Using £400k to generate c.£5k per month

[Inspectorclueso]

Obviously I am asking for a 'friend'.

So, just after views. Increasingly disillusioned with corporate life, so planning to bale. c. 50 yrs old, still have some responsibilities, so could do with about £5k per month to top up other entirely passive income. (Early Pension, rent on 1 property mainly). Depending on level of risk, have some funds to invest up to £400k unincumbered.

I'm thinking about developing some interests more seriously into a business and top of the list are:

- Car dealing (doing it properly, i.e. insurance, registered with DVLA / HMRC, Finance offering, Warranty, Auction account etc.) I am semi rural so could at least start from home - no problem with up to 10 cars being here. Feels like relatively low investment, but potentially high effort and not passive. And I'm not overlooking the strangers turning up at home issue - would be very selective on the cars traded.

- HMO / Professional room lets. High investment, but would 'leverage'. More passive (not fully of course). Potential capital growth and monthly cashflow.

- Property purchase and renovation. May look at this on a selective basis - I've done a few, tax and costs are an issue now, feels like this is least passive and most risk.

- Business purchase / creation. For example, looking at a self storage business...doing the diligence of course.

- I am running a few income lines from my current industry, so before someone says develop what you've always done, that's also on the cards, but won't be full time, I don't think.

Any other ideas / views welcomed and also feel free to reality check on a 15% return from £400k....Thx.

[macron]

Yeah 15% is going to involve some risk. HMOs at age 50 with the constant tinkering/ fixing/ fktards you get? No thanks. Student lets similar maybe but 15% seems challenging tbh, not forgetting the upcoming renter's rights bks and what you buy now sensibly would comply, or you'll end up selling, like so many LL's currently are.

[andyb28]

Personally, I would stay well away from HMO's.

Commercial property is where I would look.
Or buy a smaller but well established company doing something you find interesting.

[paddy1970]

£5k/month = £60k per year. From £400k, that equates to 15% annual return.
That is ambitious if you want true passivity (as most “passive” investments return 3–8%).

15% is possible, but not without some form of leverage or running a business....unless you want to consider speculative high risk investment.

[Inspectorclueso]

Thanks for replies so far. Just to clarify, I'm not overly worried about the income being passive or not....tbh I like working. The caveats being, when I am in control, see effort linked to reward and have a modicum of interest in the sector or product.

[loskie]

you suggest car dealing up to 10 cars from home:rural.

Would you need planning permission for that if changing what is a dwelling to a business?

[StevieBee]

Tread very carefully Inspector!

A good friend of mine found himself in a similar position to you with a similar amount of spare cash (actually a bit more) at a similar age. A combination of daft decisions and some bad luck led him to loosing the lot and at 63, he's desperately trying to re-start his career when most are winding down theirs. Not a pleasant thing to see.

But....

Inspectorclueso said:

Increasingly disillusioned with corporate life, so planning to bale

As mentioned already, it's highly unlikely that you'll find anything passive that generates the revenue you seek so you're going to need to start up, or buy and run a business. So you need to keep in mind the risk that in baling out of corporate life, you may end up back in corporate life but one that is much harder to extract yourself from.

I would suggest you apply some introspection to determine what exactly you don't like about corporate life now so that you can avoid those aspects in the future. You may well find this is one of the key things that shapes your decisions.

Inspectorclueso said:

I am running a few income lines from my current industry, so before someone says develop what you've always done, that's also on the cards, but won't be full time, I don't think.

Well, I'd suggest that the most successful business are those that someone started in an industry they already knew. Starting something or entering into something in something you know nothing about is exceptionally risky and even if you manage that risk, can take much longer to build up any head of steam.

My friend sold his highly successful recruitment business and started a new business making 'surfer dude' type bangles and bandanas and also thought he could become an animator and financed a stupid amount of money on a kids TV series which went nowhere. In fairness, had either of them panned out, he could have made a great deal of money but these were things he had no experience in, so no contacts or understanding of the nuances that applied. He didn't know what he didn't know!

So I'd be looking at what you do know and build from there.