100K investment question

[steve1]

As per title, I have 100K to invest, but I need a monthly return of about £500 to top up my pension, so my obvious thought was buying a property outright and renting it out.
I realise property investment is not what it used to be, but the need for the monthly return is pushing me this way.

[markbs]

If your looking at property, why not use £100K for deposits and buy, say, three of them instead of one outright? Should be easy enough to get a profit of £500 from three. You'd also get 3x any house price rises (assuming you're in for the long term if you're investing in property at the moment and assuming you think there will be an eventual rise OR you think you can get them below current market rate).

You'd also get 3x the hassle though

[steve1]

Did discuss this with a friend at the weekend, he also suggested buying more than one with mortgages.
I have retired early,(52), for personal reasons, and have a pension with lump sum, so what I'm after is purely a monthly top up for my pension, don't really want the hassle of looking after more than one property, at least with one i can do all the paperwork/maintenance etc myself.
But if someone knows of a better way to get what I want then I will be only too willing to listen, obviously i want to make sure that my capital is fairly secure, and property is something that I'm familiar with, unlike stocks/shares etc.

[Beardy10]

If you want to get £500 net a month form £100k that's 6% after tax (whatever your tax rate is) and costs. Will be very hard to do with property currently unless you buy somewhere where the property market is likely to be depressed for a loooong time.

I'd advise against multiple properties because during any void periods (which you will almost definitely have to start with) you'll be paying out for the mortgage with no rent coming in and it sounds like you are short of income ?

Only even consider it if you have the ability to "absorb" funding those void periods through other savings etc.

You may also find it hard to get a multiple mortgages as the lenders normally look at interest coverage from your normal income/pension.

[randlemarcus]

Not an IFA, so please feel free to compare this advice with that of a monkey, but perhaps looking at purchased annuities might work? Rates for a healthy 55yr old return over that £500 per month, but as I understand it, there's nothing left when you die.

[Beardy10]

randlemarcus said:

Not an IFA, so please feel free to compare this advice with that of a monkey, but perhaps looking at purchased annuities might work? Rates for a healthy 55yr old return over that £500 per month, but as I understand it, there's nothing left when you die.

I'm not an IFA either but that sounds quite good....obviously you'd need index linked.

[2 5HAN]

Again I'm not an IFA and depending on what final outcome you need re the initial 100k investment.

Maybe worth looking at an investment bond. My parents have some of them which have done very well over the past 6 years or so. On a 100k the bond pays you 5k tax free pa and you are allowed to take 25% of any growth out tax free too. Not sure if there is a time limit on this part.
There are tax liabilities but again depending on what your long term goals are you may be able to look.

[Broccers]

If youd like to gamble a small part of it Steve Lloyds shares will either double your money or half in the next 12 months imo.

[blueg33]

I think you should look at a fund manager who has uses venture capital trust structures tio show a tax free return.

I am currently working with one of the larger ones (they are funding some of our projects), they are user friendly with low fees (they have some of my personal money)

If you PM me, I can let you have some contact details

[Beardy10]

blueg33 said:

I think you should look at a fund manager who has uses venture capital trust structures tio show a tax free return.

I am currently working with one of the larger ones (they are funding some of our projects), they are user friendly with low fees (they have some of my personal money)

If you PM me, I can let you have some contact details

Only for the adventurous....even the "low risk" VCT's have a decent amount of risk.

Some of the one's done in the last three or four years were sold as being almost a "risk-free" tax arbitrage and have not performed in line with expectations.

[blueg33]

Beardy10 said:

Only for the adventurous....even the "low risk" VCT's have a decent amount of risk.

Some of the one's done in the last three or four years were sold as being almost a "risk-free" tax arbitrage and have not performed in line with expectations.

This one lends the VCT funds as Senior debt with a guaranteed minimum return. They are very well respected. They also have other funds with different risk profiles

[DS3R]

2 5HAN said:

Again I'm not an IFA and depending on what final outcome you need re the initial 100k investment.

Maybe worth looking at an investment bond. My parents have some of them which have done very well over the past 6 years or so. On a 100k the bond pays you 5k tax free pa and you are allowed to take 25% of any growth out tax free too. Not sure if there is a time limit on this part.
There are tax liabilities but again depending on what your long term goals are you may be able to look.

Investment bonds are touted as tax efficient by the sellers, because you can withdraw the capital over time and as it is treated as exactly that, you pay no tax on those types of withdrawal. However, it has to GROW in order for you to maintain either the original amount, or get a gain, so if you put money in to something that grows at 0% and take out 5% per annum, in 20 years time you have only recouped your original.

You can do the maths if you put the money in to something that loses 5% PA in addition to your own withdrawals too...

The problem with one of these is that rather than buying in to funds directly, you add a wrapper to them, so let us imagine you put money in to a fund that rises 10% PA, you may get 8% thanks to charges.

Not least the 7- 10% commission the advisor will typically get paid up-front.........................

And yes I do have one.

[cymtriks]

steve1 said:

As per title, I have 100K to invest, but I need a monthly return of about £500 to top up my pension,

So you want 6% a year.

steve1 said:

so my obvious thought was buying a property outright and renting it out. I realise property investment is not what it used to be, but the need for the monthly return is pushing me this way.

Why is it "obvious" ?

