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.

Definitely don't go the BTL route... the days of making any money on a rental property are long gone.

Surely as teachers you automatically have a pension? Or did you opt out?

Whatever... your best bet is to move from the SE. The home you have is your ticket to a better retirement. Along with tutoring. If I were you, I'd set up a tutoring business with your husband and save as much as you can into a pension. Once your children have finished school, you can sell up and move to a much cheaper area of the country. You'll be able to afford a better house with less money, so if your children need to continue to live with you, you'll have more space.

You can also continue to earn good money tutoring wherever you go.

Agree. I think stay close to the money. There are always ways to supplement your income if people around you have plenty to spend.

Another issue with regards to advice on moving, older teachers are seen as too expensive by many cash strapped schools. I know several teachers who can't find alternative jobs in their early 50s, they are on too high of a band, and schools choose NQTs instead. Changing jobs as a teacher is incredibly time consuming and draining at the best of times, but as an older teacher, and travelling 100s of miles for interviews? Yeesh. Not easy at all.

OP, I don't think it's a good idea in your situation. I'm an experienced LL and there is so much more to it than many people realise. For a start you have to have 25 percent deposit, then stamp duty of 5 percent of purchase price, then solicitors fees. If you wanted to write of interest against tax you'd have to set up a limited company to do so. You'd also have to do self assessment for any profits and pay tax on those profits. Other things to consider you'd need to get an annual gas certificate, insurance, carry out all maintenance and if a boiler goes you have to have enough money to get an immediate replacement. Also what would you do if your tenant didn't pay their rent? You'd still have to pay the mortgage. You would be better trying to increase your hours or maybe either you or DH to do some examining or tutoring in the evenings or weekends.

I agree with others OP this doesn’t sound like a good idea. I don’t really understand how you would fund this house purchase anyway.

Moving to a cheaper area sounds like a plan.

Or tutoring - are either of you secondary maths or science? If so you will be in demand. Boggling slightly at a tutor charging £100 ph tho!

That assumes he is a secondary school teacher. Senior management in a primary is around £40,000.

Headteacher in a small primary only earn around £50,000 and certainly no six figure sums even in a large primary.

How are your pensions so poor? The employer contributions alone for teachers pensions are one of the highest in the country across all industry sectors. Probably 6 or 7 times higher than someone on your salary in the private sector. Unless you opted out, are you sure you're not underestimating your pension?

I'm sorry, OP, but I don't think this a sensible option. I read recently that if you are relying on rent to pay your mortgage, you can't afford to be a landlord, and I do think that's true. There are a lot of legal responsibilities and costs that come with being a landlord. You need to either manage the property yourself, which can be stressful, or you'll have to pay an agent to do so - their fees aren't cheap and you'll still end up being more involved than you'd expect. You'll also have to have a slush fund to pay for unexpected expenses, like leaks, broken appliances, refreshing the property between tenants; and to cover periods where the property may be empty or the tenants you have fail to pay their rent. And you'll have to pay tax on your rental income.

If you could afford to pay for a property outright, and still have a slush fund - which you wouldn never need access to - for unexpected costs, then I think it would be something to consider. But in your current circumstances, it sounds like it would be a big risk that has the potentially to make your current financial situation much worse.

If I were you, I'd consider getting a contract in the Middle East. It sounds extreme but you'll be able to rent your current house out, you'll earn a much higher tax free salary, your accomodation would be included and private school for your children paid for. I know many teaching families in Dubai that have a brilliant lifestyle and are paying off their mortgages back home or buying second properties.

Just to add to my previous post, really good SEN schools over there.

If you're both teachers are you sure you didn't automatically pay into your teacher pension from the beginning?

First of all OP try not to beat yourself up about this - you are where you are, can’t change it now. And you certainly won’t be the only person to have ignored pensions when they were younger. You are recognising that there’s a problem and looking to do something about it which is great. Try and look at the positives.

I don’t think anyone has mentioned the difference in tax between BTL and pensions and ISAs.

BTL - stamp duty and legal fees on the way in, tax on any profit you make, CGT and legal fees on the way out vs pensions - government top up of 25% on whatever you put in. And both pensions and ISAs aren’t subject to CGT.

I would speak to a financial advisor about pensions and ISAs and ask them for a plan, not just dive into property letting because historically it was very profitable.

Most BTL mortgages are interest only because that’s the smart way to do it from an inflation and cash flow point of view. Remember you need to have money for repair costs. A BTL is essentially running a business, if repairs need done you have a legal (and moral) obligation to do them. Not having the money because you didn’t plan well enough is not an acceptable excuse. You would also need to complete a tax return declaring any property income. Easy enough to do yourself if it’s not too complex but some people find these things stressful.

As I’ve said I think you would benefit from speaking to an IFA, investing isn’t as complex as it seems at first glance, and someone else doing it for you means you can choose a strategy and stick to it without having to think about it too much. Unlike becoming a landlord.

im pretty sure that if you don’t contribute to the teachers pension scheme your employer doesn’t either. The same applies for most pension schemes
whether public sector or not.

BTL worked very well as a medium term investment 20 years ago but it's awful now. That's not the way to go.

Have you seen an independent financial advisor?

