Good idea for a pension?

beancounter1968

Hi everyone

Just wondering if anybody had any thoughts, advice or experience about buying a second property with a view to renting. I am 38 and a sole occupant of my house. The house is valued at say £150k and has a mortgage of £70K with around 17 years to run.

Pension benefits that I have are 11 years in a final salary pension scheme which is now frozen as I have left (salary at the end of my employment was £21K and 6 years in a money purchase scheme with my current employer.

I am just mindful of all the adverse publicity on future pension benefits and someone suggested buying and renting a second property would possibly provide me with an income stream in the future. I would only be in a position to raise cash from an equity that I have in my current property.

Could anybody tell me if this is a possible idea and where the best place to start my research would be.

Thank you for taking the time to read


Phil

noyk

You only started a pension at 21, too late for riches in old age i'm afraid

Probably now, with house prices looking shaky, it is not the best time to buy. But others will be along with more encouraging words i'm sure.

PoorDave

Phil,

I think the consensus will be that now is not a good time to be doing such a thing, with diminishing returns being seen form renting out property.

The basic problems seems to be houses/flat being too expensive now in comparison to the rent you can hope to achieve.

However, this is not true in all areas of the country, so have a look at how much such a second property might cost (both purchase price and cost of mortgage per month) and compare with the realistic achievable rental per month. If the second number is smaller you're on to a bit of a non-starter!

Check in your current area to start with, then a few miles around perhaps.

Don't forget to include the cost of any additional borrowing against your existing house, if that's how you plan to raise some of the cash. See the problem is, that money isn't really "equity", it's just some money handed over on the basis of additional borrowing. Also think about how much you'd save by not doing this! i.e. your mortgage payments wouldn't have to go up if you don't borrow the extra money against your house.