A house will cost thousands to buy and to furnish. There will be little extras for letting such as smoke alarms and circuit breakers if they they are not already fitted. You will need to pay a letting agent and get insurance. You will need to budget for complete redecoration at some point. You will also need to budget for any little repair that needs doing. Some tenants will do minor jobs themselves but some will either leave a problem to get worse "it's not my house, why should I care" or demand that every little fault is dealt with today "I pay for this and want it put right now or I'm not paying any more"

Then there is the hassle. Some tenants are great and give no trouble. Some will mess you around and vacate the property owing rent and leaving a mess behind.

Oh, and the rent is taxed as unearned income IIRC, i.e. at a higher rate.

The above is based on knowing some landlords socially and looking into letting a house myself a year or so ago.

Good luck, just don't fool yourself that it is an automatic way to easy money.

[NIIKME]

http://www.pistonheads.co.uk/sales/3009614.htm

And morrisons are doing 2 x 4cans of beans for £3.

[Faltz]

Broccers said:

If youd like to gamble a small part of it Steve Lloyds shares will either double your money or half in the next 12 months imo.

Agree with the first half - could double or treble or more...

But would say the downside side is actually you lose the lot... most banks in Europe would probably be technically insolvent if they marked assets to reality rather than fantasy, which in turn would mean wide scale nationalisation of the banking sector across Europe = zero equity value

Going to a casino would probably make an equally compelling "investment" as buying bank shares in this market.

[Robbo66]

cymtriks said:

Why is it "obvious" ?

A house will cost thousands to buy and to furnish. There will be little extras for letting such as smoke alarms and circuit breakers if they they are not already fitted. You will need to pay a letting agent and get insurance. You will need to budget for complete redecoration at some point. You will also need to budget for any little repair that needs doing. Some tenants will do minor jobs themselves but some will either leave a problem to get worse "it's not my house, why should I care" or demand that every little fault is dealt with today "I pay for this and want it put right now or I'm not paying any more"

Then there is the hassle. Some tenants are great and give no trouble. Some will mess you around and vacate the property owing rent and leaving a mess behind.

Oh, and the rent is taxed as unearned income IIRC, i.e. at a higher rate.

The above is based on knowing some landlords socially and looking into letting a house myself a year or so ago.

Good luck, just don't fool yourself that it is an automatic way to easy money.

This. Without Capital Growth, a serious headache.

[Deva Link]

cymtriks said:

Oh, and the rent is taxed as unearned income IIRC, i.e. at a higher rate.

That was done away with many, many years ago.


OP could maybe contact Groak (not sure if he accepts outside investors).

[98elise]

Robbo66 said:

cymtriks said:

Why is it "obvious" ?

A house will cost thousands to buy and to furnish. There will be little extras for letting such as smoke alarms and circuit breakers if they they are not already fitted. You will need to pay a letting agent and get insurance. You will need to budget for complete redecoration at some point. You will also need to budget for any little repair that needs doing. Some tenants will do minor jobs themselves but some will either leave a problem to get worse "it's not my house, why should I care" or demand that every little fault is dealt with today "I pay for this and want it put right now or I'm not paying any more"

Then there is the hassle. Some tenants are great and give no trouble. Some will mess you around and vacate the property owing rent and leaving a mess behind.

Oh, and the rent is taxed as unearned income IIRC, i.e. at a higher rate.

The above is based on knowing some landlords socially and looking into letting a house myself a year or so ago.

Good luck, just don't fool yourself that it is an automatic way to easy money.

This. Without Capital Growth, a serious headache.

On the flip side, I bought my first BTL over a year ago, and its returning 7%. I bought a reasonably modern house that needed a very small mount of work, a few hundred quid, and about a week to sort. I hardly ever hear from the tenant, and so far its just been a few minor things.

We're in the process of buying our second house now, and it will be returning about 7.5% as the rental rates are higher now.

[Zingari]

OK consider this. You have £100k and want to take £500pm = £6k pa. If you discount any interest earned it will take you over 16 years before it is spent! Now find an investment bond or interest account that will give you some interest to offset inflation.

I take it you had to take a lump sum with your pension as a commutation? I can understand people who do this if they need to clear say a mortgage or other debts but purely to bank it and want interest doesn't make sense - why not take the enhanced pension? OK you could snuff it before reaping the eqivalent benefits but so what you're dead and you cant spend it!

I did think about BTL but in reality investing all of your money into one house is not the most efficient way of achieving 'income' you need several properties all mortgaged. As ever this becomes a complete hassle and frankly I couldn't be arsed.

My pension lump sum will (hopefully) be considerable and at present it is not my intention to take it given that adding it to my investments will serve little purpose so will rely on the full pension entitlement. Each to their own I suppose

[otherman]

Basically, you're looking to yield 6%. You could buy a portfolio of the top yield shares, as of May this was
Game Group PLC 8.3%
National Grid PLC 7.2%
Chesnara PLC 6.6%
Interserve PLC 6.4%
RSA Insurance Group PLC 6.2%
Beazley PLC 6.1%
PayPoint PLC 6.1%
Scottish & Southern Energy PLC 5.8%
Catlin Group PLC 5.49%
De La Rue PLC 5.4%

These average to 6.4%

After last week's share price falls the yields will be up from here, probably to about 7%.

Another alternative is Zopa. I'm yielding just under 6% there after fees and bad debt.

An advantage with these compared to BTL is that you have no maintenance tasks to do.