Buying property for retirement

It sounds a nice enough idea. Instead of faffing around with pension schemes yielding peanuts, why not downsize on your family home and use the money to buy a property or two to fund your retirement?
A new report from LV= (formerly the Liverpool Victoria) found that most over-50s are planning to do this.  Indeed, it is what I have done myself.

About 20 years ago I downsized, zapped the mortgage and put a nervous little toe into the buy to let market.  Gradually gaining in confidence, I bought and sold over the years and now own four mortgage-free rental properties; one in London, two in Worthing and one in Oxford. 
Together, they bring me in over £40,000 a year, provided they are fully let at all times, an eventuality that cannot be guaranteed.

The major upside is that you are in control, but the drawback is that using property to fund retirement is emphatically not that same as sitting back and watching the money plop into your account.  Renting out properties takes constant work and effort, even though the income you receive is considered unearned.

The homes have to be maintained to a high standard to attract good tenants – there is plenty of competition out there – and tenants are always coming and going.  The same ones rarely stay for more than a year., and there a is constant worry that they might not pay the rent. You become an obsessive bank statement checker.

Then, tenants are not passive robots but individual human beings with their own distinct personalities.  Some give no trouble at all, while others are always on the blower to tell you they’ve locked themselves out (at eleven o’clock at night) and expect you to magic round in minutes with a spare key.  The properties often play up as well, developing cracks and leaks, and somehow, the occupants can’t seem to work the appliances.  Washing machines flood.  The list of what can go wrong is endless.

These days, there are also many certificates and safety checks required, plus fees and taxes to pay.  You have to keep very precise accounts, and also every now and again, take a property off the market to renovate.  During this time you will not be receiving any rent of course.

Using property to fund your retirement is both exciting and terrifying and you need to know that you can handle the ups and downs.  Also, I would say that you need at least four rental properties to eke out a halfway decent retirement income from them.

The Times - October 2013