retiring at 40, btl the best way?

[marieinlondon]

We are currently in our early 30s and want to retire in 10 years time. We have been working really hard to pay off the mortgage on our house and only have 30k left. We bought our place for 120k several years ago and is now worth over 300k. In a years time the clause from right to buy will end and we can finally sell it on and start planning our future.

We are planning on selling it next year and this will leave us with 280k ish in cash. We want to buy a slightly bigger place on a mortgage for about 450k using 150k deposit and then use the rest to buy two or three flats in good areas to rent out. I only work part time so take in just 8k, but my husband earns a heahtly 56k + bonus.

Can any one give me tips and advice? I want to remain in north London and have my investments in north London also. We plan to work hard for the next ten years to pay down the mortgages and then hopefully we will make enough to retire. Did originally post this in property but this seems to be the active forum here.

Am I crazy for thinking this is totally possible?

[chibi]

How are you going to buy two or three flats in n London with only a 300K deposit?

[LaurieFairyCake]

Totally. Id have all my flats in one area - actually one block would be brilliant.

[marieinlondon]

Looking a one beds and studios in shabby up and coming areas, on a 80% LTV mortgage.

[TheHouseOnBellSt]

Oh God don't...move to Cornwall!

[unhelpful]

[Earlybird]

No matter who frugal you are, or how financially savvy, I can't imagine being able to retire at 40 in London unless you inherit a bundle or win the lottery.

Do you intend on having children?

[marieinlondon]

Laurie my concern with having all flats in the one block would be if work was done I'd get bills all at the same time! Also would be outing all my eggs in one basket if something happened to the area that risked the housing market. I want them near, but not all on tjr samw street.

[Earlybird]

how frugal

[morethanpotatoprints]

I don't think you can rely on a few properties to provide an income, but if you had another income the extra would be worthwhile.
I would be considering changes to the market and what if houses and rent drop significantly and finding yourself with little income and negative equity.
However, for a long term investment as houses will always increase in value it is a good idea.
We did this on a smaller scale with just one small property but we aren't reliant on the income, investing for the long term.

[marieinlondon]

I'm hoping by 40 I inflation will have eaten away the debt lots of the mortgages paid off, lower interest rate due to higher LTV so we could start to draw an income off them and our main residence to be mortgage free

[Solasum]

Assuming you are expecting to live until normal retirement age, that is an awful lot of money you are expecting your properties to generate.

[PigPlopper]

What about interest rates... they are 'supposed' to be going up towards the end of the year - albeit very slowly. Will that make a difference?

[marieinlondon]

They have been saying for years interest rates will rise around the corner, I can't see them rising much in the next 10 years with how in debt the country is

[GlamourousBump]

The numbers don't really add up to me? Living off the income from three small flats that are 80% mortgaged whilst still paying a mortgage on the house you live in?! Unless you have really really low expectations it doesn't sound like much fun to me after mortgage/tax/maintenance costs etc.

[NinkyNonkers]

I'm v confused. Are you wanting the mortgage on new main place paid off by the time you are 40ish? So you want to pay off a 300k mortgage on a not huge combined salary of circa mid 60ies within 10 years?

[Ineedtimeoff]

I've just sold my house and about 10% of the value of the house went on fees. So, based on the same figure, from the sale of your house and after paying your mortgage you will have around £240,000. From that you intend to use £150,00 as a deposit and you will still need to find lawyers fees etc or will you be funding that from your deposit? That means that you would need at least a £300,000 mortgage based on 2 salaries that total £64,000 per annum. Based on the 4 x salary rule I think you'll find it hard to find a bank that will finance that mortgage.

That leaves you with £90,000 to buy any other properties. In London I can't imagine that you will find much for that.

Sorry, I don't thing your figures add up. I wish you luck though.

[Earlybird]

I think btl would be a brilliant way of supplementing your income, but wouldn't rely on it as sole income. Also, as someone else said, interest rates have been extremely low for years but are due to start rising by the end of this year.

Remember the obvious - upkeep on rental properties can be expensive: repairs, refurbishing, redecorating, void periods in between tenants, etc

[fastdaytears]

The speculation re interest rates seems a lot more substantial now than it has before.

It doesn't seem to add up to me. It's a lot of borrowing on your income and I know a lot of people who are struggling getting BTL at the moment.

The people who I know (professionally- I don't randomly ask people about their income streams at parties) who live off BTL have big portfolios which allows them to cope if they have people default on their mortgages or have to have empty properties for repairs. If it's a smaller portfolio then a big buffer would be needed.

Do you have good pensions?

[QueenQueenie]

Well that's not what the governor of the Bank of England announced yesterday!

[kewtogetin]

So you're bringing in just over 70k? In London thats a pittance. I think you're living in a dream world, given that you might live to be 90 how on earth are you going to fund 40 years? your property is worth nothing if you can't sell it, similarly, if tenants don't pay their rent then you're fucked.
Are you crazy for thinking this is s possibility?? Yes, absolutely.

[specialsubject]

do you have any pensions?

as someone else notes, this isn't compatible with having kids, which is ok as long as that is your plan.

One beds and studios do make the best returns. They are unsellable white elephants outside London but as long as everyone wants to live there, you'll be fine.

Mark Carney (who seems to run the country...) says rates may go up a little in November. Tax breaks for landlords will continue to erode.

[mollie123]

morally - you will be leeching of the poor renters who were not fortunate enough to have a right to buy
economically - you need 25% deposit for a BTL mortgage, have you factored in voids, costly repairs, tenants who don't pay and/or trash the place
interest rates for BTL mortgages are higher than residential and could well increase
have to really worked out how much you need to retire at 40 - will you still be working part time to bridge the gap till pension age?
do think it through - the capital gains were in the early days of BTL - London is not immune from a crash.

[fastdaytears]

Sorry I missed that you were in London. Your DH's £56k isn't disastrous then but isn't retire at 40 money!

[senua]

It is a general rule in personal finance not to have all your eggs in one basket. Have you considered non-realty investments too?

[kewtogetin]

How are you going to pay the mortgage on a 450k property if you both retire?

[specialsubject]

wondered how long it would take to get a landlord-hater...

renting out property is running a business. Nothing wrong with that.

don't think this was quite the idea with right to buy but it is EVERYONE DOES, and the OP would be a fool not to take advantage. Presumably no landlord-hater ever took up right to buy?

but basically I don't think the sums stack up. Sell up in London, take the money and run. But don't buy a one bed or studio elsewhere!!