Buy to Let for retirement

Jaco70

dunstonh said:

Pros : The rents pay the mortgage, meaning you don’t have to dedicate a large chunk of other earnings (I run a small unrelated business) to building a pot.

And what happens in retirement when you want an income?  Will the excess income above the mortgage payment be sufficient to live on or is the plan to sell up and utilise the capital (after tax)?

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones.

You do not spend your pot using drawdown either (unless by choice).   Annuities make up a very small level of the retirement income provision nowadays.  Leaving your pension to your loved ones is actually quite tax efficient as there is no inheritance tax.

Properties are illiquid but they are viable investment option as long as there is other capital to fall back on and you sell properties that are not longer viable (low rental yield for example).

A 25 to 50% uplift in property prices would change my situation dramatically and it’s not so long ago that these sorts of increases every 5 to 10 years were commonplace.

The UK went through a 30 year credit boom due to deregulation on lending and irresponsible borrowing.   That created the house price boom. That ended a decade ago.  However, shortage in supply still exists.    It would be unwise to rely on a new house price boom of a similar style in the decades ahead.

I think that the virus is likely to lead to yet another decade of poor performance but who knows.

Nobody really knows but the expectation in the housing trade is that properties with larger gardens or land will become more desirable (so they could rise whilst those with little or no garden will fall).  However, first time buyer properties will still be popular due to demand.   As time goes on, companies are expected to use technology for home working or move away from big centralised call centres and move to smaller multiple location offices (less staff in a single location).  So, commuting changes may impact on commuter towns.  Demand for rural properties is expected to increase and rural properties are constantly in decline as developments make some villages less desirable or even swallows them up into smaller towns.   So, the old "location, location, location" will still play its part.    However, within 5-10 years, this will all be forgotten at a consumer level.

Thanks, that’s all very detailed and knowledgeable and really appreciated. I clearly don’t understand pensions very well, I’m just going on past experiences of people I know. My dad simply took 25% and then an annuity. Very interesting what you say about the housing market, particularly about houses with gardens being in demand. I hadn’t given that any thought even though we were hugely thankful for our nice garden over the past month. The rental properties only have small yards though, c.1900 miners cottages, so it won’t increase their value. I suspect house price change will rely more on the economy than anything else. If youngsters feel they can get on the ladder, prices may increase but not double digit growth any more, and deposits are the main factor here. I bought my first house 25 years ago, to live in not rent out, and my mum gave me the deposit which was 5%. Even then I could’ve put that on a credit card if necessary. 95% mortgages must become common again, or we have a horrible two tier housing sector, where only kids with well off parents can buy. Life can be unfair but this seems a concocted unfairness that could easily be reversed.
The rentals made 26k profit last year, after mortgages, although I expect that to drop this year as it hasn’t been good, and that sort of figure would be adequate along with private and state pensions. Rents do seem to be rising, but not at the level newspapers would have you believe. 

cfw1994

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Thrugelmir

cfw1994 said:

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Old ideas get recycled with embellishments and take on a life of their own.  Increasingly so thanks to the wonders of social media. 

coyrls

Thrugelmir said:

cfw1994 said:

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Old ideas get recycled with embellishments and take on a life of their own.  Increasingly so thanks to the wonders of social media. 

I really find it hard to believe that the popularity of drawdown for retirement income has been driven by social media.

cfw1994

coyrls said:

Thrugelmir said:

cfw1994 said:

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Old ideas get recycled with embellishments and take on a life of their own.  Increasingly so thanks to the wonders of social media. 

I really find it hard to believe that the popularity of drawdown for retirement income has been driven by social media.

Yup.  Crazy statement!
Pensions Freedom - well, it only arrived in 2015, it's just a fad 

Thrugelmir

cfw1994 said:

coyrls said:

Thrugelmir said:

cfw1994 said:

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Old ideas get recycled with embellishments and take on a life of their own.  Increasingly so thanks to the wonders of social media. 

I really find it hard to believe that the popularity of drawdown for retirement income has been driven by social media.

Yup.  Crazy statement!
Pensions Freedom - well, it only arrived in 2015, it's just a fad 

Equity bull markets help. Bond markets considerably less so.   
Bergen first published the 4% rule (based on US data ) on a 50/50 portfolio in 1994 as a reference point. Later refined to 60\40 as real bond yields started to fall. 
As always investors will want their cake and eat it. 

AnotherJoe

(Jaco70 said:

I’ve put most of my faith in BTL over the last 15 years and I wondered how others feel this may progress over the next 15 until I retire. The way I’ve looked at it is this, but I’d be grateful for any other opinions.
Pros : The rents pay the mortgage, meaning you don’t have to dedicate a large chunk of other earnings (I run a small unrelated business) to building a pot.
At present demand for houses seems fairly stable.
You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones.

I've highlighted those two statements to comment.
re the first, what's the plan after you retire ? Because I think undeniably letting is much more hands on than drawdown, investments don't phone you up at 3am about a leaking roof or whatever, and whilst you won't be in your dotage immediately upon retirement , how long do you intend to continue managing them? And assuming the plan is to gradually sell, you are then hit by (hopefully) CGT and then the need to do something with the proceeds which presumably would be something similar to the investments you'd otherwise have in a pension. But there is that big tax hit at that time and potentially when you die (or spouse dies if you go first) 
re the second statement, as said with drawdown you can leave your pension to your family  and the money is also outside the estate for tax purposes. 

