What to invest in once property portfolio is sold

[gregs1959]

Hello

Firstly I’d love to thank anyone who takes the time out to give any advice....

I’m 62 and other half is 54..No pension ( well receiving £145.00 month) wife has a small council pension from yrs ago. Probably has £30,000 in it .

Kids all grown up and house is paid for. We are about to complete on selling a large chunk of our portfolio and would welcome any ideas where to invest.
Currently have about £90,000 in cash
Our combined isa have £180,000 ( Fundsmith £70,000) and ( £110,00 Bushveld Minerals) ( yes it’s a lot in Bushveld but I’m convinced they will come good.... Not yet used our allowance for this year.
Just opened a sipp each with £2,880 ( 20/21)

After the sale will still have around £50,000 rental income from portfolio...

Post sale £900,000. The question is what to do with it ? Will probably be needing £25,000 year out of the pot certainly over the next 15yrs.

Speak to a IFA or go it alone ... It would be nice to invest and maybe preserve the capital at least and earn a little income/ growth

1) Max out this yrs isa £40,000 and put in Fundsmith.
2) Max out Sipp £5,760
3) Dividend shares ? If so which ones...
4) Different funds ? Been looking at Vanguard , Scottish Mortgage, ( there’s so many really)

Please don’t think I’m blowing my own trumpet I’ve worked bloody hard for this over the last 30yrs.

Thanks again .

[Tim330]

https://www.hl.co.uk/funds/fund-discounts,-prices-...

I helped my father diy invest his 25% cash lump sum a few years ago. I think he put a quarter of that into the above fund which has paid a steady monthly income.
Nothing wrong with Fundsmith, I hold some in my isa and sipp (I'm 39) but I think some diversification would be sensible.

[Throttle Body]

I would advise you to get advice from an IFA. There doesn't seem to be any way to get a risk-free return, these days.

[anonymous-user]

The first place I would start is the ONS life expectancy calculator.

Your 62 gives a 1 in 4 chance of getting to 94

Your missus' 54 gives her the same, but with a slightly higher average of 87.

I would then reframe your figures with these timescales as a reasonable case scenario. Bookend it with what you want to be left in the account when you inevitably pop it - e.g. are you planning to leave a legacy, do you plan to pay for your own care, will your children/partner look after you etc?

Once these are answered you have a better picture of what you need and what you require to get there.

My approach is effectively investments spread over circa 20. accumulation focussed funds (you may be better with income) that focus on three core strategies: medium term, stable growth equities and property (e.g. US, Europe, traditional sectors), growth/contested sectors (e.g. Pharma, Biotech, Natural resources/metals/wood) and Higher risk (Latam, India). But I am operating over a long time horizon and sadly further from retirement.

I try to limit exposure, so each fund has limited crossover in terms of countries, regions and companies - though this takes some analysis.

Obviously, nothing above is advice, and I'm not qualified to give it, but I'm not convinced that you need it given your obvious capability to build a successful property portfolio and career. Though diversification is key.

[tescorank]

10% Gold 10% Crypto 10% Cash and the rest between funds and blue chips.

[Groat]

Could I ask why you disposed of the properties if they were providing decent income?

[LooneyTunes]

Groat said:

Could I ask why you disposed of the properties if they were providing decent income?

I am curious about that too. Would have expected that getting someone else to manage them (even though it costs a bit) would have still given an attractive return vs liquidating and reinvesting/eating into capital.

[bitchstewie]

I think if you want to do something fairly simple there are worst choices than Fundsmith, Vanguard's range (LifeStrategy or VWRL which is their global tracker) and some in SMT.

At the more cautious end you've got the more cautious LifeStrategy funds and the likes of Troy Trojan and similar "preservation" funds.

Being honest I'm slightly puzzled as the tone I took from your post was one of caution because you've worked hard for this money (quite right too!) but then I spotted you have £110K in a single equity mining vanadium

I mention it because that makes me question your appetite for risk but if you were to ask Terry Smith he'd say forget about investing specifically for income and instead invest for total return and just sell some stocks when you need cash.

Risk appetite matters a lot I think because if you have a million quid and "only" need 2.7% a year from it (£25K) I wouldn't be investing all of it in things that mean you might wake up one day with £600K.

[gregs1959]

Groat/ loony

My property income has in the main been UC / housing benefit. Tenants usually having social problems drink drugs or both. That in itself has always taken time to manage. I've been fortunate to have a Joiner/handy man who has worked full time. He's now 63...

I'm looking forward to having a weekend without the fear of the phone blood ringing because someone lost keys, or sink blocked , door has been broken, tenants causing a nuisance.

Had a good living over the years so decided to sell a number of flats . Still keeping a few which don't give any hassle along with some houses.

Slowly i will eventually pass these down to the kids over the next 5-10 years all being well...

[gregs1959]

bhstewie

Your right about Bushveld minerals yes I am heavily invested in them £110,000... ( I didn't mention I also have £20,00 in my son's ISA now £25,000 and £20,00 in a GIA now worth £40,000 although overall still down a fair bit.

