Debt in retirement

Jaco70

This is my first post on MSE so please tell me if I’m posting in the wrong place.
I will try to keep it simple. I have a small BTL portfolio and a home, combined worth 1.2m, mortgage debt 580k. I am 50.
If I can keep my small business running at a profit, I think that potentially I will retire in 15 years with 1.5m in property (due to inflation) but still 350k of mortgage debt (interest only). When I started out this was never the plan, and mortgage debt in retirement is a bit scarier than debt whilst still earning.
I have a very small personal pension (5k a year possibly) and so rental income will be the bedrock of retirement income. I do not plan to purchase more properties in the future, as I feel my debt levels are high enough and the last house was really tough to finance, even though my credit rating is excellent.
I don’t want to sell properties as I want to hand them on to my kids and because they produce a decent profit at present, which I don’t particularly want to reduce.
Does anyone have experience of retiring with debt, good or bad?
Thank you, Jaco

[Deleted User]

What is your goal? Or preference?

There are lenders who will most likely allow you to continue interest only lending on BTL through to over 100 years old.
So its a case of start planning to sell some assets to pay off the debt or remortgage to an (effectively) lifetime BTL mortgage. You have 15 years to play with so if going to sell, maybe do this in a stronger property market.

Do you have any plans to downsize in your personal property? Or you sell your worst BTL to pay off the other ones?

Does it make financial sense for you to sell a BTL to pay the borrowing off as this will lose a whole rental income?

Sea_Shell

Are you happy to still keep running your BTL business when you're in your 80's, or would you look to gift properties to your children before then.

Do they want to become BTL landlords? How old are they currently?

Bear in mind that you might rather be cash rich, than asset rich in later retirement.

How many properties make up your portfolio?

Jaco70

Thanks for the reply. Actually despite the modest value there are ten properties. They are just in inexpensive areas. The profit last year was 26k.
My kids are teenagers and so I don’t know how their lives will take off, hopefully they won’t need an inheritance but I think it’s worth being conservative rather than assuming thinks will work out well.
I’m also assuming very limited capital growth as that is what I’ve experienced over the past decade.

[Deleted User]

Is that a good profit from 10 properties? Im not a landlord but I just saw someone last week with 2 properties worth a total of £350k and the profit after deductions was just shy of £22k on their paperwork

Perhaps a meeting with a financial advisor is in order to see if investing elsewhere would give better returns and an income in retirement. Also maybe you are young enough to start thinking about care planning and inheritance tax planning

Most landlords either get good capital growth, or good rental returns. I would guess at the moment you are struggling with both

Jaco70

That’s a fair point, the returns are low but there are actually nine properties worth 800k. My own house makes up the other 400k. Gross income is around 50k but we have mortgages and also we use an agent. We tried running some ourselves but it was too much work on top of holding down jobs.
I’m not wholly unhappy with the income from the properties actually.

Sea_Shell

Whatever you decide, at least with 10 properties, you can "drip" sell them as and when required, rather than if it was tied up in just 2 or 3.

Please bear in mind when making a will, be careful about specifying properties, by address, to any beneficiaries, as they may no longer be owned by you in the future.

Jaco70

Thanks for that advice. Actually we made a will a year or so back with a solicitor , and deliberately kept it simple. No property allocated, just everything split 50/50 between the two kids.

Sea_Shell

Jaco70 wrote: »

Thanks for that advice. Actually we made a will a year or so back with a solicitor , and deliberately kept it simple. No property allocated, just everything split 50/50 between the two kids.

Just make sure you keep the kids fully up to speed with your BTL empire over the coming years. As, if they inherit properties with sitting tenants, they need to be aware of their legal obligations, until such time as they sell (or keep, if they can be divided equally).

Are they also your executors??

Jaco70

If only it were an empire I wouldn’t be posting on here 😂.
We are the sort of family who aren’t secretive with each other regarding money but that’s a very good point you make.
They aren’t executors because they were about 11 and 14 when the will was made. My sister and accountant are the executors but I have always intended to change that once both kids have reached 18.
Thanks for all the helpful advice, this has been a really successful first post for me.
The one thing that has come across from my accountant and others over the past few years is that people tend to overestimate just how much they’ll need once they stop work. I may be over thinking things, which isn’t usually my way, but there will come a time fairly soon when I shouldn’t have a mortgage on my own fairly comfortable house, or two kids needing first cars, university etc.
It may be a bit of a mid life crisis.
Thanks

Gycraig

What else would you want to do ?.

26k a year on top of a normal pension is a very healthy retirement. What's actually involved if you are paying someone to manage it ?