What sort of a return can I get on £650k?

[EddieSteadyGo]

bogie said:

Yeah and the GPU and PC kit manufacturers have booming sales and stock prices, thanks to all the hardware sales ...just like the gold rush, the guys selling the shovels made the real money

[supercommuter]

Hoofy said:

On some forums, I see people (with no financial experience) raving about bitcoin like it's going to make them a millionaire overnight, they see the massive fluctuations as opportunities to double their money in a day and don't see that it could easily halve, too.

This 22 year old guy i know is constantly raving about it and how I should lump all my money in it, only to watch it half.

Incidentally he was as 'binary trader' before hahaha

[Dan-Fresh]

thought about Air BnB?
My old man does it when he's off travelling, house worth £650k, made about £45k NET last year and used it a fair bit too.
He does live right on the coast in an area with little to no hotels and lots of tourism (no idea where you are)

Grandad Gaz said:

The wife and I will be retiring and moving up to our place in norfolk either late this year or early next year.

We can't decide whether to sell our current home, probably worth about £650k, or rent it out.

Renting would give us about £23k a year after deducting agents fees, landlords insurance, etc.
Can we do better than that by other means?

Whatever we decide on, we will need a monthly income from it to live on.

Thanks

[Hoofy]

supercommuter said:

Hoofy said:

On some forums, I see people (with no financial experience) raving about bitcoin like it's going to make them a millionaire overnight, they see the massive fluctuations as opportunities to double their money in a day and don't see that it could easily halve, too.

This 22 year old guy i know is constantly raving about it and how I should lump all my money in it, only to watch it half.

Incidentally he was as 'binary trader' before hahaha

Ouch. Dare I ask how much he lost?

When it hit 10k, I noticed people on forums saying it would go back up. Then it went down more.

I'm just gutted that back in 2013 when someone offered to GIVE me a couple of coins to get me to start using them, I turned down his offer.

[supercommuter]

Hoofy said:

supercommuter said:

Hoofy said:

On some forums, I see people (with no financial experience) raving about bitcoin like it's going to make them a millionaire overnight, they see the massive fluctuations as opportunities to double their money in a day and don't see that it could easily halve, too.

This 22 year old guy i know is constantly raving about it and how I should lump all my money in it, only to watch it half.

Incidentally he was as 'binary trader' before hahaha

Ouch. Dare I ask how much he lost?

When it hit 10k, I noticed people on forums saying it would go back up. Then it went down more.

I'm just gutted that back in 2013 when someone offered to GIVE me a couple of coins to get me to start using them, I turned down his offer.

No way he would tell me. I think he just liked telling people he traded forex or was a binary trader. He was on about £18k a year as a junior IT analyst....

[DonkeyApple]

Grandad Gaz said:

The wife and I will be retiring and moving up to our place in norfolk either late this year or early next year.

We can't decide whether to sell our current home, probably worth about £650k, or rent it out.

Renting would give us about £23k a year after deducting agents fees, landlords insurance, etc.
Can we do better than that by other means?

Whatever we decide on, we will need a monthly income from it to live on.

Thanks

Traditionally the investment criteria for someone in their early 60s seeking a retirement income was to create a bond portfolio with the bulk of the funds and live off the income.

Today there is a significant issue with this. Firstly, your low risk govt bonds are yielding bigger all and secondly, your higher yielding corporate bonds are not pricing in the risk properly. We’ve had a decade of very cheap corporate debt, many corporates are going to seriously struggle to maintain debt obligations as borrowing becomes more expensive and normally you’d see yields at the current place in this cycle being much, much higher to reflect this but they are low.

You probably do still want an exposure to bonds but how much is a very difficult question to answer and you’d definitely want to find a good IFA who will base his opinion on your health, what you want to do in retirement as well as what is likely to be quite a big shake out and restructuring of the corporate debt market well within your lifetime.

Traditionally, equities would have been avoided as a good equity portfolio really works on a 20+ year horizon and the average retiree at 60 would typically have been dead before 80. Not so these days so actually this rule isn’t all that relevant today. You can expect to break 90 so at 64 an equity portfolio would be sensible. What you are likely to do is balance it between key index ETFs and individual cyclical and income equities rather than your growth plays.

Tax. Nearly always overlooked but the two areas where the average citizen in the U.K. will make the most money in their life is firstly from buying well and selling well any key property and secondly from paying the right amount of tax.

You must speak to a pension advisor, given your age, as to whether you are missing out on huge tax savings by not putting all of your income into a SIPP wrapper purely to be able to claim back all of your income tax. Wrappers have been limited over the recent years but at your age you could have been in a situation for a long time now that you shouldn’t have been paying any income tax.

The use of a pension wrapper to minimise your tax is probably the key investment that will deliver the best return by a long shot.

You have a place in Norfolk. Norfolk has a strong holiday rental market. Your £650 house sounds too large to achieve a suitable yield and I don’t think using those funds to buy 10 Northern slums is the greatest option but buying a pair of holiday lets that are local to you is likely to be lower risk and also plays into the key advantage of you having excess labour once you retire. You have no need to pay another worker to manage property investments as that is only logical when you are working and earning more than the cost of paying other workers. Once retired it is more efficient to self manage etc.

With regards to property, gearing the asset up 50% doesn’t actually increase your risk significantly but obviously doubles your gross yield. Even though we have taxes increasing to 2020 to prevent interest offset you should catagorically look at whether gearing any property investment would deliver a higher net yeild.

