What if you never had to repay your interest-only mortgages?

If you want to invest in property with the minimum of risk then how about these two: SUPR Supermarket Income REIT, yield 7.83% Its portfolio includes Tesco, Morrisons, Sainsbury’s, Waitrose, Asda, Aldi, Marks & Spencer, and Carrefour. Although its major Stakes are in TEsco and Sainsbury. OR still very secure but a bit different, how about PHP Primary health properties. Yield 7.89%. The Company invests primarily in healthcare accommodation across the United Kingdom and Ireland, leased principally to GPs, government healthcare organizations and other associated healthcare users. The problem with property is the work involved an disposing of it. You cannot easily sell part of a property. There is no longer any indexation relief for capital gains and the rules keep changing. I don’t think anything has changed much in the 55 years I have been investing is shares. Any changes have tended to be favourable, Stamp duty use to be 1% but several years ago was reduced to 0.5%. Brokers fees have come down so much that you get companies like Trading212 that don’t charge any commission at all.

Reply to the comment left by Dennis Forrest at 29/03/2026 – 22:02
True, but a blend of geared capital appreciation plus liquidity provides the diversification I prefer.

I will take a look at that REIT.

Reply to the comment left by Dennis Forrest at 29/03/2026 – 22:02
I have been mulling over your strategy over the past day or so, because on the surface it is both interesting and, I can see, very appealing.

Having thought it through more carefully, I think what you have done is less about “beating” property or improving returns, and more about deliberately reshaping your position to prioritise certainty, simplicity and immediate income.

That is an entirely valid objective, but it is important to be clear about what is being traded away in the process.

At its core, the strategy is straightforward. You have borrowed at around 4.5% using a RIO mortgage and deployed that capital into a purchased life annuity generating circa 9%. That creates a positive income spread and, as you say, removes a lot of the operational friction that comes with property.

Where I think some readers may need to tread carefully is around the way the tax position is being interpreted.

It is correct that part of a purchased life annuity is treated as a return of capital and therefore not taxable. However, that does not make the income “tax free” in the usual sense. What is happening is that your own capital is being returned to you over time, with only the interest element subject to income tax. Economically, you are gradually consuming the capital you originally invested.

That distinction matters, particularly when comparisons are being made with property income, where the underlying asset remains intact and may continue to grow.

The other key point is what happens to capital over the long term.

With property, you typically retain three levers: income, capital growth, and control. You can refinance, restructure, or dispose of part of a portfolio depending on circumstances. With an annuity, that flexibility is largely gone. The capital has effectively been exchanged for a fixed income stream, and in most cases there is no meaningful capital value to pass on.

That ties into the inheritance tax point you raised, which I agree is one of the more compelling aspects of what you have done. Creating a permanent debt against the estate can be an effective way of reducing exposure. However, it achieves that by reducing the estate itself and converting capital into income, rather than preserving both.

So in simple terms, the strategy appears to be doing exactly what you intended it to do:

It simplifies your financial life
It increases predictable monthly income
It reduces exposure to property-specific risks and workload
It may help manage inheritance tax

But it also:

Removes capital growth potential
Reduces flexibility
Relies on irreversible decisions
Converts capital into an income stream rather than preserving it

I would also gently flag, for the benefit of others reading this, that using borrowed funds from a RIO mortgage for investment purposes is not always aligned with lender expectations, even if the underlying logic feels sound. That is a separate risk that needs to be considered carefully.

So my conclusion, having reflected on it, is that this is not a “higher return, lower risk” alternative to property in the way it might first appear.

It is a conscious repositioning from a growth and control model into an income and certainty model.

For some people, particularly later in life, that may be exactly the right call.

For others, especially those still focused on building, adapting or passing on a portfolio, the loss of flexibility and capital may outweigh the benefits.

As ever, it comes back to what you are trying to achieve rather than which asset class is “better”.

Reply to the comment left by Mark Alexander – Founder of Property118 at 30/03/2026 – 09:07
If property growth going forward changes significantly, then the appeal of property diminishes almost entirely.

Reply to the comment left by Colette McDermott at 30/03/2026 – 13:11
People have been saying that for centuries though haven’t they?

Reply to the comment left by Mark Alexander – Founder of Property118 at 13:52
If you are already well in to the 40% IHT band, which we are, what is the point of aiming for capital growth just so we can give HMRC £40,000 for every £100,000 we make? An annuity solves the problem to a certain extent as to how long I will live and how much of my capital to spend each year. HMRC will never touch a penny of the capital we used to buy our annuities, kindly proved by our lender. In effect we have bought our annuities at a 40% discount because the mortgage debt will save £40,000 in IHT for every £100,000 of our mortgage. We are just not interested in capital gains. Capital giving is always subject to IHT unless you can be certain of living 7 years. I am 82 , my life expectancy is 7 to 9 years, the odds are in my favour, but only just. I would rather invest £100,000 and lose £10,000 but make £10,000 in dividend which i can give to my heirs as a gift oout of surplus income. They get £10,000 tax free and they also gain when I die because there is £4,000 less inheritance tax to pay. Last year only about 500 families used gifts out of surplus income, a much under use tool in IHT tax planning. BTW about 92% of our annuties counts a return of capital so only 8% is taxable. If you have a pension – you might get tax relif when you make the payments but if you buy an annuity with the capital value 100% of it is taxable, not sure of ths – 25% of it might not be taxable if you don’t take your tax free lump sum?

Reply to the comment left by Howard Reuben – mortgage and insurance broker at 22/03/2026 – 10:44
I dont feel the rates will be fixed for more than 10 years. They may become variable and eat into the equity.
I would not be comfortable with those type of mortgages, when there are some lenders willing to lend beyond age 80.
Most lenders for BTL stop at 80.
I probably would not have properties beyond the age of 82 or not with mortgage, anyway. Already started selling and will sell 3 this year and streamline my portfolio. More will be sold as fixed rates comes to an end. May just keep about 2 or 3 after about 3 years.