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 dont think its a mad idea or that you're an idiot for thinking about it, I said you were not being unreasonable but you havent given enough information to know whether it could work. Ultimately there are places in the country where prices are very very cheap and you'll get tenants and the yield can be ok, but if you dont live locally and need to rely on someone to manage the repairs and things like that

If you already lived in the NE or NW for example and could buy a flat next door or down the road, manage it yourself, if you have the deposit, i fyou plan to take a repayment mortgage so that you have an asset which you can realse cash from easily once its paid off, if the mortgate vs rent works out, then it might work

My view would to do an airbnb better, you can find them everywhere, even in areas where people would say they wouldnt go for holidays, I saw some nice little flats for self catering rentals in Morecambe for example which is quite run down and property is very cheap.

But if you live in the SE, far away from things, cant manage it yourself, dont have the deposit etc etc, probably not a great idea

Did you read what OP said, he only started paying in a few years ago. Doesnt matter how good the scheme is, its not going to pay out much if payments werent made!

My pension with a LA is very poor because I didnt become a permanent member of staff until 10 years ago, so it wont pay me very much at all.

Op this sounds stressful, the suggestions of moving to a cheaper area sounds ideal, depending on where your parents are? Do they need you close?

The BTL mortgages are mostly interest only so when you hit your 25 years you need to pay the capital, a repayment mortgage on a BTL wouldn't have any profit at all so you'd be out of pocket with repairs or empty periods.

About 10 years back this could have been a good move but now there are no margins.

A repayment has more profit than interest only at the end of the term because you've paid less interest overall.

If OP is looking for sometjing thats going to pay off for her in the long term and provide some security a a pensioner then it doesnt matter too much about the monthly income providing 'profit' as long as OP isnt out of pocket and can afford both mortgages.

Don’t get a BTL- you can’t afford it. Instead commit to paying whatever you can into the TPS.

TPS accrual rate is 1/57 so (say you earn £35k now) you’ll accrue £614pa for each year you opt in. Work another 15 years and that’s an annual index linked pension of £9.2k. So adding the SP that’s about £20k pa each- a joint income of £40k, not bad at all. Plus you’ll presumably be mortgage free by then as well.

(Of course yours will be less if you earn less- I’ve just divided £70k in two. Your husband’s will be more so same difference.)

Give the TPS a ring and see what options there are for buying extra pension. In my scheme you can buy up to £8k pa although nb it’s expensive. You can also pay AVCs which would give you a defined contribution pot in addition to your defined benefit scheme. Remember you’ll get the tax back on anything you pay in- that alone will make it a better option than a BTL.

You really aren’t in that bad a situation at all- the excellent TPS is your saving grace as long as you can carry on working for a bit.

https://www.teacherspensions.co.uk/members/working-life/paying-in/increasing-your-pension/faster-accrual.aspx You can raise your accrual rate by paying higher contributions- would this be possible?

Madness to consider a BTL. I agree with pp who suggest you move out of the expensive southeast to a more affordable area.

Someone has already probably asked but - there's no guarantee you'll have tenants for a continuous period of 25years to pay the BTL mortgage.

Would you be able to cover the BTL mortgage and bills on top of your existing bills/outgoings if you didn't have tenants for a time?

My in-laws went 3 years without tenants and struggled, we were bailing them out before they agreed to sell it.

Don't do it. I hate being a landlord and I lost money rather than making it.

Yes, it depends on interest rates and what you want to do. I had a tracker for many years. Can't remember now how much it yielded. The investment was a modest sum to begin with anyway. The poster mentioned the amount of mortgage outstanding and I was trying to point to positives when someone is worrying about finances, highlighting that it's not a huge amount and it might be feasible to pay it off faster. She may not want to or maybe feels she cannot afford to. There can be advantages in retaining a mortgage as it could be a cheap way of borrowing should you need to in future. There are many ways of looking at it.

You don't pay off a property with a btl mortgage...it's interest only which is why the mortgages are cheap (or used to be anyway). You just buy them for the rental money and the equity but properties aren't going up that much in value anymore...they're just bobbing up and down and very slowly going up. If something happens with the economy, the prices fall and you're panicking about losing any money you've made. As far as I'm aware you need a 25 percent deposit for a btl too.

To clarify: you both opted out of the teachers pension scene for the majority of your career?

Or is it a private pension you have not set up / paid into?

You be OK.

Presumably full state pension. Your D.C. will be entitled to PIP or whatever once they turn 18. Maybe Attendance Allowance.

I have 2 friends whose Dc live very happily in well supported residential living for young adults with SEND.

