Looking for inspiration. Approx £70k to invest

[AllyBee]

Hello All

I don't normally post on this forum, and hope its not bad form, but I'm looking for ideas on what/where to invest approx. £70k. Some background I'm 43, work full time in a pretty well paid job (Java web dev, don't love it but don't hate it), own my own home with no mortgage. I don't really want to risk the capital and would like to invest it in something fairly safe, but I do quite like the idea of working for myself, but don't really have much of an idea of doing what.

One fairly obvious idea I have is to buy a Buy-to-Let property. I know the recent changes in tax law and stamp duty make this some what less appealing, but I think I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600 a month (not near where I live). If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Also I'd love to hear any other ideas of what to do with the money.

Thanks.

[dazwalsh]

Coming from a Btl background its a sound plan, although be realistic with your yield calcs, use a 10 month occupancy to account for any voids, and on top of the recent changes to the PRS, there will be a letting agents fees ban on the way which will be interesting to see. Im assuming the fees for landlords will be hiked to compensate so if your going fully managed beware of that.

[technodup]

AllyBee said:

I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600

The most obvious pitfall is having a mortgage.

In many areas you can find property for £35-40k which will rent at close to £400. Two of them and you're nearly 33% up on your £600, with no payments to worry about.

Capital growth not as big obviously, but in 3 or 4 years your rent buys you another.

[ex1]

AllyBee said:

Hello All

I don't normally post on this forum, and hope its not bad form, but I'm looking for ideas on what/where to invest approx. £70k. Some background I'm 43, work full time in a pretty well paid job (Java web dev, don't love it but don't hate it), own my own home with no mortgage. I don't really want to risk the capital and would like to invest it in something fairly safe, but I do quite like the idea of working for myself, but don't really have much of an idea of doing what.

One fairly obvious idea I have is to buy a Buy-to-Let property. I know the recent changes in tax law and stamp duty make this some what less appealing, but I think I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600 a month (not near where I live). If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Also I'd love to hear any other ideas of what to do with the money.

Thanks.

You will be lucky to have much left to overpay based on a flat returning £600pm on £120k with a £70k deposit. Unless your going to manage it yourself then you will be getting a very poor return given the high turnover of that market (1bed flat City center) and the fact you'll be paying 20% tax on your mortgage payments even if you dont make a profit! The big appeal of BTL was leverage and capital growth and I cant see you getting much of either.

£3250 - Mortgage
£600 - Agents Fees
£60 - Gas Cert
£120 - Insurance
£250 - Service Charges
£150 Council tax for months without tenants
£250 Wear & tear
£1000 - Income Tax

Get one less than perfect tenant over the 25 years and your asset could quickly turn into a liability. Lots of much more tax efficient places to put your cash.

[jonah35]

You either dont mind risking the capital or you do mind. Which is it? A btl places ypur capital at risk.

[DSLiverpool]

Off the wall suggestion - buy arcade machines and rent them out for weddings / parties etc sell them, play them, place them.
In Essex that's bound to work (may not work) - I have it pencilled in for next year in my area.

[strattonkillick]

AllyBee said:

Hello All


If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Overpaying on the mortgage would not affect your tax liability, as the profit that you make for tax is based on the interest that you pay. Repayments of capital are separate to this.

[Mr Overheads]

I would bung £20k in a Fund & Share ISA this week before tax deadline and another £20k in next tax years ISA next week. Remaining £30k into pension if you haven't got a decent one and government will add at least £7.5jk in a few weeks depending on your personal tax circumstances.

On the pension, put £1k of the £30k in a SIPP this week (in very simple terms, putting anything into a SIPP allows you to backdate contributions in a future tax year, but if you put in nothing you can't use that year for backdating). The other £29k take advice on your personal tax allowances i.e there are tax limits so you don't contribute more than allowed.

Don't buy individual shares, buy a range of Funds (Infrastructure, Global, Americas, Far East, Japan, Oil, Water, Tech, Biotech etc) to diversify risk.

Personally I use Hargreaves Lansdown. I'm aware their fees are slightly higher but I like their fund selection tools (Wealth 150 etc)

Whatever is left after pension contribution buy a used car that will at least hold it's value long term. e.g. Lotus Elise S1, BMW Z4M and have some fun, this is PH after all.

[droopsnoot]

Mr Overheads said:

I would bung £20k in a Fund & Share ISA this week before tax deadline

Isn't that too much for this tax year?

[Mr Overheads]

droopsnoot said:

Isn't that too much for this tax year?

Yes £15240 this year. Well spotted, just testing you ;-)

Also to add to my thread. The £20k for next year I would drip feed into market to take advantage of peaks and troughs i.e. £1,667 per month

[Hoofy]

DSLiverpool said:

Off the wall suggestion - buy arcade machines and rent them out for weddings / parties etc sell them, play them, place them.
In Essex that's bound to work (may not work) - I have it pencilled in for next year in my area.

