Shall we stay or shall we go now

Pincher

If you have two houses generating rent, say £15k each, so £30k, and you make it tax efficient, you don't need to draw down at all.


There are deductibles, mainly mortgage interest.
Let us say you have a fairly high deposit on the properties,
so £8000 interest, £2000 on agents fees, and £2000 on maintenance. You each have a personal allowance, let's say £9000 each. So you have £30,000 in deductibles.


The result is you get £18k income, tax free, every year.
15 years later, you sell the two properties, and pay some capital gains tax.


Beware that the HMRC will only let you claim the interest on the initial purchase price. So, if you bought the house in 1993 for £50k, you can only claim relief on the interest on £50k, even if you get a BTL mortgage of £120k.


Just a rough estimate, as management agents are nasty, so 15%+VAT is going to be more like £5,000.

Primrose

It doesn't sound enough to me. Don't forget that by quitting your jobs now you will be reducing your national insurance payments for a 15 years too which could impact considerably on your state pension in the future. I don't think we will see a return to generous interest rates on savings for many years and I don't know what level of inflation you have built into your calculations. If you are prepared to take a big risk, then go for it, but if you are both fit and healthy with long life expectations, my feeling is that you may be drawing on your resources too early, leaving little in reserve for your later years if things go wrong.

Ryan_Futuristics

Well I think you've got the assets, you just need to get the timing right

Before you do anything else, I'd pay the buy-to-let mortgage off - make sure you've got no debts outstanding

I'd work out what the rental yield is from your properties (after tax and expenses) - I'd imagine it's about 3-4% (and consensus seems to be that the housing market's slowing - at least in London)

If you sold a property and built an investment portfolio (stocks, bonds, cash, alternatives) you should be able to do better than 3-4%

Basically my aim would be to live off income and not capital - considering Italy's economic problems, I'd be surprised if you couldn't live comfortably there while keeping the rental properties in the UK (once the debt's paid) for income (or switch one for an investment portfolio to diversify and possibly push that income up a bit) ... Might just mean waiting a year ... Assets are generally better to have than cash though

TheTracker

I'd dump the BTL. But that's me not you.

Archi_Bald

Spanish_Escape wrote: »

We have worked out that we think we need £15k a year to live comfortably (enjoy meals out, pay for hobbies etc) on paper that seems enough but in reality we don't know.

£15K each or £15K between 2 people? Even assuming it's £15K each, that's just £1,250 a person a month. How will you fund the travelling from that? How will you fund any repair/maintenance to your houses? How are you going to pay for white goods / boiler / car replacement? What will inflation have done to your money in those 15 years?

Stubod

£15 k per year is incredibly naive in my humble opinion..i have been doing our household accounts for the last (many) years, (2 people, average house), and the absolute "minimum" we would need to cover the essentials is about 16k, (no holidays, eating out, or any other significant spend)....If you want to be "comfortable", then I would think you need to consider an annual income of at least 25k. (Assumes no mortgage), + a couple of grand per year to put away for "one off specials"..ie new car / big house repair.

planteria

interesting thread. i wish you luck, Spanish Escape..nice people, and i think it's important to know what you want to do. forum contributors are keen to make their money grow, but there's no harm in knowing what we are growing it for:)

i agree with much of the above. it does sound tight. perhaps planning carefully & working another 2/3/4 years could make a big difference, and give you time to get all of your affairs really in order. private and state pensions here, and 1 or 2 good BTL properties, are a good basis. you just need to really carefully consider the numbers.

mgdavid

where do you envisage the 'go travelling'? If around UK and Europe then consider selling the Italian property, buying a motorhome, paying off the BTL mortgage. Yopu could then continue to work and have plenty of long weekends away while saving some more, with a fully costed plan (with good contingency) for early retirement in a few more years time. Difficult to be precise with so few details. Are the company pensions DB or DC? I trust you are not thinking of taking DB pensions early with actuarial reduction!

PenguinJim

Stubod wrote: »

£15 k per year is incredibly naive in my humble opinion..i have been doing our household accounts for the last (many) years, (2 people, average house), and the absolute "minimum" we would need to cover the essentials is about 16k, (no holidays, eating out, or any other significant spend)....If you want to be "comfortable", then I would think you need to consider an annual income of at least 25k. (Assumes no mortgage), + a couple of grand per year to put away for "one off specials"..ie new car / big house repair.

Then again, my partner and I live comfortably on under £8K/year (not including holidays abroad or buying cars, but including our mortgage repayments and all monthly bills and spends on food/fuel/clothing etc). And we have all of the modern conveniences; there's nothing we're "missing" (retirement at 33 aside ).

It's definitely worth spending time reading the MSE forums to learn all of the moneysaving tips that users share here! Better to spend a little time now than a lot of money over the years.

PeacefulWaters

I've been doing a lot of sums for retirement recently.

£2,100 net per month for a couple is my magic number. A number that also needs to increase YoY for inflation.

That will maintain the house (only got one). Food, heat, property tax. Replace a small car every five years. Allow for 4-5 weeks of holiday abroad and around £6 a day each to do what we want with. We rarely eat out and rarely will eat out once retired!

£15k a year is £1,250 a month. I'd be seriously struggling to pay the bills, replace the washing machine and run a car on that.

Proceed with caution. My expenses will be different to yours. But I couldn't trim £850 a month off the budget I have in place for when we both stop working.