pension problem

marcr826

currently our earnings are something like £72000 p.a. which is 4000 a month after tax. with 3 kids and a mortgage of 200K we have £1100 a month left over of which i put £300 into a pension (not enough) I am 36. The rest(£800) we use for savings , holidays cars etc.

Do I take out an additional £80k mortgage, which i believe i can do, to buy a holiday rental property which may pay for itself in 25 years and provide me with an income in retirement or is this too risky as I would be using 80 % of the equity in my house ?? (sounds a bit too risky to me)

Debt_Free_Chick

You need to think about the practicalities of managing a holiday rental property. How far away from where you live, will it be? How will you manage maintenance? What if there are any problems/complaints from tenants - how will you resolve them if you have to travel 3 hours to the property?

Once you are satisfied that you can overcome these issues, you then need to be realistic about the rental income. Are you likely to let it for 52 weeks of the year? Remember to factor in advertising costs, cleaning costs and other maintenance bills.

All of this is applies to any holiday rental property.

Now for the pension issue .... you need to assess what you are likely to need as a retirement income. Then look at what your current pension plans are likely to provide. If you then rely on a holiday let to fill the gap, look at what your proposed let is likely to produce. Will it fill the gap on realistic assumptions?

Personally, I would only use a holiday let as extra, but not critical, retirement income. I would be sure that my minimum level of income was already covered in other ways (in my case, by pensions) and then use any other retirement income as a bonus, rather than an amount I had to have, simply to exist.

HTH

EdInvestor

Hi marcr826

Personally, I think you'd be better to start investing in shares, either directly or in an ISA, or overpay the mortgage.

Holiday letting is actually quite a complicated business, much more so than ordinary BTL and it's also less likely to provide a reliable income stream to repay a mortgage.
This plan would also mean you had virtually all your assets in the property basket at a time when property values are expected to be either stagnant or to fall and when rental yields are so low they barely cover the mortgage.