Millions Still See 'property As Their Pension'

[A_Landlord]

are you going to be a pwoperdie miwwionaire?

Nope and never said that - but atleast I will be in a position to retire in my 50s and have a sensible pension which can be passed down to my family.

How are you planning for retirement?

[abharrisson]

Without being rude, you are talking out of your ****.

The issue with this sort of investment as a pension is that I know of no 70-80 year olds, who could be bothered being woken up at 6am with the news that their tennants have run off, having urinated in the cooker.

Extreme example? Yes!

However, you cant look at world then, through your currently (younger) eyes.

Whilst I wouldn't want to show you up as being the #### you clearly are as your argument holds as much water as a leaking bucket.

Have you never heard of agents ?, have you never heard of selling the properties concerned when it suits? have you never heard of partners and family? have you never heard of retiring before you are 70-80 ?.... to base your premise that investing in property at the bottom of a cycle for a pension is wrong becasue you may have a difficult tenant when you are 80 is childishly bizarre to say the least.

Its best not be rude to people and then show yourself up as being an idiot at the same time as it just comes right back at you.

[Si1]

Nope and never said that - but atleast I will be in a position to retire in my 50s and have a sensible pension which can be passed down to my family.

How are you planning for retirement?

in my opinion your projections for investment growth on property are woefully optimistic and you will not be able to do this with the method you suggest.

Edited July 3, 2009 by Si1

[A_Landlord]

Without being rude, you are talking out of your ****.

The issue with this sort of investment as a pension is that I know of no 70-80 year olds, who could be bothered being woken up at 6am with the news that their tennants have run off, having urinated in the cooker.

Extreme example? Yes!

However, you cant look at world then, through your currently (younger) eyes.

Regarding your extreme example there are ways to mitigate against this.

1. be selective in who your tenants are. I buy terraced houses near schools so look for long term family renters - not in their interest to damage the property.

2. use a management company, they will take care of day to day hassle and produce a nice annual summary of income for tax returns.

3. use your kids/family to take an increasing interest in the property as you get older. They will inherit it so get them used to how it is being managed and get them.

My parents are in their late 60s, and although they do a lot of th work themselves (painting etc.) they can call on the family for larger projects.

[Mrs Bear]

One of the best ways to ensure you have a good pension is to choose a partner whose parents own their own house. When his or her parents go to meet their maker in their eighties your be approaching your sixties and will inherit their property -- the sale of which will provide a sizeable boost to your bank balance.

But do make sure they're an only child, with folks who are conveniently going to cark it without needing care homes at £800+ per week.

[Si1]

Regarding your extreme example there are ways to mitigate against this.

1. be selective in who your tenants are. I buy terraced houses near schools so look for long term family renters - not in their interest to damage the property.

2. use a management company, they will take care of day to day hassle and produce a nice annual summary of income for tax returns.

3. use your kids/family to take an increasing interest in the property as you get older. They will inherit it so get them used to how it is being managed and get them.

My parents are in their late 60s, and although they do a lot of th work themselves (painting etc.) they can call on the family for larger projects.

4. fantasy financial projections

[A_Landlord]

4. fantasy financial projections

You are being a bit of an ****.

You have no idea of my LTV, original property purchase price, my monthly mortgage payments and monthly rental income, but still you going on about financial projections.

Currently 1/2 my rental income is going on paying off the remainder of the mortgages.

Note, I did not mention any projections for investment growth. Does it matter as the property rental income for my pension ? as long as I get <10% voids on houses I own, I still get to leave something to my family when I'm gone.

I noticed you didn't answer me on your pension plan .... there has to be a reason for this!

[Si1]

You have no idea of my LTV, original property purchase price, my monthly mortgage payments and monthly rental income, but still you going on about financial projections.

you have been speaking in the present tense about property - 'I buy' -this implied at current prices, with, imho, negative future returns.

Note, I did not mention any projections for investment growth. Does it matter as the property rental income for my pension ? as long as I get <10% voids on houses I own, I still get to leave something to my family when I'm gone.

'does investment growth matter' - yes. you are a numtpy if you think it doesnt. If it is negative then you will be poorer.

I noticed you didn't answer me on your pension plan .... there has to be a reason for this!

only because I was being lazy - considering conservative 6% above inflation likely growth (including dividends and capital) in stockmarket over next 10 yrs, and likely higher than that in foillowing years, then I've calcualted for modest but sensible regular investments I can retire OK at 60 with a decent standard of living. I'll buy a home when it represents a similar return and then I am neutral re: home ownership costs. Granted that you have to be careful as pension funds are rip-off merchants - low cost funds being the name of the game for me, but most people get ripped off.

I am going to remember your 'does investment growth matter' jeez, one's born every minute. Rental income is an inate part of your investment growth, which will for the forseeable future be negative in real terms. Don't ask me to explain 'real terms' look it up yourself. House prices as an asset class are overpriced.

edit: typos

Edited July 3, 2009 by Si1

[Timak]

I still don't understand the people who argue BTL doesn't make financial sense as a pension.

