Building a substantial property portfolio can take years of hard work. For many landlords, the rental income and wealth accumulated along the way become an important part of their long-term financial security. But there can come a point when the question changes.

Instead of asking “How can we grow our property portfolio?”, it becomes “Do we still want the responsibility that comes with owning it?”

That was the position facing a married couple who came to Rowley Turton in their early 60s. Over many years, they had built a successful buy-to-let portfolio of more than two dozen properties. It had served them well financially and generated a significant rental income. The problem was that managing it had increasingly become a bind.

“We can’t completely switch off, even when we’re on holiday”

Owning one or two rental properties can involve a reasonable amount of administration. Owning more than two dozen is quite different.

There were properties to let, tenant issues to deal with, repairs and maintenance to arrange, tradespeople to manage, safety certificates to keep up to date and tax matters to consider. Individually, none of these responsibilities was necessarily a problem. Collectively, however, they required a considerable amount of time and attention. And property problems don’t necessarily wait until you are conveniently at home.

Our clients found that even when they went on holiday, it was difficult to switch off completely. There was always the possibility that a tenant might call or something might need dealing with.

They had accumulated considerable wealth, but some of that wealth was now creating a responsibility they increasingly didn’t want.

They had already started selling

Importantly, our clients didn’t come to us asking whether they should sell their properties.

They had already recognised that they wanted to simplify their lives and were in the process of selling some of the portfolio when they approached Rowley Turton. Their question was what should happen next.

Selling properties would reduce the management burden, but it would also mean giving up some of the rental income they had become accustomed to receiving. There were other considerations too.

How many properties should they retain? Should they sell everything or keep some of their better-performing properties? What should they do with the proceeds? And how could they replace some of the income they would lose as the portfolio became smaller?

This was therefore about much more than deciding whether property remained a good investment. It was about creating a financial plan that better suited the next stage of their lives.

The planning approach

Rather than making a wholesale change and selling the entire portfolio, we worked with the clients to develop a gradual plan.

The intention is to sell a small number of properties each year over the next few years, ultimately reducing the number they own by approximately half.

This allows them to simplify their affairs progressively while retaining some of their better-performing properties. It also means the transition doesn’t need to happen overnight.

Alongside the planned property sales, we worked with them to create a diversified, tax-efficient investment portfolio using some of the proceeds.

The objective was not simply to invest the money released from property.

The investment portfolio formed part of a wider financial plan designed to provide an alternative source of income, helping to replace some of the rent being given up as properties were sold.

As the property portfolio gradually reduces, their reliance on managing individual rental properties should therefore reduce with it.

Why didn’t they simply sell everything?

Financial planning doesn’t have to involve moving from one extreme to another.

Our clients’ properties had been successful. There was no reason to conclude that because they wanted less responsibility, they should immediately dispose of an entire portfolio that had taken many years to build.

Instead, the plan allowed them to retain some of the properties they were happiest owning while gradually disposing of others. That created a balance between property and other investments, rather than making it a choice between the two. It also gave them time to adjust to receiving their income from different sources.

Most importantly, the plan reflected what they actually wanted: fewer properties and less administration, without unnecessarily giving up the financial security their portfolio had helped them create.

From accumulating wealth to simplifying life

There is an interesting point in financial planning when accumulating more ceases to be the obvious objective.

For many years, building their property portfolio had made perfect sense for our clients. Each additional property represented another asset and another potential source of rental income. But circumstances and priorities change.

By their early 60s, they weren’t looking for more properties to manage. They wanted more freedom to enjoy the success they had already achieved. That meant thinking differently about their wealth.

A property portfolio can look impressive on a balance sheet, but wealth also has a practical purpose. It should help support the life you want to lead.

For our clients, simplifying the portfolio meant accepting that less could actually give them more: fewer tenants to deal with, fewer repairs to organise, less administration and, ultimately, more freedom over their time.

What does this illustrate?

Investment decisions shouldn’t be considered solely in terms of financial returns. An asset can have performed very well financially and still become less appropriate as your circumstances and priorities change.

For someone approaching or entering retirement with a substantial property portfolio, useful questions might include:

• How much time do I still want to spend managing properties?
• How dependent am I on the rental income?
• Which properties are genuinely worth retaining?
• What would happen to my financial position if I sold some of them?
• How could the proceeds support my future income?
• Would greater diversification and liquidity make my finances easier to manage?
• And perhaps most importantly, what do I actually want my wealth to enable me to do?

For these clients, the answer wasn’t to abandon property. It was to gradually reduce their dependence on it.

Their property portfolio had been very successful at helping them build wealth. But that success had also created complexity. The next stage of their financial plan was about making that wealth simpler to manage and easier to enjoy. And hopefully, making the next holiday feel rather more like a holiday.

Frequently asked questions

Should I sell my buy-to-let properties when I retire?

Not necessarily.

Whether retaining or selling rental properties is appropriate depends on your individual circumstances, including the income they provide, their performance, taxation, borrowing, management requirements and what you want from your retirement.

For some people, continuing to own property may remain entirely appropriate. Others may decide that the time and administration involved are no longer worth it.

Do I need to sell my entire property portfolio at once?

No. Selling a property portfolio doesn’t necessarily have to be an all-or-nothing decision.

In this case, the clients planned to sell a small number of properties each year, retaining some of their better-performing properties while gradually reducing the size of the overall portfolio.

The appropriate approach will depend on individual circumstances, including tax considerations.

How can I replace rental income if I sell investment properties?

That depends on your wider financial position and income requirements.

For these clients, part of the planning involved creating a diversified investment portfolio designed to contribute towards replacing the rental income lost as properties were sold.

That does not mean an investment portfolio will be appropriate for every landlord, or that investment income will replicate rental income. The different risks, taxation, accessibility and characteristics of each approach need to be considered as part of the wider financial plan.

Is an investment portfolio more tax-efficient than buy-to-let property?

Not necessarily.

The tax treatment of property and other investments is different, and the appropriate structure depends on individual circumstances.

In this case, improving tax efficiency formed part of the wider planning, but tax wasn’t considered in isolation. Income, diversification, liquidity, management responsibilities and the clients’ longer-term objectives were also important.

Important information

The clients featured in this case study have been anonymised and some identifying details have been changed or kept deliberately broad to protect confidentiality.

The examples are intended to illustrate the financial planning process and should not be treated as financial, investment or tax advice.

Property sales and investments can have tax consequences, and the suitability and tax treatment of any arrangement depend on individual circumstances and the rules applying at the time. Investments can fall as well as rise in value, and you may not get back the amount invested. Appropriate advice should be sought before taking action.

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Written by Scott Gallacher, Chartered Financial Planner at Rowley Turton, 50 Today 100 Tomorrow explores an important financial planning question: once you’ve accumulated enough, what is the money actually for?

The book looks beyond simply accumulating more wealth and considers the choices money can create — from enjoying more of it during your lifetime to helping your family and deciding what you eventually want to leave behind.

If you’re wondering how to balance enjoying your wealth today with providing for yourself and future generations, it may help you think differently about what comes next.

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