Should I buy a second home as a pension investment

busysquirrel

We are lucky to be in a position to be mortgage free with the family home we live in. It has been suggested to me by my brother (who is also mortgage free and is planning on doing this).... to:
- release equity from our home e.g. £40k
- buy a two bed flat
- rent it out to cover the mortgage
- 25 years later be the owner of a property that can bring in an income in retirement

We are in our early 40s so, would be in our mid 60s by the time the mortgage is paid off.

Anyone got any advice on whether this is a good idea or a totally bad idea?

thanks for any help

Cath :-)

opinions4u

It's an all eggs in one basket approach.

If the area the property is in declines, you could lose big time.

getmore4less

Renting property is a business

do a business plan

dimbo61

well done on both you and your brother being mortgage free at such an early age.
Have you looked at the local rental market? Can you buy a 2 bed flat in your local area and rent it out at a PROFIT?
Have you got the contacts to maintain a property and look after your tenants!
What is the local rental market like, student land or out in the countryside

Thrugelmir

busysquirrel wrote: »

- 25 years later be the owner of a property that can bring in an income in retirement

Will letting the property provide a sufficient after tax return to repay the capital owed on the mortgage.

This is a primary failure of most BTL business plans. As the numbers rarely stack up. Hence why prior to 1998 property letting was primarily the preserve of the capital rich. Leveraging up on debt simply wasn't worth the effort as better returns could be made elsewhere.