To want to buy a second property

[TheArts]

I'm 51.
After several mc I had my dc late in life in my early 40s.
DH is 55.
DH and I are low earners, teachers, joint annual income £70,000 but that's before the deductions for tax, NI.
This is a terrible mistake of us both, but neither of us paid in to pensions until 5 years ago. Terrible I know. But we always struggled with our income versus high mortgage (high due to SE housing costs) and saw payment pensions as money we could use to help with the mortgage, pay bills, car costs, etc. and other life expenses. I can't actually tell you how much I regret this now. But money has always been tight and I can't change it now.
We will not receive any inheritance. DH's parents and my parents are in rented social housing with no savings between them. So there is no financial change to our circumstances on the horizon.
Both DC have SEND and because of their specific needs I feel they are going to be dependent on us in to their adulthood.
We live in a tiny house, front door leads straight in to lounge, no hallway, kitchen is 7ft x 9ft, 3rd bedroom for DC2 is 6ft x 8ft. So there's no opportunity to sell and downsize in order to inject some capital in to our lives when we retire (DC will still be living at home due to our late age as parents and their SEN).
Since having DC I've reduced my hours to part time, which has meant reduced monthly income plus - not only did I only start paying in to my pension 5 years ago - it's on a part time wage which means my pension contribution is even smaller still, due to reduced hours.
I can't work full time because DC would not be able to manage wraparound before/after school care, they literally wouldn't cope, they can barely cope with being at school 6.5 hours a day, and both only do so with lots of school scaffolding in place to support them through the day.
We have £50,000 left on our mortgage.
I am desperate to, in some way, improve our future financial situation.
AIBU to think we could buy a second property, a flat maybe, I have heard you can get a mortgage late in life now, as a buy to let? I wouldn't be looking for a monthly income profit, I would simply be looking at the rent covering the mortgage each month. But after 25 years, I'd be 75, the mortgage would be paid off having always been paid by tenants, and at that point we could continue to rent it out and then the rent would top up our monthly income at a point in our lives when we will be on an extremely low pension with adult DC who may likely still be living at home.
Or am I completely and utterly mad for even thinking this could be viable?
It's just that DH and I have always struggled financially throughout our adulthood despite working really bloody hard in our chosen professions, neither of us have ever had any financial help from parents, neither of us will ever receive anything financially from parents, DC are not looking set to be good earners in adult life therefore our support towards them will need to continue well in to our retirement, we are both looking at working for years past the standard retirement age of 65 despite feeling utterly bleak about the thought of it because we won't actually be able to afford to retire, and all I can see on the horizon is financial struggles.
I feel like a bloody idiot right now, lots of life regrets, and a failure as a parent in terms of knowing I'm never going to be able to financially provide for my DC when they become young adults, which is causing me great distress, so please be gentle.

I don't think that's a good idea, OP. I have a BTL and am very aware that we're going to be increasingly penalised as time goes on. Also the capital gains tax will take a massive chunk of what I thought was going to be our pension. You have security, and that's the most valuable thing. I do know somebody who was an ex estate agent, and when she retired made money by moving to a very up and coming area and then downsizing after a few years to cash in on her gains. I think that's always a possibility in the SE.

Do you still live in the SE?

Teachers are needed in all parts of the UK so would you consider relocating to a much cheaper area? (e.g. NE England)

It could potentially improve your financial position a lot by moving to somewhere with cheaper housing

Of interest how much is your house worth? Given that you are teachers could you sell up, move to a cheaper area to be mortgage free and look into the best ways to make additional contributions to the teachers pension?

Completely agree with all those saying consider moving. You have very portable jobs and you are in the most expensive part of the country. Even if you don’t do it now, maybe when your children are out of education. This could considerably ease the financial pressures in retirement. In the meantime I would chuck extra into pensions and look into possible investments, the buy to let idea seems really precarious.

Could your DH earn more through promotions? If he is top of the pay scale, he’ll be on 50k but with TLR or management points it’ll be nearer 60k. A deputy can earn anything from 60k plus depending on school size, and a head even more. Executive heads can earn six figures. If his earning was increased, he could increase pension contributions and maybe even over pay. I’d be focusing on one or both of you improving earning potential and then financial security resulting from this. Teaching isn’t the most lucrative career ever but it certainly isn’t badly paid if you climb the ladder!

You’d be much better off putting more into your pension or an ISA and investing it from there in a basic low cost ETF. Do not buy a second home in your position. Even just buying government gilts would give you a 5 percent return on your money and would be better than a second home.

And finding a well paid side hustle eg tutoring is a really good idea!

The time when buy to let rental made financial sense has passed. Please do not invest in buy to let. I am selling (and taking tenants to court) - its very hard to make any money as a landlord at the moment.

The tutoring idea sounds like a good one. You can find the going rate on tutoring websites.

Buy to let mortgages are often interest only so you would need to 1) make sure you have £ to put aside from the rental to pay off the propertyor 2) e aware a repayment rental would need quite a bit of rent multiples tonbe accepted 3) make enough to then also pay any tax owed to hmrc 3) hope that the ending value will be more and give you that pension

Tutoring is a good idea I pay £60 er hour cash in hand for primary

You are both teachers.
The teachers pension scheme (TPS) is excellent
You first point of call should be to talk to TPS about making additional contributions (AVCs) to your pension to build it up.
Then look at investment ISAs (not cash, you need to take some risk to make the better returns you need)
Buy to let is fraught with pitholes & not something I would consider.