I haven't got one but I will seriously consider it when I think the rental income will cover the repayment mortgage payments.

If I buy the house for £100k with a 20% deposit and for the next 25 years the mortgage repayments exactly match the income received through rental then I now own a house.

In reality the rent will slowly increase over the 25 year period and I have the opportuity to put the £200 a month I would otherwise be putting into a pension fund in to reduce my outstanding mortgage amount.

So by overpaying on my mortgage I could probably own a BTL outright in 15 years and start enjoying an additional income by the time I'm 50.

Even if the resale value of my property in 25 years time was only £50k then it would still be a good investment as I've only paid £20k (plus any overpayments) and I'm getting an income from the rent.

[Si1]

I still don't understand the people who argue BTL doesn't make financial sense as a pension.

I haven't got one but I will seriously consider it when I think the rental income will cover the repayment mortgage payments.

If I buy the house for £100k with a 20% deposit and for the next 25 years the mortgage repayments exactly match the income received through rental then I now own a house.

In reality the rent will slowly increase over the 25 year period and I have the opportuity to put the £200 a month I would otherwise be putting into a pension fund in to reduce my outstanding mortgage amount.

So by overpaying on my mortgage I could probably own a BTL outright in 15 years and start enjoying an additional income by the time I'm 50.

Even if the resale value of my property in 25 years time was only £50k then it would still be a good investment as I've only paid £20k (plus any overpayments) and I'm getting an income from the rent.

compounded growth of your deposit £20,000 at 7%pa for 25 yrs gives you about £105,000 you would throw away to get £50k back

plus you failed to include maintenance and voids - aty roughly £2000 pa very rough, another 50k off. big big losses to be made.

Edited July 3, 2009 by Si1

[Austin Allegro]

I expect to spend my retirement living with Mrs Yogi on the ground floor of our current house while letting out the upper two floors to student doctors at the nearby hospital.

At current rentals that should bring in around £1200 pm to supplement Mrs Yogi's NHS pension. I think we'll survive!

Your house can be your pension!

Cheers

George Roper-Rigsby

Will you also be wearing a green cardie and installing a desperate spinster, a cat called Vienna and a series of eccentric characters who change on a weekly basis?

[A_Landlord]

you have been speaking in the present tense about property - 'I buy' -this implied at current prices, with, imho, negative future returns.

'does investment growth matter' - yes. you are a numtpy if you think it doesnt. If it is negative then you will be poorer.

only because I was being lazy - considering conservative 6% above inflation likely growth (including dividends and capital) in stockmarket over next 10 yrs, and likely higher than that in foillowing years, then I've calcualted for modest but sensible regular investments I can retire OK at 60 with a decent standard of living. I'll buy a home when it represents a similar return and then I am neutral re: home ownership costs. Granted that you have to be careful as pension funds are rip-off merchants - low cost funds being the name of the game for me, but most people get ripped off.

I am going to remember your 'does investment growth matter' jeez, one's born every minute. Rental income is an inate part of your investment growth, which will for the forseeable future be negative in real terms. Don't ask me to explain 'real terms' look it up yourself. House prices as an asset class are overpriced.

edit: typos

Of course house prices inceasing again will benefit me. But I do not need (or plan to sell) and in 2 years time will add. It is rental income that is important - firstly to pay off the mortgages and secondly to provide an income.

If my plan is to leave mortgage free houses to my kids, how does it matter if they drop back over the next few years to when I purchased them?

So you have a lot of optimism in the stockmarket recovering in 10years and companies providing dividends in the future ... pretty risk free choices.

[juvenal]

But do make sure they're an only child, with folks who are conveniently going to cark it without needing care homes at £800+ per week.

Spot on, Mrs Bear!

[Bug16]

Regarding your extreme example there are ways to mitigate against this.

1. be selective in who your tenants are. I buy terraced houses near schools so look for long term family renters - not in their interest to damage the property.

This one always makes me laugh. Landlords ususally start off with grand ideas of who they'll have as tenants. Then the void periods kick in so they make a few compromises and so it goes on until they've got long term unemployed chavs in their dealing weed and slowely destroying the place.

I've seen this happen so many times I've lost count.

[Si1]

Of course house prices inceasing again will benefit me. But I do not need (or plan to sell) and in 2 years time will add. It is rental income that is important - firstly to pay off the mortgages and secondly to provide an income.

If my plan is to leave mortgage free houses to my kids, how does it matter if they drop back over the next few years to when I purchased them?

So you have a lot of optimism in the stockmarket recovering in 10years and companies providing dividends in the future ... pretty risk free choices.

yes good idea. leave houses worth fraction of the value you paid in to your kids. they'll love you for that.

edit: paying p*ss poor income at the same time. genius.

Edited July 3, 2009 by Si1

[Si1]

So you have a lot of optimism in the stockmarket recovering in 10years and companies providing dividends in the future ... pretty risk free choices.

much much better punt than properdie - you don't actually know what the stockmarket is, do you?

