Please evaluate my investent/early retirement plans

Whiterose23

I have just sold my house and have £190k equity, plus savings of £20,000. I'm 60 and can access a couple of small pensions which will give me tax free lump sums of just over £50,000 and a yearly income of £6,000 from now (DB pensions).

I'm currently not working but expect to take on some freelance/part time work soon. I can live comfortably on £1700-2,000 a month net, sometimes less. I'm considering renting a small place rather than buying and looking into if I can retire early by investing the £190,000 plus the lump sums and taking an annual income from it for the next 7 years until my govt pension starts.

My initial plan was to try to buy a property and rent it out, but it seems too fraught with issues (from another thread).

Does my plan sound doable? If I buy a property I'll have to keep working as all my money would be tied up in bricks and mortar and I would like more freedom to do what I want without having to worry about upkeep of a house.

So the upshot is:

£260,000 invested

£6,000p/a income from DB pensions now and then take what I need (£14,000 a year) from my investment till I'm 67, when my govt pension kicks in. I may or may not decide to buy a small flat in a few years, depending on how I feel about renting.

I'm new to investing so if I'm missing something would be good to get some advice. Plus any advice on investing so I can have a semi-passive income would be good.
I know most people on this forum are much wealthier than me, so please be kind.

Thanks

El_Torro

I know that in certain situations money in property can be considered "dead money", though it really isn't. If you buy a property then for one thing you won't be paying rent in future. Also, and more importantly, the older you get the more you will appreciate living in a property that you own. Imagine if your landlord kicks you out when you're 80, not fun.

In my opinion if you can't afford to buy a property and retire at 60 then you can't afford to retire at 60.

QrizB

I'm new to investing so if I'm missing something would be good to get some advice.

I don't know anything about the property market in your area, either prices or rents.

But, around my area at least and referring to Rightmove, £130k will buy a flat that rents for £800pcm (£9600 a year). To earn £800pcm your £130k would need to make 7.4% after tax.

I accept that owning a flat will involve additional costs (stamop duty, insurance, ground rent, service charges etc) that renters don't face, but even so renting doesn't seem that great a moneysaving idea.

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81877517#Comment_81877517

I would have agreed with you at one time but I’m not sure I do now. I’ve owned property all my life and if I continue to own it, I’ll need to continue in a full time job and at my age a full time job is hard to come by as I’ve been trying hard this past three months with barely even a reply.

Also the cost of maintaining the properties I’ve lived in has hit me hard over the years. New boiler, roof repairs, new guttering and soffits all in the last ten years. It’s been a hard slog.

Re renting I would be sharing the cost with my daughter for at least a couple of years so my outgoings wouldn’t be high. I would then evaluate when she’s ready to move on.

True at 80 I wouldn’t want to be chucked out by a landlord but if I’m still alive, I would imagine I would have bought myself a small retirement flat by then.

New rules banning Section 21 no fault evictions are coming into place very soon, so I don’t think the rental market looks as scary as it used to.

Whiterose23

After looking into it. I don’t think I want the hassle of being a landlord. And with £260,000 invested, I could revisit home ownership later on if it comes to that.

I’m not in it just to make as much money as possible, but to also give myself time to enjoy myself before I get too old.

PropertyGuru_Wannabe

https://forums.moneysavingexpert.com/discussion/comment/81877568#Comment_81877568

You're absolutely right. Just saying that renting is bad is just not the right answer. There is a formula that you can use to calculate whether it is better to rent or to buy called the 5% rule. In fact, renting could be much cheaper in the long run and can save you a lot of hassle in managing the property yourself.

So £14k drawdown would be approximately 5.4% of £260k but given that it is only for 7 years, the likely erosion of your capital investment will be minimal. You are well on your way to retiring early with your state pension and DB pensions coming in at 67. Good Luck!

Yorkie1

I think the rental market is changing significantly at the moment. There are not-uncommon stories of multiple people chasing every property. People who you would think would be very attractive to a landlord are not being successful in getting selected.

There are fewer rental properties generally available, with the withdrawal of many landlords from the market for the reasons you've already considered when deciding (probably for the best) not to dip your toe into that market.

In some areas, supply vs demand is pushing the remaining rental prices up, and also particularly as some landlords may need to spend some money on getting their properties up to improved standards.

You may find that the amount you need to spend on rental, even if you are successful in finding a property you wish to rent, is higher than anticipated, potentially diminishing your equity.

All of this may not come to pass; all I would suggest is to avoid being complacent about how easy it will be to find somewhere to rent, and / or to fund a retirement flat in the future.

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81877589#Comment_81877589

Thank you for such a positive and supportive response.

Whilst I do welcome different opinions, I do find on these forums some people enjoy being awkward and negative for no reason.

I was looking into buying and letting out a place and all I got was ‘bad idea/don’t do it, too much cost/hassle’ etc. sometimes I feel I can’t win.

I’m sure I’ll have a part time job at some point soon, and I’m hoping for more positive responses around how to invest effectively, but thank you.

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81877611#Comment_81877611

Thank you. You’re right; I’ve seen how few properties are available to rent in the town I live in. Fortunately the area I’m going to is more city-based and currently there is still a lot available in that area, but it’s something to be aware of.

It’s worrying though; I feel for young people who can’t afford to buy but also cannot find anything to rent.

Whiterose23

https://forums.moneysavingexpert.com/discussion/comment/81877517#Comment_81877517

Just looking back at this and the last paragraph is insulting to people who don’t ever get a chance to own a property. To say someone can’t retire until they own a property is coming from someone who hasn’t faced hardship. Not everyone is as fortunate as you.

PropertyGuru_Wannabe

https://forums.moneysavingexpert.com/discussion/comment/81877625#Comment_81877625

Thank you. The current climate for buying property in your own name unfortunately does not really work given the recent higher taxes and higher stamp duty. If you wanted to buy, it would have to be through a limited company route and with yields of at least 7%+ to make it worthwhile.

It's quite simple to invest, you could use a DIY platform and buy with 60% equity tracker fund and 40% bonds to play it safe but if your money is invested over 20 years as most people will be living to 80+, there is no reason why not to invest more into equity as that is the only way to not let inflation erode your assets. If you don't know how to invest, then using a managed platform such as JP Morgan Investing or Moneybox is an option but the higher fees will eat into a portion of your profits. The only danger is of course you cannot handle volatility and the market drops 40% and you capitulate and hit the sell button, then investing is definitely not for you.

If you still aren't sure, then I'm sure getting in touch with financial planner or IFA could assist you in your retirement plans but I can already see that your plans would work as long as you stick with it.