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Marcos Scriven

What's The Historic Low Of Housing Cost Vs Living Cost?

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Hi

I just saw that story on here about how too many people are relying on their home as their pension, and that downsizing would on average only be 16% of avg earnings.

However, I was wondering about BTL as a pension, and how much it would give you if you kept it to rent, rather than relying on a good sale price?

IE, when you're 50, you own two properties outright, one you live in, and one you rent, then surely that should be a good chunk of what you'd need to live, in the sense that you have no rent for your own place, plus you've got money coming in that's a good proportion of living costs (say a 3rd).

So you'd only have to make up another 3rd or so and you're sorted no?

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IE, when you're 50, you own two properties outright, one you live in, and one you rent, then surely that should be a good chunk of what you'd need to live, in the sense that you have no rent for your own place, plus you've got money coming in that's a good proportion of living costs (say a 3rd).

So you'd only have to make up another 3rd or so and you're sorted no?

We can't work out your living costs, but rent - maintenance - insurance for a single property doesn't seem like it is necessarily going to amount to a huge chunk of your living costs to me.

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We can't work out your living costs, but rent - maintenance - insurance for a single property doesn't seem like it is necessarily going to amount to a huge chunk of your living costs to me.

I wasn't talking about my particular living costs - hence the title. Ie What's a good average figure for how much housing cost accounts for living cost.

if you have a property you can rent out, even if you take 30% off for maintenance, insurance, and tax, you've still got 60% of whatever it costs to rent a place. If that is on average a 3rd of people's incomes of the day, then you've got a 3rd of what you need, plus the 3rd from the home you're living in.

I'm thinking 2 properties gives you, say, 50-65% of a pension, if one is to live in, and the other is to rent out (ie not relying on selling at all)

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I wasn't talking about my particular living costs - hence the title. Ie What's a good average figure for how much housing cost accounts for living cost.

if you have a property you can rent out, even if you take 30% off for maintenance, insurance, and tax, you've still got 60% of whatever it costs to rent a place. If that is on average a 3rd of people's incomes of the day, then you've got a 3rd of what you need, plus the 3rd from the home you're living in.

I'm thinking 2 properties gives you, say, 50-65% of a pension, if one is to live in, and the other is to rent out (ie not relying on selling at all)

It depends on your standard of living too, and what the properties rent at. If its typical BTL flats, its going to be less than 50% i'd think. Historically housing has not been seen as giving good long term returns on capital for a reason....

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the problem is few now own that btl outright, the ones that did now own 5 or 6 on mortgages, most people are not prepared to wait till 65 to start spending any money they have accumulated.MEW was a one off once in a lifetime bonanza for mainly the over 50s.average people with average jobs suddenly found themselves quite rich, it takes a brave person to not then spend some of that wealth

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the problem is few now own that btl outright, the ones that did now own 5 or 6 on mortgages, most people are not prepared to wait till 65 to start spending any money they have accumulated.MEW was a one off once in a lifetime bonanza for mainly the over 50s.average people with average jobs suddenly found themselves quite rich, it takes a brave person to not then spend some of that wealth

So if you don't MEW, and you have no mortgages at all in 25 years' time, what do you think would be a good % estimate of what such a situation could bring in, in terms of living costs of the day?

I can't really see it being much less than 50%

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BTL depends on when you did it. pre 1998 you got a free pension.

after that, no. you paid too much for your investment.

your having a bath unless you have deep pockets for next 5 years..

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So if you don't MEW, and you have no mortgages at all in 25 years' time, what do you think would be a good % estimate of what such a situation could bring in, in terms of living costs of the day?

I can't really see it being much less than 50%

they have all done MEW

this is what has fueled the consumer boom, dont let any one of them kid you, every single one of them has MEW

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It's better to put the money into a pension than to BTL a properties and then live on the rent after 25 years of mortgage payments. There is 100% tax relief up to annual earnings on pensions so you would make money through compounding it a lot faster. The limits for tax are higher than £225k pa and Millions total and 25% lump sum can be taken out with zero Tax.

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I wasn't talking about my particular living costs - hence the title. Ie What's a good average figure for how much housing cost accounts for living cost.

if you have a property you can rent out, even if you take 30% off for maintenance, insurance, and tax, you've still got 60% of whatever it costs to rent a place. If that is on average a 3rd of people's incomes of the day, then you've got a 3rd of what you need, plus the 3rd from the home you're living in.

I'm thinking 2 properties gives you, say, 50-65% of a pension, if one is to live in, and the other is to rent out (ie not relying on selling at all)

The answer to the question in your post (which isn't aligned to your title) still obviously depends on the property and what your expected pension income and living costs are. You also actually mean what is the average rent as a percentage of average income, not housing costs in general.

I rent a two-bed flat for <600 pounds a month and that constitutes less than 20% of my post-tax earnings. I'd say I was towards the lower end of rent and upper end of income, but data from here suggests that average private rents have been between 17 and 22% of the average household income and data from ONS suggests that in 2006 the average rent in the UK was 60 pounds a week and the average individual gross income was 440 per week or 335-ish post-tax, for a rental cost percentage of around 18%. Personally, I think these figures seem low considering my own example, but you take what you can get.

So, taking the highest percentage from the stats, you shouldn't count on more than 20% of the average wage out of an average house as rental income. That said, considering my local area, the ONS figures for average rent seem to be less than half what a modest 2-3 bed house will actually rent for and so I think the figures are being heavily skewed by subsidised rents and even more by the fact that most rents are at flats/studios and bed-sits. If I were thinking about the BTL pension route, I would work from the property type I am buying and the general expectation of returns on the value minus the maintenance and insurance costs and expected fallow rental periods rather than the national averages.

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  • 296 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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