FIRE Review
Posted: October 23rd, 2023, 11:10 am
I've been thinking about retirement for a while, and over the weekend spent a fair bit of time on the train during which I took the opportunity to read through quite a number of the threads on here.
Checking my posting history, I've not posted for nearly 6 years during which time a fair amount has happened and as will become evident if you were to review a couple of the previous topics I started, I didn't follow through on my own thought processes at the time (and nor the largely supporting posts that suggested I had a well thought through plan.
But given I've been keeping a spreadsheet - albeit occasionally sporadically - monitoring "net equity", it's relatively easy to pull the details together:
"Balance Sheet":
Property (at cost) £480k. I would estimate realisable value around £1050k-£1100k of which c£350k would be main residence.
Pensions (3 separate ones, all company , no SIPP) £264k
Cash £86k (c£30k of this is held in Euros and will remain there). UK balances earning just under 4.9%. Euro balances earning 0.
Vested share options (in company I work for) c£30k
Unvested share options (next 2-3 years) c£15k
Other share investments (UK) c£25k
Mortgages (spread across 4 properties) £169k
Net Balance Sheet position - c£735k (using property at cost value)
"Annual P&L Key Figures": (Single, no dependents, age 43)
Salary £80k (was previously higher but lowered when I moved back to UK c3.5 years ago just before pandemic)
Rental Income (gross) c£28k
Mortgage Payments (including on main property) c£13k
Main Household bills c£7k (utilities, council tax, broadband etc)
Pension Contributions c£20k from me, c£9k from employer
Currently, any surplus funds are deployed temporarily into cash in the expectation that they will be used to pay off mortgages as and when they fall due. This is because the mortgages are all on fixed rates with the first (and worst) one due to come off that in Aug-24 would move from 2.45% to 8.24% on a balance of c£82k.
As you can work out, that is c50% of the mortgage debt while the others revert to the lenders SVR in late 2025 and late 2026. The current rates on these vary between 1.85% and 2.69%. My spreadsheet suggests together with the overpayments allowed in the interim that with no change in job/salary and rental income remaining static that they can be paid off at that time (or very close to).
Some of my own observations on this:
(i) when you compare property realisable value to rental income, the yield looks awful. There's probably scope to increase some of the rents but suspect c£40k is max. One of the property is not rented out permanently - it is basically a holiday let albeit doesn't meet criteria for a FHL - and this generates only c£6k on a market value close to £250k because while I own it personally it is also used by myself/ wider family for a chunk of the year each year.
(ii) Once the mortgages are paid off, I'll be 46 (or thereabouts) and a scary high % of my net worth will be in property. It's all UK property with the exception of the holiday let which is in continental Europe.
(iii) As will be evident from the difference between the purchase price and the current realisable value, I suspect there will be a chunk of CGT on any sale of any of the BTL. All are owned personally. I probably need to look into this further.
(iv) My train of thought is that at the point of retirement and no mortgage balance and having monitored my spending over the last few years, I would need c £2k/month post tax to live comfortably and that would be about when I'm 46 so need to start putting the investment house in order in advance of that. I'm not a massive traveller, not do I have or need a car or a desire to have one - if I want to visit something or someone I'll either take the train or jump on my pedal bike. Indeed, one of the things I'd like to do while still fit enough to do so is tick off each and all of the Eurovelo routes (https://en.eurovelo.com/) which would take a lot of time but would be great to do it with no time pressure while on annual leave or the like!
Appreciate that was a bit rambling but welcome any thoughts etc.
Checking my posting history, I've not posted for nearly 6 years during which time a fair amount has happened and as will become evident if you were to review a couple of the previous topics I started, I didn't follow through on my own thought processes at the time (and nor the largely supporting posts that suggested I had a well thought through plan.
But given I've been keeping a spreadsheet - albeit occasionally sporadically - monitoring "net equity", it's relatively easy to pull the details together:
"Balance Sheet":
Property (at cost) £480k. I would estimate realisable value around £1050k-£1100k of which c£350k would be main residence.
Pensions (3 separate ones, all company , no SIPP) £264k
Cash £86k (c£30k of this is held in Euros and will remain there). UK balances earning just under 4.9%. Euro balances earning 0.
Vested share options (in company I work for) c£30k
Unvested share options (next 2-3 years) c£15k
Other share investments (UK) c£25k
Mortgages (spread across 4 properties) £169k
Net Balance Sheet position - c£735k (using property at cost value)
"Annual P&L Key Figures": (Single, no dependents, age 43)
Salary £80k (was previously higher but lowered when I moved back to UK c3.5 years ago just before pandemic)
Rental Income (gross) c£28k
Mortgage Payments (including on main property) c£13k
Main Household bills c£7k (utilities, council tax, broadband etc)
Pension Contributions c£20k from me, c£9k from employer
Currently, any surplus funds are deployed temporarily into cash in the expectation that they will be used to pay off mortgages as and when they fall due. This is because the mortgages are all on fixed rates with the first (and worst) one due to come off that in Aug-24 would move from 2.45% to 8.24% on a balance of c£82k.
As you can work out, that is c50% of the mortgage debt while the others revert to the lenders SVR in late 2025 and late 2026. The current rates on these vary between 1.85% and 2.69%. My spreadsheet suggests together with the overpayments allowed in the interim that with no change in job/salary and rental income remaining static that they can be paid off at that time (or very close to).
Some of my own observations on this:
(i) when you compare property realisable value to rental income, the yield looks awful. There's probably scope to increase some of the rents but suspect c£40k is max. One of the property is not rented out permanently - it is basically a holiday let albeit doesn't meet criteria for a FHL - and this generates only c£6k on a market value close to £250k because while I own it personally it is also used by myself/ wider family for a chunk of the year each year.
(ii) Once the mortgages are paid off, I'll be 46 (or thereabouts) and a scary high % of my net worth will be in property. It's all UK property with the exception of the holiday let which is in continental Europe.
(iii) As will be evident from the difference between the purchase price and the current realisable value, I suspect there will be a chunk of CGT on any sale of any of the BTL. All are owned personally. I probably need to look into this further.
(iv) My train of thought is that at the point of retirement and no mortgage balance and having monitored my spending over the last few years, I would need c £2k/month post tax to live comfortably and that would be about when I'm 46 so need to start putting the investment house in order in advance of that. I'm not a massive traveller, not do I have or need a car or a desire to have one - if I want to visit something or someone I'll either take the train or jump on my pedal bike. Indeed, one of the things I'd like to do while still fit enough to do so is tick off each and all of the Eurovelo routes (https://en.eurovelo.com/) which would take a lot of time but would be great to do it with no time pressure while on annual leave or the like!
Appreciate that was a bit rambling but welcome any thoughts etc.