Author Topic: UK property investing question (versus shares)  (Read 1219 times)

Malo

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UK property investing question (versus shares)
« on: April 12, 2014, 10:30:25 AM »
Hi all,

I've been following an early retirement strategy in London for a while. At age 42, this is a quick summary of progress:

I'm in a good job from which I save about 7200 a month. From this job I have a substantial final salary pension, but given the unfunded liability risk around this scheme I'm not planning to rely on it on retirement.

So, instead I've been building up the following assets:
- House, all paid off, value c500k
- Savings immediately accessible of 240k (in stocks / bonds)
- Pensions savings, accessible at age 55, of 170k (also in stocks / bonds)

I'm expecting an inheritance of c150k which I'm contemplating putting in a let-to-buy arrangement to diversify. I would take out a 75% mortgage on the current house, and add 6 months of savings and the inheritance to buy a new place worth 550k (which would be more convenient for work).

Monthly rent would be about 1700 and mortgage interest 1000 (at current rates). If I put all monthly savings for the next three years into it I could pay off the mortgage in that period (or at least have the cash available to do so, while taking advantage of the tax relief). That's a yield of c4.5% + capital growth - not far off what I'd get if I stayed with my current investment strategy.

So the question is - is it worth diversifying in this way? I might want to leave my current job around then (or at least there's a risk of it), so would be left with:
- One house let for 1700 a month (value 500k+)
- A second house to live in (value 500k+)
- All mortgages paid off
- Roughly 300k-350k savings, partially accessible

What's making me pause is the risk of going into buy-to-let and the sense that I might be overbalancing myself into property (and particularly property in London). On the other hand, the steady stream of rental income after three years feels nice.

All advice and experiences very welcome!

Thanks.

daverobev

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Re: UK property investing question (versus shares)
« Reply #1 on: April 13, 2014, 06:31:34 AM »
No need to buy near London, IMHO. Much better deals in, say, the North East. And no need then to risk so much leverage. Mortgage rates... well, you remember when they were 20%, right?