Really bad idea.
The btl mortgages you are thinking of are basically interest-only. The rent will just about cover interest payments plus maintenance costs, agent fees and the costs of an occasional nightmare tenant (and you will get them occasionally). The only profit in this scenario is from house price rises but with the economy as it is I wouldn't bet on that as a certainty for you between now and retirement.
If you increased monthly payments to make it a repayment mortgage by adding in your own money once your main mortgage is paid off then your plan might possibly work but I doubt you'd be any richer than if you put the same money into other investments.

It's really only profitable if you can make significant savings on running costs by having multiple properties and getting economies of scale, but the people doing that are the ones to blame for the ridiculous acceleration of house prices beyond the means of most FTBs causing the rental traps that secures their profits - ie not good to emulate.

I too became an accidental landlord after the 2008 crash. I do still rent out the property but there is no profit in it - once you’ve paid tax/maintenance/repairs plus mortgage there is nothing left. I’m hanging onto it though but the mortgage is repayment not interest only, so it’s being paid down over time.

I've recently sought advice from an Estate Planner and been advised to sell my property and invest instead/use the income from interest.

I'm disabled and inherited a decent sized, well maintained pretty modern 3 bed home which I rent out. The income works out at about 5k per annum once you take out tax, landlords insurance, safety checks and inevitable repairs/maintenance. I am reliant on the income to survive. Some months I make nothing at all as I've had to pay out for emergency repairs, call out fees, two things going wrong at once. I pay around £90 a month to a management company to save some hassle, but still...it's not as lucrative as people think. The current government is very anti-landlord too so letting out is only going to get harder.

Look it maybe a fair financial plan but whenever I hear people trying to find ways to get others to pay their mortgage for them it grinds my gears.

Even if you have not been paying into the Teachers' Pension Scheme, your employer should have been, so your pension is not dependent on your contributions like a private pension. Buying a second property is not the solution - you are just straddling yourself with more debt. Also, a lot of buy to let mortgages are interest only meaning at the end of the mortgage you still owe the full lump sum (the real reason landlords are selling up). Plus, with a BTL flat you might find yourself having to pay for freeholder's repairs/improvements like replacing windows or a new roof as well as any ground rent or service charges they put on. It's not a money maker. Pay extra into your pension. Build up an ISA. Also look at SEN tutoring through your local authority for the days you are not in school.

I really think that in your situation I would consider relocating to a cheaper area.

I know that it would be a massive faff and upheaval, but so would buying and letting a second properly, with all the complexities that accompany that.

If you are teachers, I don’t think you would struggle to find work anywhere jn the country, the way things are now.

I know your DC have SEN and it would be a huge change for them, but if you thoroughly research schools and SEN provision in the area before committing to move, it can be done.

I am a landlord and I’d strongly advise not to do this.

I don’t want to sound glib but investing in a single buy to let property is only a safe investment if you don’t need the money. One non paying tenant could bring you to your knees financially.

There seem to be additional responsibilities and costs being added on a frequent basis, and there is no question of ‘not being able to afford’ them. The rules regarding the EPC C rating will be costly ( in my case one suggestion is insulating floors at a cost of £7k, which is expected to save £13 PA in fuel), and is another reason why so many landlords are selling up.

Larger scale landlords can spread the load and be more resilient, but I don’t see much future for landlords with only a few properties.

Others have given good advice regarding BTL but here's an idea for you - tutoring, not bog standard tutoring, but something specialist (you get people's kids through 11 plus or to specialist SEN stuff in the daytime for kids who are out of school, getting kids top marks in physics A level & support with uni applications etc) make it so that very soon you are word of mouth and difficult to book. And charge a LOT £100 an hour at least. Then squirrel it all away. You're in the SE and there are a lot of ambitious parents there.

The tax alone makes it totally not worth it. We became accidental LLs during the pandemic and sold up last year. We’re still dealing with the tax headache. Total nightmare.

Buying a rental is risky at the moment, many landlords are selling up because of increasing costs and less profit and the political situation. You also need a financial cushion in case you get a bad tenant who doesn't pay - it's not something to do if you are short of money.
I would look for a cheaper area where you can buy a bigger house mortgage free and therefore live on less money. Teachers are needed everywhere so you should find work.

I'd be more tempted to relocate to a cheaper housing area to make teaching income go further

These days (or rather, the last time I looked into it!) if the rent is paying capital into your mortgage (ie not interest only) then you have to pay tax on that capital that you've essentially gained. So you're having to pay tax on money that's not yet actually hit your pocket.

That said, there is still a small amount of money to be made from buy to let, it's just nothing like it used to be.

FWIW for other people suggesting "just get a teaching job in a cheaper part of the country" it's not usually that simple - if you've been teaching a while and are on the upper pay scale, then you're expensive, and most schools are forced to go for cheap over experienced these days.

I think there's more money to be made by staying in the SE and supplementing your incomes through tutoring.

This isn't a good idea. Where are you finding the lump sum for deposit and stamp duty if things are that tough?

You've made some extremely questionable financial decisions up til now - don't make another one and try to buy another property.

The only real option is to move somewhere cheaper!