Pension : Stick with Property or Get Out?

B

BrianDwyer

Guest
I'm considering retiring in the next year, if I can afford it. I'll be consulting an accountant in the next few weeks to crunch the numbers, but could I ask any interested "askaboutmoney experts" if they have any ideas or suggestions?

Here's the deal:

62 Years old.
Property investments in Ireland and the UK.
House mortgage paid off.
No pension. (I know, I know . . .)
Me and the Mrs both healthy so far Deo gratias.

Currently the property just about "washes its own face", as the saying goes - i.e. the rental income equals the mortgage repayments.

If I sold it all off, it would raise a little over 600k.

Our house is also too big for us now, and we could trade down, freeing up about another 100k for use.

I'm wondering if I should:

* Sell off some of the property to make the rent from the rest more than the repayment, hence providing an income.

OR

* Sell them all off and buy some kind of financial instrument which will provide an income.

OR

* something else maybe you can think of.

Any suggestions much appreciated.

Brian
 
Hi Brian

Even at this late stage you should consider setting up a pension. You can get tax relief on 30% of your salary, so if you have income which is taxable at 42%, then it's worth doing.

I don't think I would trade down to release €100k in equity. Have you factored in all the costs? Stamp duty on the new home, moving costs, legal costs, redecoration? Unless you can trade down to one of your investment properties?

I don't like the sound of your property strategy at all. I am not sure of the numbers, but how big is the mortgage as a percentage of the property value. It seems quite high if the property is just washing its face. A person close to retirement should not borrow to invest in anything. If the value crashes or if the rental income declines, you will be in serious financial trouble.

Let's assume your properties are worth €1.2m and you have €600k in borrowings. You are worth €600k. If property values fall by 30%, you will lose €360k, so your net worth will be reduced to €240k. I would sell sufficient properties to pay off all borrowings. You will then be left with one or two properties worth €600k and no borrowings.

You should probably consider diversifying half of your €600k into equities. ( Personally, I would put it all in equities, but I know there is little point in trying to convert a property investor).

Brendan
 
Would agree....

... with Brendan here. You should do something about a pension and prior to 31/10.

Trading Down. This is something the state should look at. Why should you have to pay stamp duty to trade down. It makes no sense. You have plenty of senior citizens living in houses too big to cope with that would trade down and there is a shortage of larger houses on the market.
 
Back
Top