How to invest £100k

DrPhil

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Been having the discussion with a friend in work. He was left an inheritance recently. Has cleared his mortgage and has just shy of £100k sitting in the bank. Nice pot to have in the bank, but for me, unless it is put to good use it isn't going to make much of an impact long term. I'd want to make that money do as much as possible in order to eventually get me into retirement earlier but he's happy to put it into a low risk savings account and watch the interest come in.

I'd be more inclined to invest in property. A few friends of mine are heavily into property investment, and use as little of their own money as possible to buy property with mortgages and have as many rental incomes as possible coming in. Not sure I'd have the cajones for that but I would certainly buy 2 houses for rental purposes. He could pay off the mortgage within about 15 years and from there on it's clear profit, even if he never sold the house again.

Neither of us would have the balls to get into stocks etc, lol.

So is there a right answer?
 
Property can make you money but can also take a fair bit of your time too. So may not be for everyone. Sometimes there is more to life and enjoying the now than making the most you can in terms of money.
Your friend needs to get some proper advice on what is best for them to do with the money since it will be different for each of us.
 
True, but if it's making a solid income then at worst you could pay a management company to take care of it.

From the rough calculations I made he could bring in an income of about £2k a year per house now and closer to £4k each once the mortgage was cleared.

That's an extra £8k per year after tax to top up his pension. Not to be sniffed at, (bearing in mind that his current salary is around £23k a year gross).

I know from my own experience of renting out a property that management companies around here will look after all the hassle for about 8-9% of the rent so it's still doable. I don't see any more reliable way to bring in that kind of income long term.

Plus when he's older if it's becoming a nuisance he can always sell it off again. Property values are low now so it's not a bad time to buy.
 
BTL mortgage laws change soon, might not be worth the hassle. Stocks are dropping & most investors have stopped. Under the bed gives you more returns that the bank. With that if I had that to invest I would put it into a classic car or premium bonds.
 
I'd want to make that money do as much as possible in order to eventually get me into retirement earlier but he's happy to put it into a low risk savings account and watch the interest come in.

My brother has mucked about with rental for years and is getting out of it, I think it's possibly not a good time to be thinking about this.

Do you have a good financial advisor?

:)
 
My brother has mucked about with rental for years and is getting out of it, I think it's possibly not a good time to be thinking about this.

Do you have a good financial advisor?

:)
It's not me that has the cash sadly. Just been having a debate with a colleague.

Even if not property, I think he should be investing it in some way other than a savings account.
 
My brother has mucked about with rental for years and is getting out of it, I think it's possibly not a good time to be thinking about this.

Do you have a good financial advisor?

:)
There are some significant tax changes coming if you're a loan-to-let landlord, i.e you need to borrow to buy. But if you buy outright things are still good IMHO. I have a modest portfolio (in the Southampton-Winchester-Chichester triangle) and I am yet to see any property left vacant for more than a few weeks - there just isn't enough housing to go round.
 
There's a lot to be said for cash at the moment. Boring but safe.
There's lots of chatter "out there" about housing bubbles, a new recession, deflation and all the other cheery Monday morning stuff.
 
Runandgo in the 3.15 at Doncaster
 
They should be able to buy a house out right for that which is the best way for first time landlords. If they like the work then they simply borrow on that house to buy the next
 
They should be able to buy a house out right for that which is the best way for first time landlords. If they like the work then they simply borrow on that house to buy the next


Thats what im doing, safer without borrowing to see how it works and if its for us, well im building a house and then will rent.
 
They are in the position to buy outright, but my 2 friends who own 5 or 6 properties each reckon you're better to use the bank's money to maximise your buying power.

As I said, if one of them had £100k in cash, they would probably put down £20k each on 5 £60k houses. Keeping the mortgage low enough for the rent to cover it with a bit to spare. So for the period of the mortgage the rent pays the bills with a bit to spare, after the 15 mortgages end they have 5 paid off houses with rental income rolling in.

For me, all those mortgages would scare me. I'd probably do what @Lizard said and buy 1 as a test run.
 
They are in the position to buy outright, but my 2 friends who own 5 or 6 properties each reckon you're better to use the bank's money to maximise your buying power.

As I said, if one of them had £100k in cash, they would probably put down £20k each on 5 £60k houses. Keeping the mortgage low enough for the rent to cover it with a bit to spare. So for the period of the mortgage the rent pays the bills with a bit to spare, after the 15 mortgages end they have 5 paid off houses with rental income rolling in.

For me, all those mortgages would scare me. I'd probably do what @Lizard said and buy 1 as a test run.
That works now because you can claim tax relief on the interest portion of the mortgage. But that is being phased out over the next 4 years and being replaced with a basic rate tax credit. Assuming your friend is in the upper or additional tax bracket, it will disadvantage him.
 
What about setting up a company for it? Then your personal income doesn't come into it.
 
What about setting up a company for it? Then your personal income doesn't come into it.
Yes, you can go down that route which has significant tax benefits but would also have implications for the loans on offer. Other factors may be relevant as well (business premises?) but yes, this is the preferred route for those considering this income stream.
 
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Didn't realise that about the tax rules.

I have a rental property myself but it's in Ireland and the tax relief rules still apply.
I can only speak for England - not sure how it is going to apply elsewhere. Just to be clear though this is being phased in between now and 2020 (in England) so I expect quite a few landlords are currently unawares.
 
Aren't they bringing in some extra allowances to offset it a bit? Might be wrong.
 
They are in the position to buy outright, but my 2 friends who own 5 or 6 properties each reckon you're better to use the bank's money to maximise your buying power
You can make good money, but you can also lose good money to. 1St time landlords often make a lot of assumption that can be badly wrong and really hurt in the pocket, such as it might take 6 months to let, need unexpected repairs, get a bad tenant, etc

All those things can cause really problems if you are relying on the rent to cover a mortgage
 
True.

I've been fortunate with the house I have, first tenant I has was a nightmare, but the guy I have now has been in 2 years and is a great tenant.

I must admit I would be tempted to buy another if I had the money. There is huge demand for rental property in Ireland at the minute.
 
Yep, rental is an excellent investment as long as you allow for the risks and don't think it is easy money
 

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