Fund Smith have done me well over the last 3-4 years so that has mitigated my losses somewhat.

The shares are in a mining company producing vanadium which goes in to steel and now storage batteries. I believe these will make me a lot of money over the next few years.

https://www.bbnbigbitenow.com/post/do-newly-announ...

[bitchstewie]

I'd simply suggest ask yourself if you had that money in Bushveld sitting as cash today would you invest it in Bushveld?

Don't get too attached or focus too much on recovering from a loss if you're sitting on a loss.

Personally I'm not a fan of individual stocks because I know my own stock picking abilities and yours might be better but for most people I think funds or trusts or etfs are a more sensible option

[98elise]

LooneyTunes said:

Groat said:

Could I ask why you disposed of the properties if they were providing decent income?

I am curious about that too. Would have expected that getting someone else to manage them (even though it costs a bit) would have still given an attractive return vs liquidating and reinvesting/eating into capital.

Property will only yield about 5%. You can get they from a RIET without hassle.

We have 50/50 property vs stocks and shares and our S&S beat the property investments jphands down every year. Then there is the tax advantages on SIP and ISA investment vs the punitive taxes on property.

We're also liquidating (or we're before Covid) our BTL property and looking for better returns.

[DonkeyApple]

gregs1959 said:

Hello

Firstly I’d love to thank anyone who takes the time out to give any advice....

I’m 62 and other half is 54..No pension ( well receiving £145.00 month) wife has a small council pension from yrs ago. Probably has £30,000 in it .

Kids all grown up and house is paid for. We are about to complete on selling a large chunk of our portfolio and would welcome any ideas where to invest.
Currently have about £90,000 in cash
Our combined isa have £180,000 ( Fundsmith £70,000) and ( £110,00 Bushveld Minerals) ( yes it’s a lot in Bushveld but I’m convinced they will come good.... Not yet used our allowance for this year.
Just opened a sipp each with £2,880 ( 20/21)

After the sale will still have around £50,000 rental income from portfolio...

Post sale £900,000. The question is what to do with it ? Will probably be needing £25,000 year out of the pot certainly over the next 15yrs.

Speak to a IFA or go it alone ... It would be nice to invest and maybe preserve the capital at least and earn a little income/ growth

1) Max out this yrs isa £40,000 and put in Fundsmith.
2) Max out Sipp £5,760
3) Dividend shares ? If so which ones...
4) Different funds ? Been looking at Vanguard , Scottish Mortgage, ( there’s so many really)

Please don’t think I’m blowing my own trumpet I’ve worked bloody hard for this over the last 30yrs.

Thanks again .

I would say that if you're 62 and in a situation of having no pension but a £50k income plus a large pool of cash that the most lucrative play is to pay £40k of your annual income into a SIPP and claim back all the tax while living off the cash pool. That would be step one as it gives you an enormous annual return for zero risk.

The next thing is that you obviously don't want to be sitting on £900k of cash. Firstly it is only going to fall in value and secondly there are risks however small unless you open numerous accounts etc. So, as you discuss above, you want to design a high quality investment portfolio for the bulk of that money and hold it with a broker who will permit you to cross positions in that GIA over into your wrappers without incurring full market costs.

You have that extremely high risk and speculative position in a single stock. That can go to zero any day but it represents well under 10% of your net worth and you clearly receive enjoyment from that crazy gamble so I don't see any particular harm. If it went to zero tomorrow it wouldn't change your quality of life and that's the big test that most small cap punts fail on. I certainly wouldn't be buying any more or palming more of it off onto your children.

As an extremely crude basis you probably want to consider one investment portfolio that is spread over a GIA and a SIPP where each year you migrate assets from the GIA into the SIPP. You can work out the best rate for you as it will be generally defined by the amount of taxable income and the wrapper limits. By all accounts those look to be £50k and £80k respectively.

You can also easily work out a good quality portfolio as you've already shown you can do that. A bit more diversification and obviously no penny share punts. You have a large enough pool that where you are uncertain between two quality funds you can do both which is another huge advantage that you have.

Finally, you just need to settle on the rate at which you convert the cash into the investment portfolio. You probably want to lump sum a pretty solid percentage to start with and then settle on a large monthly rate. For example, £250k straight in and then £10-20k a month. This part is all about trying to hedge out some timing risk as a three year cycle is generally about the sweet spot.

[DoubleSix]

DonkeyApple said:

I would say that if you're 62 and in a situation of having no pension but a £50k income plus a large pool of cash that the most lucrative play is to pay £40k of your annual income into a SIPP and claim back all the tax while living off the cash pool. That would be step one as it gives you an enormous annual return for zero risk.

The next thing is that you obviously don't want to be sitting on £900k of cash. Firstly it is only going to fall in value and secondly there are risks however small unless you open numerous accounts etc. So, as you discuss above, you want to design a high quality investment portfolio for the bulk of that money and hold it with a broker who will permit you to cross positions in that GIA over into your wrappers without incurring full market costs.

