parents predicaments. They're both in their 60s and selling the family home to fund their retirement (they don't have much pension between them - about 180 a week for the two of them). The house is worth 290k and they're looking for a a new home around the 200k - this leaves around 80k for their retirement pot.
They plan to live off this money but i'm really keen they invest properly and talk to a financial advisor. I think they should buy a small property or flat and let it to provide a regular monthly income without depreciating their capital. They're reluctant to talk to financial advisors and realistically 80k won't get them much of an investment property (although i've offered to help top up by releasing some of my equity) and they don't want to spend less on their new home.

Does anyone have any advice as to what they think my parents should do? Are there any other investment opportunities they should consider - especially in the current economic climate. What kind of monthly return could 80k realistically return if not in another property?

I'd really appreciate any other thoughts on this...

Many thanks
Glynn

poppysarah

Nothing depreciates capital like a bad tenant and a house price crash.

Fire_Fox

Welcome to MSE! What are you trying to achieve here - do they need income on a monthly basis from day one (if so how much?), making the capital last as long as possible, or preserving the capital for your inheritance? Have you checked that your parents would not get pension credit or council tax benefit or other support?
https://www.entitledto.co.uk

Property is usually a good long term investment, how long term are you thinking? Is it a wise move to put all their eggs into one basket (the property market)? Do you know anything about landlording? Who will manage the let property on a daily basis - taking late night calls about a water leak for example? Have you considered the costs of repairs and maintenance and, if a leasehold flat, service charges and ground rent? Have you thought about income tax, capital gains tax, vacancies, tenants who do not pay or trash the place?

My parents retired early and sold their BTL property so they would not have to worry about it as they hit their seventies. Against my advice they invested their capital; then of course both the property and stock market have reduced in value in the last couple of years. They lost a third on some investments! IMO they should have had some money simply in a savings account - making very little in interest in the current climate but completely safe.

Wee_Willy_Harris

Are thery claiming their pension credits?

Perhaps a slightly more boring, less potentially lucrative but secure investment option would be wiser? A single property LL could take years to recover from just one bad tenant.

BitterAndTwisted

A buy-to-let is the very last thing I would advise a retired couple to tie up their entire nest-egg in. The money-train left that particular station some time ago. Even professional landlords can have problems with non-paying, difficult-to-evict tenants who trash the place and cause thousands of pounds' worth of damage and this is one headache that can cause an amateur one very serious problems indeed. Please do not advise you parents to consider this option!

clutton_2

as a mature professional landlord of 11 years i wholeheartedly agree with the "dont do it " responses above... for a start the start-up costs will be huge... solicitors fees, surveyoers fees, letting agents fees, mortgage broker fees, building society fees, refurbishment fees - although most of these are deductible on sale to mitigate Capital Gain Tax liability - who knows what the CGT rate will be when they want to sell..

BTL mortgages are often 25% deposit these days.... altho i did hear last week that one or two small lenders would demand less.. but whether to a very matue couple wiht no experience i dont know... i doubt they will have the income required for a BTL mortgage anyway - as Lenders have to know there is a war-chest of cash for a rainy day/tenant from hell...

SouthCoast

Old news, but still relevant.

Landlords as well as tenants suffer problems

Published Date: 01 November 2007

IN response to the article (Gazette, October 25) about a single mother's housing hell, while I feel very sorry for the young lady and her baby, I would like the public to know about the housing hell facing many landlords.
What dreadful advice Arun District Council is giving to tenants, to wait for a court order to evict them from private premises, so they can be a priority to be rehoused.

It is the landlords who have to pay for all the solicitors', court and bailiffs' charges, with very little hope of ever getting this back from the tenants.

I know of a retired pensioner with a mortgage on a buy-to-let property.

This tenant had not paid any rent for three months, therefore the landlord is struggling to save his house from being repossessed, while paying for all court costs, too.
How unfair this system is, that tenants can only get better housing at the expense of their former landlords.

Name and address supplied
East Preston

PasturesNew

glynnadams wrote: »

They're reluctant to talk to financial advisors and realistically 80k won't get them much of an investment property

Which makes me wonder why you think they'd want to speak to:
- letting agents
- tenants
- bad tenants
- courts if they need an eviction
- repairmen to deal with problems

.... there's a LOT of work in renting property out, calls can come in 24/7 requiring action and decisions.

It's hardly a retirement at all....

Cardinal-Red

Also, a property investment is highly illiquid, especially at this stage of the economic cycle. I'm with the general concensus on here that this is NOT a good plan at all.

Fire_Fox

PasturesNew wrote: »

Which makes me wonder why you think they'd want to speak to:
- letting agents
- tenants
- bad tenants
- courts if they need an eviction
- repairmen to deal with problems

.... there's a LOT of work in renting property out, calls can come in 24/7 requiring action and decisions.

It's hardly a retirement at all....

Good point. Or indeed whether they will comply with the one hundred plus pieces of legislation as Clutton occasionally reminds us.

HAMISH_MCTAVISH

glynnadams wrote: »

I'd really appreciate any other thoughts on this...

I'm probably the biggest property bull on these forums, and even I think this is an absolutely terrible idea.

BTL is seriously not a good idea for pensioners. Too much risk, too much hassle, too much stress.

Take the 80K and invest it in a good mix of term accounts, blue chip high yielding equities, and low risk corporate bonds, Tesco and the like.

They should be able to get a return of between 5% and 7% if they can handle a bit of risk, or 4% to 5% with very low risk.