I'm glad I saw this thread tbh. DH and I are in 40s and 50s and very underprepared or retirement as we have been focusing on getting a mortgage (which we now have) and in recent years every spare penny has gone on childcare fees so I could continue to work at all. We both have SOME workplace pensions savings but not large pots - we have a lot of work to do in the next 15 years (by which time DH will be 70 and need to retire I'd imagine, even tho we'll still have one DC at uni if they choose to go)

Can either of you or your DH shift into allied but higher paying professions? I know one former classroom teacher who is now in education policy and earns much better.

Could either of you focus on joining SLT and then choose to pack a large amount away

Don't forget that if your DC have SEND, once they are 18 they will qualify for much more support financially. Start researching that now: what might their lives look like in terms of work and benefits? So while you're right to be considering the amount of emotional investment they may need well into your late life, you need to help them make a financial plan for adulthood including whatever benefit support they qualify for because - bluntly - you won't be around for the whole of their lives.

I would book a session with an independent financial advisor OP. You don't want to make another costly mistake at this stage of you life as you can't afford it.

I have a friend who kept her flat in London after she got married. It's her nest egg for retirement (she and her DH own a house outside London). However, the only reason she can now break even without a stress each month is because she's had it for ages and the amount she can charge for rent now covers both the mortgage and all the extras like replacing appliances, redecorating between tenants, tradesmen to fix things, etc.

A lot of tenants only stay a year. They also aren't careful with things, so fixtures, fittings and appliances get broken. The flat needs redecorating every time someone moves out. It costs money each time to advertise the property, run credit checks, etc, and there can be gaps of a month or more between one tenant moving out and other moving in. It can be a big stress for her at times and being a LL nowadays isn't easy. You need to find out the exact financial implications before you take the plunge.

This isn’t true. I’m a UPS3 primary teacher earning 50k (£49 to be precise) FTE. Next step for me is assistant head (anything from £55-60 depending on school); deputy is £55k plus - again depending on school size. A head in a four form entry will earn 75-85k (I’ve seen job adverts recently in my borough) and an exec head 80k plus - right up to about 150-200k depending on trust etc.

The first thing is not to panic about your situation. Out of unnecessary panic you can end up landing yourself in a worse state. Buy to let is for people who are well set up, with their home mortgage paid off, children grown up, a good salary and pension and spare cash cushion.

Being in a worse state would be having a buy to let property that doesn't pay its way, is a liability as much as an asset, like a millstone around your neck and that you maybe can't sell if you need to. That's if you could afford to buy it in the first place and could persuade a mortgage lender that it would yield enough to cover the mortgage and liabilities. Yes, you can get mortgages at an older age - I did - but it depends on your financial circumstances and stringent affordability criteria.

Your position isn't so bad: both of you will have some private pension as well as state pension; you still have many years ahead to keep adding to occupational pension and to pay off the mortgage - £50,000 is not huge, between the two of you. You can keep chipping away at it, paying a little extra each month or an occasional lump sum, say once a year, so that you pay it off a bit quicker, which reduces the total amount you pay over the life of the mortgage. After it's paid off, you can pay extra for pensions, save in a tax-free ISA to build a cushion, or spend money supporting children etc.

Find out from your occupational pension provider exactly how much you will each get based on your contributions up to retirement age and how much it would cost to pay some extra to bump up your final pension.

Look at things realistically and don't be tempted to leap into madcap schemes driven by dreams rather than reality.

It’s a risky investment that requires lots of work. Pour as much money as you can into (in this order):

1. Workplace pensions
2. Clearing mortgage
3. ISAs
4. personal pensions

Then you can take money out as needed and they will never require you to pay out for a new kitchen and carpets or wake you up at 3am to a plumbing problem.

Not saying this is wrong but other people have said similar things before and I’m curious.

My mortgage is at 3.4%, investing in a passive tracker fund should easily yield at least 6% over the long term so doesn’t it make sense to keep the mortgage in place and invest for a longer period to take advantage of compound interest for a longer period?

I obviously have no idea what interest rate the OP is paying but I’m interested in whether or not you think the benefit of paying the mortgage off is psychological, financial or a bit of both?

Yes I was also going to suggest this. Good pay in Dubai, Abu Dhabi, Singapore and others. Rent out your UK home meanwhile.

Of course it will depend on your DC ages and whether they could cope with a move and get the appropriate support in these places.

The Teacher Pension Scheme is automatic and should have been growing since you began. Or are you saying you elected to opt out of it in the early years? If so, unfortunately that would have been a really major error as the employer contributions are massive.

Size dependent and this is impacted by area. First headship I spotted, starting at £56,000.
I was putting the PP’s ideas into a broader perspective, given the OP said her DH earned less than £40,000 now.

My first headship was only around the £50,000 mark and many schools I work with are lower than £60,000 as a start.

https://teaching-vacancies.service.gov.uk/jobs/headteacher-bassenthwaite-primary-school

Agreed - the biggest thing considering OP and her husbands ages and teaching being a tough career especially as people get older is that moving money into a pension scheme gives an immediate tax benefit.

Leadership roles are size dependent yes, but the pay scale isn’t. You can earn just over 49k without any leadership points. You then accrue points from this point onwards. I don’t know any headships at 50k these days; it wouldn’t be worth the hassle when you can earn the same as a classroom teacher. Was this a while back? Remember, we have recently had a pay rise, so most heads will be in the 65-70k region for one form - two form schools. Two teachers will never be rich, but the profession does give scope to be well off if you’re prepared to progress