I think those magical selfie mirrors could be a good one for weddings etc. People are so obsessed with themselves these days.

[edc]

Pension gets you tax relief. So whilst you are not immune to movement in whatever your funds or investments are, you are up almost straight away with the tax relief. I think you are just now too old for a lifetime ISA.

[AllyBee]

Thanks very much for the replies. definitely some food for thought there. Thanks for putting the figures up, when you look at it like that then maybe its not such a good idea.

I've already got some money ear-marked for a stocks and shares ISA, and also a pension from work, but I've book-marked this and will look into some other options.

Also thanks for the gaming machine ideas, I'm not much of a computer games fan, and the thought of lugging machines all around the place does not really appeal either.

[Mr Overheads]

AllyBee said:

Thanks very much for the replies. definitely some food for thought there. Thanks for putting the figures up, when you look at it like that then maybe its not such a good idea.

I've already got some money ear-marked for a stocks and shares ISA, and also a pension from work, but I've book-marked this and will look into some other options.

Also thanks for the gaming machine ideas, I'm not much of a computer games fan, and the thought of lugging machines all around the place does not really appeal either.

Even if you decide not to invest in an ISA long term, it can't harm to at least bung this years allowance in this week before the deadline. Can withdraw it next week with no penalty if you decide not to stick with it.

[AllyBee]

Mr Overheads said:

Even if you decide not to invest in an ISA long term, it can't harm to at least bung this years allowance in this week before the deadline. Can withdraw it next week with no penalty if you decide not to stick with it.

Thats today isn't it.

[Mr Overheads]

AllyBee said:

Mr Overheads said:

Even if you decide not to invest in an ISA long term, it can't harm to at least bung this years allowance in this week before the deadline. Can withdraw it next week with no penalty if you decide not to stick with it.

Thats today isn't it.

Yep

[98elise]

ex1 said:

AllyBee said:

Hello All

I don't normally post on this forum, and hope its not bad form, but I'm looking for ideas on what/where to invest approx. £70k. Some background I'm 43, work full time in a pretty well paid job (Java web dev, don't love it but don't hate it), own my own home with no mortgage. I don't really want to risk the capital and would like to invest it in something fairly safe, but I do quite like the idea of working for myself, but don't really have much of an idea of doing what.

One fairly obvious idea I have is to buy a Buy-to-Let property. I know the recent changes in tax law and stamp duty make this some what less appealing, but I think I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600 a month (not near where I live). If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Also I'd love to hear any other ideas of what to do with the money.

Thanks.

You will be lucky to have much left to overpay based on a flat returning £600pm on £120k with a £70k deposit. Unless your going to manage it yourself then you will be getting a very poor return given the high turnover of that market (1bed flat City center) and the fact you'll be paying 20% tax on your mortgage payments even if you dont make a profit! The big appeal of BTL was leverage and capital growth and I cant see you getting much of either.

£3250 - Mortgage
£600 - Agents Fees
£60 - Gas Cert
£120 - Insurance
£250 - Service Charges
£150 Council tax for months without tenants
£250 Wear & tear
£1000 - Income Tax

Get one less than perfect tenant over the 25 years and your asset could quickly turn into a liability. Lots of much more tax efficient places to put your cash.

A 50k mortgage is not going to be 3k. I've just taken out an 80k mortgage and its about £200 per month, so about £2400 pa. my BTL's were all intially 120-130k properties on 75% ltv. let at £650pcm with mortgages at a about £325pcm. The yields were 6-7% which means the ROI on the original cash investment was 12-14%.

A few years later the properties would rent for £850 pcm, and the properties are worth about 40% more than I paid. I don't bank on capital growth though.

[DennisCooper]

Hi,

There's a whole host of potential ways to invest the money, it's down to you to look at each and decide if you feel the 'risk' is worth it for the potential return you'd ideally like. So far, it sounds as though Property is your preferred route, which is fine if that meets your risk criteria you are comfortable with.
Within the UK, there's still various risks and pitfalls as a fundamental aspect and they will change according to such things as location, residential or commercial property, freehold/leasehold etc etc. For me, I am very interested in investing in more properties, but BTL doesn't interest me one bit and I have my own strategy for what I'm going to do. Some good advice so far with the 'Property' route and no doubt plenty more available here and on other quality Financial based websites.

Other potential routes are many and varied;

1. Open a business
2. Buy an existing business.
3. Invest in an existing business.
4. Invest in a crowdfunding startup/business, so that you get a potential return.
5. Invest in Stocks/Shares
6. Lend your money directly to enterprises you find worthwhile.

