‘Can I become a landlord aged 56 with £280k?’

Divorce has left Alan Birtwistle with spare cash but no property. Rachel Mortimer looks at how to fire up his income

Landlords have been ditching properties in their droves after changes to taxation, a ban on evictions and ever-increasing regulation. Many have sold up as house prices soared amid demand for bigger homes. Despite all this, Alan Birtwistle is considering becoming a landlord for the first time.

Mr Birtwistle, 56, recently extinguished a 29- year career as a fireman, retiring in 2019. He now lives and works at a campsite near Orpington in Kent during the summer and wants to escape to the Canary Islands during the winter.

After a divorce in March last year, he has £280,000 in bank accounts, earning little or no interest, and no property. “I chose not to buy a home so I could travel,” he said.

However, he wants to know how his savings can top up his income and fund his winter travels.

“I am unsure if I should invest the cash in property. The Hastings area looks good, maybe for a buy-to-let, but it is extremely expensive in this corner of the country. I could invest in my home county of Lancashire, where it is cheaper, or even dabble with stocks and shares,” he said.

Mr Birtwistle has an income after tax of £1,700 a month from a pension and his campsite work, but it drops to £ 1,200 in the winter. He said he needed his savings and investments to provide about another £4,000 a year to feel comfortable.

There is £41,000 invested via Isas in a mix of stocks and bonds nds via Aegon funds, which returned rned 10pc last year. Mr Birtwistle tle also has £12,450 invested d with the advice app Wealthify, which has returned 12pc since October 2020.

He a l so has a £ 20,000 private pension which he intends to cash in, but is conscious of the tax implications.

Jason Hollands

From Bestinvest, the fund shop After his divorce, Mr Birtwistle faces new beginnings with no debts, no mortgage, a large amount of cash and

Alan Birtwistle, a retired firefighter, wants to spend his winters in the Canary Islands the security of a defined benefit pension. Break-ups can be financially challenging, but objectively this is a decent starting point.

His income will rise when he is 67 and receives the state pension, but that is still a decade away. In the meantime he needs to boost the amount he receives every month.

Let’s start with his massive amount of cash. It certainly makes sense to have some cash for unforeseen emergencies, but it is unwise to leave a large sum lying around as the value will be eroded by inflation, which is on the rise.

If he invests in a buy-to-let property, the rental income will be taxable, unlike income generated within Isas. Having a lot of his wealth tied up in a single property is also risky.

He has made a good start to investing with more than £40,000 in his Isas, but his fund choice does not match his self- declared status as an adventurous investor. He is invested in the Aegon Risk Managed 23 fund. This is a lowcost portfolio aimed at someone who is slightly cautious. It certainly is not designed for an adventurous returns seeker. If he can leave the money invested for several years or more, perhaps until he receives his state pension, he could invest a much greater proportion in stocks, where potential shortterm volatility is higher but so is the longer-term potential for returns.

One place to start would be to consider global equity funds such as Fundsmith Equity, Evenlode Global Income and Lindsell Train Global Equity. These are riskier than bond funds but invest in high- quality, larger, well- established “b “blue chip” companies. T They don’t own racy startu up businesses. This provides some protection against the sharpest of market falls.

M r B i r t w i s t l e’s £ 20,000 pension is invested in a “closed” p pension fund, which is r run quite conservatively, s so I can see why he is dissatisfied with it.

If he cashes it in, 25pc, or £5,000, can be taken tax- free. However, the remaining £15,000 will be subject to income tax and, thanks to his pension and campsite work, he is already a basic-rate taxpayer. If he cashes in the pension in one go, he will end up paying emergency tax on the remaining £15,000 and more than £5,000 will be deducted from £15,000, rather than the £3,000 he is actually liable for. He would have to complete a P50 form to receive a refund, but this would take time.

Instead, he could transfer the money to a self-invested personal pension and pick from a wider range of funds that better suit his more adventurous investment instincts.

Chris Sykes A mortgage broker at Private Finance

Most buy-to-let lenders have a requirement of £25,000 income and that you own your own home. There are exceptions to these rules, but very few lenders out there will consider a case where you meet neither of these points.

Mr Birtwistle will have fairly limited options from a standard mortgage point of view because of his income. Pensions and the part-time work will be considered by lenders, but would not give him a significant level of borrowing power.

That said, I have successfully managed similar cases in the past, allowing someone to buy a buy-to-let to provide an income for the long term.

The amount of buy- to-let finance available will be somewhat down to the rent the property brings in and what it would yield. But this would vary according to whether the client was buying in Hastings or Lancashire – with the latter often having great rental yield potential.

Many would say that it would be best to hold off investing in a buy-to-let for a while because of a lack of high-quality houses on the market and inflated prices. It sounds like Mr Birtwistle is in no rush and can take a considered approach to his property investment.

That said, a cash buyer such as him could be able to secure a good deal if they can complete a chain and wrap up the purchase by the time the stamp duty holiday ends in June.

Properties can be refinanced in the future to withdraw funds and you may have more lender options after six to 12 months of letting out a property.