Giving up on a career - income from property

ttaylor

My friend has given up on the idea of a decent job and instead has, after several years of saving, bought a property to rent out while living with parents.

He said the jobs market is so bad it's not worth trying and thinks this is an alternative. He doesn't want the pressure of interviews/doing courses etc and wants a passive income, once the mortgage is paid he said he can live on the rent.

I wondered what the forum thinks of this kind of idea, part of me feels it's a waste of talent as he's obviously intelligent but is staying in a low end job with no skills. Although I can understand his frustrations with the economy and lack of opportunities/competition for jobs.

dktreesea

Presumably he is still working at some kind of job, if he was able to get a mortgage?

It is a problem when you work for someone else; how do you leverage any money you have saved? You could save £50k and just leave it in the bank, for a paltry 3% per annum befor tax, so say 2.4% p.a. after tax, and barely be making enough on your savings to stay ahead of inflation.

Or you could buy a house for £100k, and sure, you do have to be making enough rent out of it to cover the repayment (preferably interest and principal), and the amount of interest received that you have foregone by taking the money out of the bank, just for cash flow reasons. But the value of the house isn't likely to drop in nominal value in the longer term, even if the pound sterling depreciates so much that in 20 years time you couldn't buy much if you sold it.

In 20 years time, he could be living in a house that someone else has bought for him, mortgage free. Is that such a bad way to go, especially with our ever rising population and increasing demand for rental property?

JodyBPM

One property alone isn't enough to provide a liveable income, especially if he has a mortgage to pay. In reality, he is presumably being heavily subsidized by his mum and dad, since he is living with them, rather than paying his own accommodation costs in the open market.

Obviously, it is possible for this to be the start of a property business for him, where he buys more and more properties by releasing equity from his existing one, but that's an *extremely* risky game to play.

I'm not necessarily saying that investing in property is a bad thing, I just don't think that buying one property whilst living off of mum and dad is a substitute for a job!

Just re-read, and realised he has still got a job, albeit a low paying one. In which case, a house may well be an OK investment vehicle for him, presuming he has done his sums and is sure he can avoid void periods and maintenance etc.

ttaylor

I don't think he'll have a problem with void periods here, there is a high demand for rentals. Yeah he is working but in a below average job, and he is someone who everyone knew was bright but I suppose a bit of an under achiever. I guess he wants an easy life!

dktreesea

ttaylor wrote: »

I don't think he'll have a problem with void periods here, there is a high demand for rentals. Yeah he is working but in a below average job, and he is someone who everyone knew was bright but I suppose a bit of an under achiever. I guess he wants an easy life!

I wouldn't describe property investment as an easy life, unless you are farming out the management of the property and are prepared therefore to be ripped off by every tradesman the property company deals with.

I like the idea though of renting to the council so they can use the property for social housing. That's a commerical, rather than a residential lease, so the council would be responsible for all outgoings AND restoring the property to its original state once the council's lease is up.

Annisele

ttaylor wrote: »

I don't think he'll have a problem with void periods here, there is a high demand for rentals.

There's a high demand for rentals now. But I'm guessing his plan is a long term one?

It might well be that in a few years the rental market is completely different, and it's far harder to let the property.