Each of those can have subsets of what to do and how to do things all in relation to your attitude to risk. Some are 'relatively' low risk and other's are 'relatively' high risk, the reason they're relative is that it'll be personal to you - others may think what's low risk to them is higher risk to someone else/you and vice versa.

There's some good threads on this forum where others have asked very similar things where they're in very similar circumstances to you. Have a look and read around.

Cheers, Dennis!

[ex1]

98elise said:

ex1 said:

AllyBee said:

Hello All

I don't normally post on this forum, and hope its not bad form, but I'm looking for ideas on what/where to invest approx. £70k. Some background I'm 43, work full time in a pretty well paid job (Java web dev, don't love it but don't hate it), own my own home with no mortgage. I don't really want to risk the capital and would like to invest it in something fairly safe, but I do quite like the idea of working for myself, but don't really have much of an idea of doing what.

One fairly obvious idea I have is to buy a Buy-to-Let property. I know the recent changes in tax law and stamp duty make this some what less appealing, but I think I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600 a month (not near where I live). If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Also I'd love to hear any other ideas of what to do with the money.

Thanks.

You will be lucky to have much left to overpay based on a flat returning £600pm on £120k with a £70k deposit. Unless your going to manage it yourself then you will be getting a very poor return given the high turnover of that market (1bed flat City center) and the fact you'll be paying 20% tax on your mortgage payments even if you dont make a profit! The big appeal of BTL was leverage and capital growth and I cant see you getting much of either.

£3250 - Mortgage
£600 - Agents Fees
£60 - Gas Cert
£120 - Insurance
£250 - Service Charges
£150 Council tax for months without tenants
£250 Wear & tear
£1000 - Income Tax

Get one less than perfect tenant over the 25 years and your asset could quickly turn into a liability. Lots of much more tax efficient places to put your cash.

A 50k mortgage is not going to be 3k. I've just taken out an 80k mortgage and its about £200 per month, so about £2400 pa. my BTL's were all intially 120-130k properties on 75% ltv. let at £650pcm with mortgages at a about £325pcm. The yields were 6-7% which means the ROI on the original cash investment was 12-14%.

A few years later the properties would rent for £850 pcm, and the properties are worth about 40% more than I paid. I don't bank on capital growth though.

OP was talking about repayment and as a first time landlord would struggle to get the 3% interest only your quoting. The yields your quoting are gross and therefore largely irrelevant and your increased rent is an assumption and conveniently ignores any future rate increases.

Most people including some much pretty big investors I've spoken too have not grasped the impact of the revised BTL income tax. At 75% leverage with a gross of 6/7% you will be lucky to breakeven.

Assuming you are taxed at 40% here are your actual numbers.

Rent £6500 - Assuming 10mths
£3900 - Mortgage
£600 - Agents Fees
£60 - Gas Cert
£120 - Insurance
£150 Council tax for months without tenants
£250 Wear & tear
£1350 - Income Tax

Annual Profit = £70!

I'm sure you think you can save a bit here by not using an agent or you wont have rent free periods because your place is better than the next place etc but the fact is its a very risky model.

1% rise in intrest rates and you'll be looking at a £1k loss pa, combine that with a reduction in rent and you are in trouble.

Risk for reward make BTL a very difficult choice these days hence why I wouldn't advise it for the OP unless you are willing to get your hands dirty or gamble on capital growth outweighing the significant risks.

[ex1]

AllyBee said:

Hello All

I don't normally post on this forum, and hope its not bad form, but I'm looking for ideas on what/where to invest approx. £70k. Some background I'm 43, work full time in a pretty well paid job (Java web dev, don't love it but don't hate it), own my own home with no mortgage. I don't really want to risk the capital and would like to invest it in something fairly safe, but I do quite like the idea of working for myself, but don't really have much of an idea of doing what.

One fairly obvious idea I have is to buy a Buy-to-Let property. I know the recent changes in tax law and stamp duty make this some what less appealing, but I think I've found an area which I can get a decent 1 bed flat for around £120k in a city near a large hospital and University, which would obviously make the target audience 20-30 year olds, that will rent for about £600 a month (not near where I live). If I were to do this then it would mainly be as part of my retirement plan, so my question is can I overpay on the mortgage and effectively make no profit and avoid paying tax at 40%? Am I missing any obvious pit-falls here

Also I'd love to hear any other ideas of what to do with the money.

Thanks.

Might be useful if you gave us a better idea of what your looking to get from it.

On a scale of 1-10 whats your appetite for risk - 10 being the casino!

What do you enjoy and have an active interest in?

What are your financial goals? Retire by 50? Passive Income of £500pm? Lump sum of £100k in 5 yrs?

Some classic cars have appreciated more than property over the past few years and they are tax free? Maybe a punt on something you've always wanted? Running costs can kill this but might be a safe haven while you decide?

Maybe a bit in shares, a bit into a venture/startup and some into a classic?