passive income from rental property as retirement income

ognum

Thrugelmir wrote: »

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.

Thanks for this, I agree 8k is a lot of cash but not something I would worry too much about as it is not a large percentage of my rental profit.

I agree all LL need to have sufficient to take care of all rental problems.

atush

you may agree and realise this, but many nwebie wannabies dont'.

So we have to point it out in all good conscious.

And TBF, the 6 property rule is probably considering you would have leverage on some/all properties? Which in this day and age could be possibly wiser (as the interest cost is deducted from gross income) due to the current low cost of borrowing.

Thrugelmir

ognum wrote: »

Thanks for this, I agree 8k is a lot of cash but not something I would worry too much about as it is not a large percentage of my rental profit.

Maybe not, but it has to be considered against using the capital elsewhere. Perhaps for a table more secure return. I doubt many people truly understand the risk they are assuming when leveraging up with debt. A totally scenario to those that are capital rich. The boom in BTL has happened in the last 15 years. So in many ways the jury's still out until the current financial crisis is finally put to bed.

Cornucopia

jamels2 wrote: »

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?

I wouldn't get too deep into the planning until you find out what the lender(s) can do for you. This in turn will be based upon your payment record, the LTV(s), and the rental return.

If you want more of a guide here, you'll need to post some example figures. Or consult directly with your lender and/or a mortgage broker.

kidmugsy

jamels2 wrote: »

If paying interest is bad (which I agree, usury?)

Of course paying interest isn't bad: interest is just the rent you pay on borrowed money. If you live in someone else's house, you pay rent; if you drive a car from Avis, you pay rent, but they'll call it a "hire charge"; if you borrow capital from the Nationwide, you pay rent, but it is called "interest". That's all there is to it.

atush

I was of course talking about paying interest on debt such as CCs which is high, and best avoided for your financial health (one of the reasons for the emergency cash buffer). This is 'bad' debt interest. Payday loans, worse.

Longer term leverage/debt such as a mtg was not the reference. This is 'good' debt interest.

jamels2

Thanks for all replies. I like jamesd's plan of starting again with my own residence being bought with at least 25% deposit. Then later on buying the BTL place once I have more equity. Also cornucopia's idea of providing low rent properties is good, how will you keep the rent low though?

IronWolf

The main thing I would bare in mind is that rental properties are not 'passive' they require active management. Do you really want all that hassle in your old age?

I think its fine to have a BTL now, but I wouldn't want to keep it as my source of retirement income, Id prefer a dividend paying REIT or Investment Trust.

Cornucopia

jamels2 wrote: »

Also cornucopia's idea of providing low rent properties is good, how will you keep the rent low though?

This is a long-term plan of mine, and as yet I don't know how feasible it is.

The outline of it is this:-

- Planning authorities have exemptions for affordable housing.

- Kit houses have lower build costs and generally come eco-friendly from the outset. (Another tick in the box for the planners).

- The rent is determined by the costs, not the market, so there is no issue in keeping it at the appropriate level.

atush

It depends on those costs- you can't charge above the market, so the market does control rent in a way.

Obv if your costs are lower than normal, you can choose between extra profit for yourself, or lower rents.