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Many people are interested in the prospect of retiring early, and one way to make this a possibility is by making successful property investments. Rather than simply giving up work a few years before the UK state pension age, solid property investments could enable investors to retire in their forties.

The Financial Considerations of Retirement

In the UK the retirement age is currently set at 65, at which point you become eligible to receive the state pension and gain access to any private pensions that have been set up. Many people aim to have paid off their mortgage by the time they retire, in the hopes of living off their pension (state and/or private). For further information about state and private pensions, please refer to the embedded PDF.

Whilst this may work in theory, many people have not considered that the average pension income will not enable them to live at their desired standard of living, particularly once inflation has been considered and the average life expectancy has risen to 95 years-old.

All things considered, for many people being mortgage-free and living off a state pension is not enough – which is where property investing comes in.

Find Financial Freedom Through Property

It is very possible to retire well ahead of retirement-age through property investing. Property enables investors to build passive income in addition to their employment income, resulting in a larger overall income that can be enjoyed in the present, invested, or put into savings.

‘Financial freedom’ means having enough income to pay for your lifestyle without having to work. To be financially free, your income must comfortably cover all of your expenses, as well as enabling you to live to your preferred standard. Things to consider include:

  • Mortgage payments and paying back loans
  • Paying for your children’s education and lifestyle
  • Being able to pay for care and accommodation for elderly relatives if necessary
  • Paying bills
  • Buying clothes, food, and ‘luxury items’
  • Going on holiday
  • Buying cars, bikes and other large-ticket items

It is important to understand your financial position and goals to work out how much money is required to cover your monthly costs. Once your desired monthly income is known, it is time to look at the options available, as there are many different ways to invest in the property market.

The average income from a buy-to-let property is £350 PCM, whilst rent-to-rent income is around £1,250 PCM and renting out commercial property brings in an average income of £1,000 PCM.

Using these average income calculations, to create a monthly income of £2,500 PCM (which is the average salary in the UK) over a five-year period it would be necessary to invest in the following:

  • Seven buy-to-let properties
  • Two rent-to-rent properties
  • Two-and-a-half commercial properties

Property investing can be a great way of making passive income, and it can be done on a part-time basis. However, it is always advised to work alongside an expert who can find the most suitable and profitable ways of investing.

Paul Smith, Touchstone Education co-founder, set up the company to share his expertise in property investing. Touchstone Education runs a unique Wealth Through Property online training programme, which has been designed to educate potential property investors in key strategies.