2 adults sharing a household on full state pension plus a small additional pension is do-able.

You have not failed your Dc: you are giving them what counts.

Not necessarily. A buy to let mortgage may be interest only - many are - or repayment, similar to a residential mortgage but usually they require a higher percentage deposit and the interest rate will probably be higher than for a residential mortgage.

I dont agree that depends what you want out of it. Any time Ive had thoughts of getting a BTL, or airbnb option, there is no way I would do interest only. You pay off way more interest and then need a way of paying it back, you may not want to seel, perhaps you cant sell for some reason. It leaves you very vulnerable.

It doesn't sound like you are anywhere close to being able to afford a second property, as you'd have to pay the mortgage even if you didn't have a tenant.

Am a landlord but wouldn't recommend it. I don't earn anything from it (it doesn't even fully repay the mortgage) but that is partially because I am a higher rate tax payer so you might be better off (though imagine you won't get great rates if you don't have much deposit) but it is a hassle. You will need to do a tax return, if there are issues then it will be a nightmare. I had to sort out emergency boiler problem there other week and luckily my DP was able to have the kids while I dealt with it all evening and that was a fairly minor issue. Friend just took over a year to reclaim her property - she wanted to live in it herself but the tenant was told by the council not to leave as he would be making himself homeless

Benefit of interest only is that inflation reduces the value of the principal amount. So you’re opting to pay it off at prices in say 25 years rather than todays prices. Which is how I would do it as it makes more sense financially.

But I believe this is heavily debated among BTL landlords (of which I’m not one) so I guess it’s horses for courses.

You don't appear to be in a financial position to carry a second property.

I'm a landlord, last Friday I paid out for a new boiler without any notice (£3500) and the upgrading of the electrics to current regulations (£1100). That's pretty much wiped out any profit for several years plus you are taxed on turnover, not profit, so you can't even offset spends now.

Take care if you do go down this route to have enough liquid funds.

You can't afford to be a mortgaged buy-to-let landlord. Worst case scenario is tenant doesn't pay, you have to cover the mortage for the up to a year it takes to evict them, plus legal fees, plus the costs of fixing up the inevitably trashed flat.

You don't even begin to have the kind of money to take that level of risk. I'm sorry.

A friend of mine who has had a BTL property for nearly 20 years has sold it - she was lucky enough to have long term tenants but when they left she sold the flat. The reasons were she was not prepared to deal with voids etc (even though she had other savings to cover these ) risk of having a bad tenant and just the time and effort it took - even though she had put it the hands of a rental agent - do deal with all the day to day stuff and keeping the flat up to scratch. I think she is typical of BTL owners now AND she had savings which could have covered most eventualities. In your situation that doesn't sound like the case.

My advice would be , as others have said , check out your current pensions in forensic detail & find out if you may have more than you think you have. Consult an IFA .

One more thing I would investigate is if you have not been paying NI (is this right ? Would that not be taken from your salary at source ? ) anyhow you can buy NI contributions in retrospect to improve your state pension at retirement age. Up until the end of this tax year the years available are more generous than will be available after the new tax year - BUT BUT please do investigate this yourself as I am not a qualified financial advisor - but I have bout an NI top up this year as haven't paid enough for a full state pension.

Good luck - but I would investigate all aspects of pensions now.

The tutoring sounds like a good idea which would could put into a a top up pension

I would absolutely not buy a rental property in your situation. We do rent a house out but we bought it outright. Last year we bought a new boiler, dishwasher and washing machine for it (they just all happened to go wrong at once!) so if we'd been relying on the rent to cover a mortgage we'd have been stuffed. Also, our tenants paid a year's rent in advance and look after the house beautifully but I've heard some horror stories of non payers and tenants being destructive. It's certainly not a reliable income.

OP, you need to stop focusing on your regret of late pension contributions. Your mind is in rollercoaster mode which is very stressful.
Please take notice of the advice of the majority of people on here. Step by step

They’re are 17 years til you can retire with state and work pensions. Lots of time to add to teacher’s pensions.

you have a mortgage in the SE. You can sell that and buy a much cheaper property away from SE, releasing money.

Absolutely the leadership scale is an agreed scale, I agree.
Headteacher salary for last year , leadership 1 starting at £53,000, with a rise for this academic year to £56,000.

We appoint with governors at L1, for a new to headship candidate, which the OP’s DH would be.
Our larger schools, which would demand a higher level on the pay scale would be advertising for candidates who are on at least their second headship. Of course this applies to executive headship posts too. Headteacher Pay Scale