[The McGlashan]

Aha. Unsurprisingly, landlords advocate reliance upon unearned income through rent seeking, which they seem to have mistaken for entrepreneurial economic activity.

Is this because they lack the wit or creativity to actually engage in an enterprise which creates wealth and adds value to the economy?

While it is clearly true that professional landlords are a necessity, we can't all take in each other's washing...

[sleepwello'nights]

Aha. Unsurprisingly, landlords advocate reliance upon unearned income through rent seeking, which they seem to have mistaken for entrepreneurial economic activity.

Is this because they lack the wit or creativity to actually engage in an enterprise which creates wealth and adds value to the economy?

While it is clearly true that professional landlords are a necessity, we can't all take in each other's washing...

What form of pension doesn't rely upon unearned income?

Dividends from shares is unearned income

Annuities from a pension provider is unearned income - and that's dependent in part on dividends and rents

Interest from deposits is unearned income

We all have to rely on the concept of unearned income because sooner or later most of us won't be able to earn a living. And as far as I can see there is an element of risk in all forms of saving. Even the ultra safe investment in Gov't bonds is reliant on that country's administration continuing to honour them. A revolution for example may change the commitment.

[Si1]

What form of pension doesn't rely upon unearned income?

Dividends from shares is unearned income

Annuities from a pension provider is unearned income - and that's dependent in part on dividends and rents

Interest from deposits is unearned income

We all have to rely on the concept of unearned income because sooner or later most of us won't be able to earn a living. And as far as I can see there is an element of risk in all forms of saving. Even the ultra safe investment in Gov't bonds is reliant on that country's administration continuing to honour them. A revolution for example may change the commitment.

I think you misunderstand - dividend income is what you receive for investing in a tangible productive company - this is active profit, so not unearned.

By the same token, a professional landlord's rent income is similarly earned.

If, however, the market is so skewed that the property market relies on inflows of speculative capital disconnected to the economic future then, like any bubble, this is unearned and unsustainable.

Edited July 3, 2009 by Si1

[Sibley's Love Child]

Hang on a minute; wasn't it a glut of amateur pwoperty barons that helped get us where we are now?

For those about to BTL, we salute you.

[The McGlashan]

I think you misunderstand - dividend income is what you receive for investing in a tangible productive company - this is active profit, so not unearned.

By the same token, a professional landlord's rent income is similarly earned.

If, however, the market is so skewed that the property market relies on inflows of speculative capital disconnected to the economic future then, like any bubble, this is unearned and unsustainable.

Indeed, the distinctions are subtle. I was careful to use the phrase 'rent seeking', which has connotations of exploitation of the economic environment to capture a speculative profit, extracting uncompensated value from others without making any contribution to productivity.

Rent-seeking does not necessarily involve a tenant - any unearned capital gain through speculation in a commodity or asset is 'rent seeking' - the economy as a whole pays the 'rent' to the speculator in the form of inflation and opportunity cost.

As you rightly point out, the investor risking his capital in a productive enterprise (under non-bubble conditions) is not rent seeking.

(edited for clarity!)

Edited July 3, 2009 by The McGlashan

[kingsgate]

Without being rude, you are talking out of your ****.

The issue with this sort of investment as a pension is that I know of no 70-80 year olds, who could be bothered being woken up at 6am with the news that their tennants have run off, having urinated in the cooker.

Extreme example? Yes!

However, you cant look at world then, through your currently (younger) eyes.

You are talking out of your **** here.

I own 25 places, all of which when we bought them yielded double the IO loan rate (when we were paying around 6 or 7% interest). With base rates as they are now, we are earning £190K a year over the interest payments, with which we are paying off the loan capital at double-quick speed.

Even when rates go back up, we will still be quids in. In less than seven years time, we will owe no-one any more loans.

Then, however long I live, I will simply pay someone else to deal with bad tenants. Not that we get deliberate damage and vandalism very often.

Why would I be awoken at 6am because of petty vandalism anyway? And even aged 70+ I would rather have to take (and make) the odd phone call to sort out a problem than the alternative - living in poverty.

[kingsgate]

This one always makes me laugh. Landlords ususally start off with grand ideas of who they'll have as tenants. Then the void periods kick in so they make a few compromises and so it goes on until they've got long term unemployed chavs in their dealing weed and slowely destroying the place.

I've seen this happen so many times I've lost count.

We'll just stick with university students from well-to-do middle class homes. No chav layabouts. Given that we get their mums and dads to sign guarantees, they tend not to trash our places, and its nice and predictable - we spend ONE weekend each year re-letting them all for another year, six months ahead of the date they will actually move in! Then ONE weekend dealing with everyone moving out and arranging for summer redecs and repairs etc, then ONE weekend moving them all in in late September. That's it, usually. Have a good working relationship with a local building and maintenance firm to deal with any unexpected breakdowns and call-outs.

[Si1]

Kingsgate

good grief

get some logic man and address the future not the past. I give up.