passive income from rental property as retirement income

ognum

atush wrote: »

Perhaps you should go over to the property boards? It can and does happen.

But what if as you age you can't look after the properties. So you have to hire someone to do it for you. Immediate reduction of income.

What if properties are vacant for a period? Need new roof? The capital required to be held back for such issues would be large, and multiplied by each property owned.

Basically, a BTL or even a portfolio of them as part of a series of assets is fine. a % of your porfolio, never 100%

It should never be your only asset and source of income. AS both could go/decrease at once.

Thanks Atush, I spend a lot of time, too much on the Property Board, I do have a portfolio of wholly owned properties as part of my pension provision and have a comfortable income from them.

I have just never heard the six property thing before and while I read about the possibility of trashed property have never suffered one, many people I know have let properties and have never had one either!

Thanks, I'll head back to the property board!!

atush

Do you manage them/vet tenants yourself? Or do you use a management company?

If you vet tenants well, things can go well. but you will eventually age to a point where if might be difficult for you to look after them yourself?

And yes, with a series of places a bad penny will eventually turn up. Hopefully you will continue to escape or your tenants will stay long term.

Linton

ognum wrote: »

Thanks Atush, I spend a lot of time, too much on the Property Board, I do have a portfolio of wholly owned properties as part of my pension provision and have a comfortable income from them.

I have just never heard the six property thing before and while I read about the possibility of trashed property have never suffered one, many people I know have let properties and have never had one either!

Thanks, I'll head back to the property board!!

So you do have some diversification to spread your risk and fully own your properties. This is very different to the OPs situation where he is proposing to live on the income from one mortgaged property which to me sounds frighteningly risky.

jamesd

jamels2 wrote: »

1. can i have two residential mortgages, if one is on consent to let? or does one have to be a proper buy to let and the other residential?

The law imposes no limit on the number of residential mortgages you can have. Lenders often have policies in this area so you should be considering the policies of the lenders. Most lenders are likely to limit you to no more than one or possibly two residential mortgages with them but may accept more with others, provided you genuinely are living in the property, or a family member is, and it is not let for profit.

How consent to let is viewed will depend on the lender and you may have a time limit, higher interest rate or both to consider.

jamels2 wrote: »

2. i don't like debt and in the last few years got rid of every credit card/overdraft/loan i've had so i am now debt-free apart from a mortgage. is there any way of living without debt totally or do you have to have it, in order to have your own place and a place to rent out?

It is possible to live without explicit debt but it's not usually the most efficient solution.

A residential mortgage is simply a mortgage secured on your own residence, or one of them. The money from the mortgage can be used to buy all or part of a BTL property.

A BTL mortgage is simply a mortgage where the debt is secured on a let property. The debt doesn't have to stay in the business, you can take out a BTL mortgage and use it to fund withdrawing capital from the business, up to the limit of the capital account of the business. The capital account is something you should learn about from HMRC if you're unfamiliar with the term. You need to know about it when in this business.

In general the most efficient funding for buying BTL property is a residential mortgage secured on your own home with the money from the mortgage used to buy the BTL property. Because the purpose of the borrowing was to buy the BTL property, the interest on the amount paid into the business is an allowable deduction from rental income for income tax purposes. However, there are various potential timing catches and it's wise to seek the advice of an accountant familiar with BTL to be sure that the specific method and timing used meets HMRC's requirements.

If you want a suggestion of how to proceed with this letting only income plan mine is:

1. Buy your own home with a residential mortgage at 75% LTV to get a good interest rate.
2. Save as hard as you can to accumulate the deposit for a BTL property and buy with a BTL mortgage.
3. When buying or BTL, buy a property that needs work. That will allow you to do up the property while nobody is living in it, and increase the value of the property. In some cases this can allow you to remortgage to free the whole of your deposit amount. You could then use that to get another property more quickly.
4. Ensure you have a minimum of £5,000 of readily accessible money to cover contingencies at all times. That's not really high enough for high prudence, just a minimal sort of level to allow redoing a significantly damaged property and pay the mortgage until you can get the tenants out. Six months mortgage per property plus refurbishing costs is a more prudent sort of level, something you could start reducing once you have three or more properties and are less likely to have a high percentage of the total vacant at the same time.

Cornucopia

Not entirely through choice, I find myself living off rental income.

Whether it suits depends on a huge range of factors:-

- Number, type, price, LTV, rent, type of tenants in property/ies

- Other savings (for rainy days)

- Other investments (to balance your investment portfolio).

- Your own skills as a landlord/bookeeper/DIYer

The idea that there is a fixed ideal number of properties (6?) is wrong. The question is (a) how the figures stack up - one property might deliver £1500pm in profit, and if that is enough to live off, great, (b) balancing the risk of voids - that could be through multiple properties or it could be by having cash in the bank - either works.

In answer to the OP's questions - yes, lenders will entertain Consent to Let. One of my properties is CTL for an initial 3 years. I suspect the lender would probably renew at the end of that period.

It will depend entirely on the mix of mortgage types you are interested in, and the individual lenders' rules as to whether they will let you use your entire income multiple again, having used it once on a CTL (though generally, this is often the point). Best option is to speak with a mortgage broker and get proper advice.

Other than that, you need to work out how much you need to live on, and see how the figures stack up. Ideally run different rent/interest scenarios so you don't end up in a tricky situation later.

Morally, this is basic capitalism at work. You acquire an asset through leverage, and then exploit the asset. As long as you are fair to your tenants and observe the (not insubstantial) legal requirements for both LL's duties and Tax, then I don't see a moral issue.

Longer-term, I'm interested in developing/building properties for affordable rent, so perhaps that's a more morally-acceptable angle?

jamels2

So if I am considering letting out my existing property and buying another one, but unsure if I want to continue it for more than 2/3 years I could potentially:
-change my current mortgage to consent to let for say 2 years
-at the same time taking some equity from it to put down as a deposit on another property which I will get another residential mortgage on?

Thrugelmir

ognum wrote: »

I have heard this tenant from hell thing many times, I would be interested to know how many people have them, though if it happened to me it would be fine, just never met anyone it has happened to!

Then you've lived a sheltered business life. Plenty of sharks out in the wider world. They'll know the law better than you as well.

Thrugelmir

jamels2 wrote: »

-at the same time taking some equity from it to put down as a deposit on another property which I will get another residential mortgage on?

2 issues then potentially arise.

Will your existing lender agree to the equity release.

Will the new lender be happy with the source of the deposit.

ognum

Thrugelmir wrote: »

Then you've lived a sheltered business life. Plenty of sharks out in the wider world. They'll know the law better than you as well.

I am not disputing that sharks are out there,all I am saying is that it is quoted time and time again on forums like these but I have yet to find anyone it has happened to.

I am happy to admit I may be lucky or careful or even perhaps have not lived a sheltered buisness life so have sidestepped those individuals.

Thanks for your input!

Thrugelmir

ognum wrote: »

I am not disputing that sharks are out there,all I am saying is that it is quoted time and time again on forums like these but I have yet to find anyone it has happened to.

I am happy to admit I may be lucky or careful or even perhaps have not lived a sheltered buisness life so have sidestepped those individuals.

Thanks for your input!

A friend of mine lost around £8k. When letting a 4 bed flat. This was a mixture of rent, legal fees and damage. She's a professional landlord though with 7 properties so could withstand the loss. There's a difference between having the capital to buy outright and leveraging with debt.

The post 1998 generation of property investors are heavily leveraged. So be interesting to see how the market develops over the next 10 - 15 years.