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 c£500k
- 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 c£150k 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.