There's my 2c worth.  

Jaco70

AnotherJoe said:

(Jaco70 said:

I’ve put most of my faith in BTL over the last 15 years and I wondered how others feel this may progress over the next 15 until I retire. The way I’ve looked at it is this, but I’d be grateful for any other opinions.
Pros : The rents pay the mortgage, meaning you don’t have to dedicate a large chunk of other earnings (I run a small unrelated business) to building a pot.
At present demand for houses seems fairly stable.
You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones.

I've highlighted those two statements to comment.
re the first, what's the plan after you retire ? Because I think undeniably letting is much more hands on than drawdown, investments don't phone you up at 3am about a leaking roof or whatever, and whilst you won't be in your dotage immediately upon retirement , how long do you intend to continue managing them? And assuming the plan is to gradually sell, you are then hit by (hopefully) CGT and then the need to do something with the proceeds which presumably would be something similar to the investments you'd otherwise have in a pension. But there is that big tax hit at that time and potentially when you die (or spouse dies if you go first) 
re the second statement, as said with drawdown you can leave your pension to your family  and the money is also outside the estate for tax purposes. 

There's my 2c worth.  

Hi there, my plan is to live on the rents in retirement, at least for some time. We don't get the 3am calls because we use an agent. This is a minefield because there are so many rogue agents but we've finally found a decent one, fingers crossed. I know many older people who run a BTL portfolio and I believe that having an interest (probably the wrong word) in older age is a good thing. I run a business, so being in the office at 7:30 and struggling to take time off is natural to me. Running the properties doesn't take up 10% as much time. My dad still works part time at 77 and it is undoubtedly good for him. Also, I have two boys who I hope will turn out well and I would be happy for them to take over the properties if they want to. I'm also old enough to realise that you shouldn't have too firm a roadmap because everything is subject to change. If my kids become doctors, dentists etc, I'm sure they wouldn't be interested in running a few properties and then my wife and I may offload them over time. If their careers aren't so fruitful, maybe they'd like to get involved.
CGT would be a horrible hit but one that we would have to suck up if we wanted to sell, and I just have a feeling that if I live another 30 years or so IHT won't be such an issue. If we keep having Tory governments I have a feeling it will be scrapped or lifted to a very high level at some time, due to it being so unpopular.

AnotherJoe

Interested in your comments on agent. My only sort of second hand experience is my next door neighbour who let his property out when he was abroad for 5 years, whatever needed doing they would call him to ask for permission to go ahead so it didn't seem to cut out much work though to be fair I suppose they arrange work to be done (and charged on top for that?)

i suppose if you can hang onto the properties until death then afaik there's no CGT? Is that right? Gives your kids an incentive to continue managing them after you've had enough, if you get to that point. 

cfw1994

Thrugelmir said:

cfw1994 said:

coyrls said:

Thrugelmir said:

cfw1994 said:

Thrugelmir said:

Albermarle said:

You don’t spend your pot (the properties) on buying an income, in the way you do with an annuity, so therefore you should in effect leave your pension pot and income to your loved ones

Most people do not buy an annuity nowadays . They keep the pension pot invested during the retirement/withdrawal period.

Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical. 

You think?
DC pension drawdown is a fad?
Really?

Old ideas get recycled with embellishments and take on a life of their own.  Increasingly so thanks to the wonders of social media. 

I really find it hard to believe that the popularity of drawdown for retirement income has been driven by social media.

Yup.  Crazy statement!
Pensions Freedom - well, it only arrived in 2015, it's just a fad 

Equity bull markets help. Bond markets considerably less so.   
Bergen first published the 4% rule (based on US data ) on a 50/50 portfolio in 1994 as a reference point. Later refined to 60\40 as real bond yields started to fall. 
As always investors will want their cake and eat it. 

& you feel "Drawdown might lose it's appeal rapidly over the next few years. Fads are cyclical."
I guess you used the word "might", which perhaps means you don't have an opinion, & were just making statements you felt might be contentious....

OP, your plan sounds okay to me.   
As you say, 15 years is a long way off, the world will likely look very different....might even at some point sell YOUR house (no CGT), move into your finest let for 6+ months then repeat to make a bigger gain, if your offspring don't show interest in taking them on!
Agents are key to this as you move into retirement, I would say - sounds like you have a good one.  My suspicions are that many get slightly greedier over time.  We moved agents years back (a holiday place we have on the IOW - message me if anyone wants to stay, the bookings are cancelling left right & centre, funnily enough!) when they wanted to charge us to replace keys that they managed and had lost!   We again shuffled more recently from the one that made the press recently to a more local one when we realised 24% was a LOT to be taking from us.   Sometimes they lose sight of the fact that you are actually their customer!
So long as you have one who you trust and doesn't shaft you for LOTS of money to change a washer (!), I'd stick with it!