You have that extremely high risk and speculative position in a single stock. That can go to zero any day but it represents well under 10% of your net worth and you clearly receive enjoyment from that crazy gamble so I don't see any particular harm. If it went to zero tomorrow it wouldn't change your quality of life and that's the big test that most small cap punts fail on. I certainly wouldn't be buying any more or palming more of it off onto your children.

As an extremely crude basis you probably want to consider one investment portfolio that is spread over a GIA and a SIPP where each year you migrate assets from the GIA into the SIPP. You can work out the best rate for you as it will be generally defined by the amount of taxable income and the wrapper limits. By all accounts those look to be £50k and £80k respectively.

You can also easily work out a good quality portfolio as you've already shown you can do that. A bit more diversification and obviously no penny share punts. You have a large enough pool that where you are uncertain between two quality funds you can do both which is another huge advantage that you have.

Finally, you just need to settle on the rate at which you convert the cash into the investment portfolio. You probably want to lump sum a pretty solid percentage to start with and then settle on a large monthly rate. For example, £250k straight in and then £10-20k a month. This part is all about trying to hedge out some timing risk as a three year cycle is generally about the sweet spot.

Rental income is not relevant UK earnings.

[Mr Pointy]

DonkeyApple said:

As an extremely crude basis you probably want to consider one investment portfolio that is spread over a GIA and a SIPP where each year you migrate assets from the GIA into the SIPP. You can work out the best rate for you as it will be generally defined by the amount of taxable income and the wrapper limits. By all accounts those look to be £50k and £80k respectively.

The OP can only migrate 2x £2880 a year into a SIPP so it's not going to dent £900k very much. Even hoovering out 2x £20k a year into an ISA is going to take 23 years to get his GIA funds moved & that's assuming they don't increase in value.

[LooneyTunes]

gregs1959 said:

Groat/ loony

My property income has in the main been UC / housing benefit. Tenants usually having social problems drink drugs or both. That in itself has always taken time to manage. I've been fortunate to have a Joiner/handy man who has worked full time. He's now 63...

I'm looking forward to having a weekend without the fear of the phone blood ringing because someone lost keys, or sink blocked , door has been broken, tenants causing a nuisance.

Had a good living over the years so decided to sell a number of flats . Still keeping a few which don't give any hassle along with some houses.

Slowly i will eventually pass these down to the kids over the next 5-10 years all being well...

I can see the appeal of less hassle, but always think there's a lot to be said for hard assets if you can find a way to manage (or get them managed) effectively. Groat's far more expert on this front when it comes to property!

98elise said:

LooneyTunes said:

Groat said:

Could I ask why you disposed of the properties if they were providing decent income?

I am curious about that too. Would have expected that getting someone else to manage them (even though it costs a bit) would have still given an attractive return vs liquidating and reinvesting/eating into capital.

Property will only yield about 5%. You can get they from a RIET without hassle.

We have 50/50 property vs stocks and shares and our S&S beat the property investments jphands down every year. Then there is the tax advantages on SIP and ISA investment vs the punitive taxes on property.

We're also liquidating (or we're before Covid) our BTL property and looking for better returns.

Your 5% is rental yield against current value? I daresay there are some on here who bought 20 years ago (seemingly always the best time to buy!) who have seen material increases in house prices and hence are seeing much greater returns (i.e. that property someone paid £70k for but is now worth £200k will see rents aligned with it's current value rather than original purchase price)? Put it in a REIT and you'll only get your [5%] on whatever you have invested. Or am I missing something?

Edited by LooneyTunes on Saturday 10th April 11:57

[swanseaboydan]

I understand selling portfolio- I’ve been offloading the last year - less money coming in monthly but less hassle, fewer phone calls .
Post covid and brexit I think tax will get tougher for landlords - low hanging fruit for the treasury, also not having kids I plan to enjoy spending money rather than handing it over to the government in taxes when I do croak .
I’m no expert and this is just my take on things

[Mr Pointy]

OP: with £50k a year rental income & only needing to pull another £25k a year out of the £900k pot it's possible that your biggest problem is going to be around IHT. If you invested the £900k & took out just 3% a year that's £27k you'll die with £900k in the pot, & probably much more given that even a conservative fund is going to return 3% (I accept the numbers are crude & don't allow for inflation etc).

Have a look here:
https://www.pistonheads.com/gassing/topic.asp?h=0&...

[Groat]

gregs1959 said:

Groat/ loony

My property income has in the main been UC / housing benefit. Tenants usually having social problems drink drugs or both. That in itself has always taken time to manage. I've been fortunate to have a Joiner/handy man who has worked full time. He's now 63...

I'm looking forward to having a weekend without the fear of the phone blood ringing because someone lost keys, or sink blocked , door has been broken, tenants causing a nuisance.

That's sad. Did you never work out how to select tenants who weren't a hassle, or find a management company to do everything (like foreign investors have to do)? Or come across another younger handyman?

[Groat]

LooneyTunes said:

Your 5% is rental yield against current value?

......including capital growth?

You'd almost have to work at it to 'make' as little as 5% with income and growth added together unless you've bought something or somewhere really stupid or you're very unlucky, and I don't think the OP has done or is.