Inheritance - investing for income

Personally, I would invest it in either commercial industrial units (in a part of the country where there is always demand) or in holiday lets in perennial areas.

As an example of each, I invested in a commercial property 12 years ago for £1.15m, and due to rent increases it has gone from around £100k per annum to about £190k per annum, and the property has increased in value to almost £4m.

I'm now thinking of buying a holiday let near me, and have seen a beautiful place for £550k. It generates around £45k a year through a holiday let agency, whilst slowly appreciating in value over the years as it always has done.

In either of those scenarios, the properties are handled by agents and you rarely have to involve yourself.

I wouldn't be touching stocks/shares or other financial investments. Bricks and mortar all the way, but avoiding residential.

Others may have a different opinion.

Fair enough, but there really is no palaver.

You don't get personally involved in these sorts of things, at that level. You have an agent/surveyor recommend which property to purchase (almost always with a commercial tenant already in place), and if you buy it, they handle everything to do with the lease. They collect the rent, and call you every 5 years to ask for permission to renegotiate the rent with the tenant. Professionals will act on your behalf with regards to petty much everything.

Even if you were to invest the money in finance/stock/shares etc, you would probably require to have similar levels of involvement and meetings with advisors and your account manager.

Because with a £500k holiday let or a £1m commercial unit, you will never get a call one day to say "Sorry, your investment just didn't work out and your holiday let has vanished" or "Sorry, your holiday let is now worth £100k as there has been turmoil in the financial markets"

That is obviously a very simplistic explanation, but I'm sure you get the idea. Some people do very well out of financial investments, and some people get burned.

Even if the property market took a bath, it will always rise again over time. You never actually run the risk of losing your investment if it is a property bought it in cash.

Totally agree that the property requires some specialist guidance and advice.

If you want to invent in a holiday let, speak to the biggest and most reputable lettings agency in the market and get some advice from them, and get advice from a local estate agent. You can often buy properties that are already registered and let through a lettings agency. You just buy the property and start receiving the monthly lettings payments.

With commercial property, get yourself a reputable commercial and industrial agent/surveyor and get them to act on your behalf.

A perceived low risk investment can also be viewed as a high risk.

Keeping money in cash/safe bonds will often yield a return less than the rate of inflation. Over 30 years that £1m can become worth significantly less in real terms which might create a big risk for them.

Thanks all

To narrow it down further can she get anything like an annuity at the age of 44? or maybe a long--dated bond?

ETA I might be overthinking this. I've just stuck the figures into an excel sheet and assuming a 2% yield and 3% inflation she will be able to draw down £24k per annum for about 35 years. She has a pension income on top of this so it should be OK.

There are so many variables here (income, pensions, property, savings, dependants etc), so I will only echo what others have said: professional advice will beget more sound and personalised answers. Things to consider in the meantime are expected life events, objectives over time and risk tolerance - so that the person concerned can discuss these rather than ideas for one way ahead.

And that evidently is the difference. I once invested in a major name property fund thinking (1) property seems like a safe bet (2) a big name like that must know what they're doing. But then in 2021 I got a letter saying 'Sorry, we fked up, we're closing the fund, you'll get some money back eventually'. I'm still waiting for the last bit because apparently they can't sell an office block, but even when it arrives it was a very poor investment, taking about 25 years to stagger from £6K to £7K, which I make about 0.6% a year (excluding inflation)

So there are certainly ways not to invest in property.

How i feel today, if someone gave me a million quid i would probably FIRE asap. I'd probably spend a lot (if not all) of the year abroad - somewhere like Spain, Portugal. Life's too short, for some people a million quid in your hand is enough to be the happiest bunny in the world. Obviously YMMV, but if you're not built for it, don't make extra unnecessary work for yourself.

£1M is a life changing sum.

If I was your friend I'd be giving a lot of thought to risk/reward as generally there is no such thing as reward without taking some risk.

Right now you could park the lot in NS&I and it will be completely safe and you'll get 3% with absolutely zero risk.

But it isn't inflation linked.

The most traditional route is stocks and shares where there's a whole spectrum of risk/reward but your friend has to accept that to make anything other than a "savings" interest rate she will have to take some risk.

Ask you friend to imagine a scenario where she's invested the £1M and in six months time she goes to look at what it's worth.

What would she be comfortable seeing and what would make her absolutely freak out?

Personal view is don't listen to anything about property or products where if you decide you want a new car you can't quickly and easily get your hands on the money to do it.

I put half my money in high quality BTL yielding 7%, and half my money into globally diversified equities through Vanguard.

It’s had its up and downs (especially around Covid) but net returns across everything have been around 10% per annum so can’t complain.

I’m happy with that considering everything is boring, low risk and hands off.