Quick question, how much is the gross and net (after all expenses but before tax) income of the rental property ?
Thanks for the insight,
Otherwise nicely done. You got some freedom and you have the luxury to choose between different alternatives. In the end, that is all what FIRE (the good one) is about.
If you follow the Safe Withdrawal Rate concept, once you calculate your annual budget then your FI number is calculated for you.
For example I’m in my 40s and plan using 3% SWR. For 50k CHF /yr spend I would need 1.67M CHF
Gross rent is GBP 9600, Total agent fees are approximately GBP 1000, Building service charges another GBP800. So taxable income is probably about GBP 7800. in terms of maintenance it really varies. After a tenant leaves (hopefully not every year) I probably spend 500-1000 on cleaning, re-painting minor repairs etc. If the boiler breaks I’d would cost about 3-4k to replace.
I think if you allocated about GBP1500 for maintenance on average you probably wouldn’t be too far wrong. That said I don’t really assume anything. Just pay the bills when they come it.
So overall the property probably brings in about GBP6000-7000 after all expenses but excluding the mortgage. I am on a repayment mortgage and don’t owe very much which is definitely not what you would do to maximise returns. I pay GBP 300 per month for that and there are 7 years left till the mortgage is gone.
No tax to pay as it’s well below the UK’s income tax threshold but you do need to do a tax return each year.
With property the idea is generally that most of the gains come from house price rises. Because of this the text book move would be to use the capital+ additional interest only debt to buy several properties and hope for price rises.
I’m not doing this because I don’t want to spend more time being a landlord and I don’t want a risk of negative equity. I wouldn’t buy another apartment now but to due to the hassle and transaction costs of selling I’ll keep this one.
Thanks, I understand the maths. It’s the “calculate your annual budget” step that is the tricky part for me. Depending on the assumptions I make I get a range of about 1-2 million. Hence my uncertainty about whether I’m getting there or just getting started.
The uncertainty is what make most of us never to retire early.
The best will be to reduce uncertainty by tracking your budget for few years.
If it is really a goal, you will be able to cut some expenses to make the move.
Most of your asset are not very liquid so you may want to focus on the portfolio generating net dividends.
Otherwise keep going.