Second property

c22x

Seeking views on our situation. 
Partner and I - no mortgage. Partner (52) early retired (ok-ish pension - £20k year). I'm a decent earner (£75k and 45 years old). 
Own our house outright - mortgage paid off 4 years ago. 
I'm also seeking to retire early. 
We have over £130k in cash ISAs. Partner gets pension lump some soon. We save around £2000-2500 a month. 
Risk averse - don't want to do stocks and shares route.
Interested in getting small mortgage and a second property. Less so about rental income now (maybe even a second home?). But overtime, when we retire, it would either provide a useful income to top up the pensions, or we can sell one. 
Aware higher stamp duty costs. 

Thoughts?

user1977

Why not put more cash into your pension instead? You don't get any tax breaks in buying/letting a residential property, and substantial costs/risks involved (especially if you're risk-averse!).

Keep_pedalling

What is your marital status? If not married or civil partners, you should look at what IHT liability your estates would be subject to if either of you met an early demise. 

With that sort of income you really should be pushing some more of your income into pensions not cash ISAs or a second home.

c22x

Thanks for your reply. We’re married. I do contribute to a decent pension each month already. 

p00hsticks

From experience, don;t underestimate how expensive a second home is to run - insurance will be higher unless you can visit frequently and there are typically more exclusions. Depending on the council there is likely to be a council tax premium so expect to pay double the normal rate. 

And (not from experience , just from reading these boards) don't underestimate the costs responsibilities and hassles or being a landlord. 

In my view, you say that you are 'risk adverse', and this is why you are avoiding stocks and shares but buying a second property is far more risky than investing in the stock market.  

user1977

c22x said:

Thanks for your reply. We’re married. I do contribute to a decent pension each month already. 

Well, contribute more, unless you've actually reached the maximum you can. The pension fund will (I hope) be investing in something more diverse than just the rental income from a single property.

c22x

Thanks for advice. Very helpful 

Albermarle

Risk averse - don't want to do stocks and shares route.

Being risk averse and thinking of buying a rental property, does not really add up.

Also your pension is mentioned, which I presume you know is almost certainly invested in stocks and shares, as for the long term this is usually actually the less risky option.

ReadySteadyPop

c22x said:

Seeking views on our situation. 
Partner and I - no mortgage. Partner (52) early retired (ok-ish pension - £20k year). I'm a decent earner (£75k and 45 years old). 
Own our house outright - mortgage paid off 4 years ago. 
I'm also seeking to retire early. 
We have over £130k in cash ISAs. Partner gets pension lump some soon. We save around £2000-2500 a month. 
Risk averse - don't want to do stocks and shares route.
Interested in getting small mortgage and a second property. Less so about rental income now (maybe even a second home?). But overtime, when we retire, it would either provide a useful income to top up the pensions, or we can sell one. 
Aware higher stamp duty costs. 

Thoughts?

 Not a great idea for preserving/increasing wealth, too much can go wrong with BTL for it to be worth it in your situation, the reason so many piled in is because the bank doesn`t lend you money to invest in stocks, people with decent savings pots should steer well clear, there is just going to be more and more legislation and tax plus an empty rental or non-paying tenant will quickly become a money-pit. If you really don`t want to get involved  in or study stocks/bonds just buy dips in the S&P or other main index with smaller amounts, get a money market fund within an ISA maybe and pop money into premium bonds from time to time if you don`t already. Property is increasingly risky and it is the most illiquid investment you can get affected by a multitude of factors when you try to sell.

Herzlos

What do you want your pension to look like?

How much income do you need (a) now and (b) when you can access your pension fund?

£75k works out at about £4.5k/month, so you're saving towards half of that and presumably means your outgoings now are about £3-4k/month between you. Do you need to sustain that going forward?

Given your salary, age, etc. can you get away with just dropping your hours drastically? Assuming a 9-5 mon-fri job you'd lose £15k (pre-tax) for each additional day off you work, but realistically less due to tax. 

Property will probably result in the highest percentage yield but will require some work and money being fed back into it for upgrades. A management agent can take some of the work away for a fee but they rarely have a good reputation and you'll still need to pay for stuff like kitchens and roof repairs.