Looking at your existing home, you could take £300k out to achieve a higher yeild and invest that £300k for income via bonds/equities as discussed above but the other key aspect you need to consider is that your £650k asset today currently has no CGT liability but may have once you move to your other property. Whether you sell it of hold it you need to ensure you understand the tax implications.

There is also IHT to consider. You may be under the threshold today but you may be hugely over it in 30 years time. Any investment wrapper must take IHT into consideration at the outset. You may also wish to seriously consider putting property assets into trust to hedge against Labour who will get back into power in your lifetime and will be bringing down heavy taxation on property.

The final bit of information to consider is that very many IFAs are fking idiots. Grubby little salesmen who only aren’t selling windows because they attended a good school and managed just enough to avoid being an estate agent or job recruiter. Speak to more than one and only after a few will you begin to get a feel for spotting the well spoken window lickers versus those who actually listen to your answers and structure their responses based on who you are.

[Grandad Gaz]

DonkeyApple said:

Grandad Gaz said:

The wife and I will be retiring and moving up to our place in norfolk either late this year or early next year.

We can't decide whether to sell our current home, probably worth about £650k, or rent it out.

Renting would give us about £23k a year after deducting agents fees, landlords insurance, etc.
Can we do better than that by other means?

Whatever we decide on, we will need a monthly income from it to live on.

Thanks

Traditionally the investment criteria for someone in their early 60s seeking a retirement income was to create a bond portfolio with the bulk of the funds and live off the income.

Today there is a significant issue with this. Firstly, your low risk govt bonds are yielding bigger all and secondly, your higher yielding corporate bonds are not pricing in the risk properly. We’ve had a decade of very cheap corporate debt, many corporates are going to seriously struggle to maintain debt obligations as borrowing becomes more expensive and normally you’d see yields at the current place in this cycle being much, much higher to reflect this but they are low.

You probably do still want an exposure to bonds but how much is a very difficult question to answer and you’d definitely want to find a good IFA who will base his opinion on your health, what you want to do in retirement as well as what is likely to be quite a big shake out and restructuring of the corporate debt market well within your lifetime.

Traditionally, equities would have been avoided as a good equity portfolio really works on a 20+ year horizon and the average retiree at 60 would typically have been dead before 80. Not so these days so actually this rule isn’t all that relevant today. You can expect to break 90 so at 64 an equity portfolio would be sensible. What you are likely to do is balance it between key index ETFs and individual cyclical and income equities rather than your growth plays.

Tax. Nearly always overlooked but the two areas where the average citizen in the U.K. will make the most money in their life is firstly from buying well and selling well any key property and secondly from paying the right amount of tax.

You must speak to a pension advisor, given your age, as to whether you are missing out on huge tax savings by not putting all of your income into a SIPP wrapper purely to be able to claim back all of your income tax. Wrappers have been limited over the recent years but at your age you could have been in a situation for a long time now that you shouldn’t have been paying any income tax.

The use of a pension wrapper to minimise your tax is probably the key investment that will deliver the best return by a long shot.

You have a place in Norfolk. Norfolk has a strong holiday rental market. Your £650 house sounds too large to achieve a suitable yield and I don’t think using those funds to buy 10 Northern slums is the greatest option but buying a pair of holiday lets that are local to you is likely to be lower risk and also plays into the key advantage of you having excess labour once you retire. You have no need to pay another worker to manage property investments as that is only logical when you are working and earning more than the cost of paying other workers. Once retired it is more efficient to self manage etc.

With regards to property, gearing the asset up 50% doesn’t actually increase your risk significantly but obviously doubles your gross yield. Even though we have taxes increasing to 2020 to prevent interest offset you should catagorically look at whether gearing any property investment would deliver a higher net yeild.

Looking at your existing home, you could take £300k out to achieve a higher yeild and invest that £300k for income via bonds/equities as discussed above but the other key aspect you need to consider is that your £650k asset today currently has no CGT liability but may have once you move to your other property. Whether you sell it of hold it you need to ensure you understand the tax implications.

There is also IHT to consider. You may be under the threshold today but you may be hugely over it in 30 years time. Any investment wrapper must take IHT into consideration at the outset. You may also wish to seriously consider putting property assets into trust to hedge against Labour who will get back into power in your lifetime and will be bringing down heavy taxation on property.

The final bit of information to consider is that very many IFAs are fking idiots. Grubby little salesmen who only aren’t selling windows because they attended a good school and managed just enough to avoid being an estate agent or job recruiter. Speak to more than one and only after a few will you begin to get a feel for spotting the well spoken window lickers versus those who actually listen to your answers and structure their responses based on who you are.

Thanks for taking the time to reply. Much appreciated, with lots to think about!

Regarding our place in Norfolk, worth about £340k, we have had an agent around about holiday lets and at first glance it looked like we would make a fortune from it. However, we would have to spend about £10k on "improving" it to make it look like a holiday home and not like a home someone would live in all year round.
Also, after factoring in cleaners etc, not to mention the extreme high rate of wear and tear, we thought it wasn't really for us.

We shall definitely get some professional advice nearer the time.

Thanks for all the help.

[Wacky Racer]

tescorank said:

low risk-property
med risk-bit coin as they have stabilised
high risk-Brighton to win the premiership next season.

That is high risk

[joyless lobotomised parrot]

What about a Celtic/Bayern/PSG treble to win their leagues?

[V8 Fettler]

DonkeyApple said:

The final bit of information to consider is that very many IFAs are fking idiots. Grubby little salesmen who only aren’t selling windows because they attended a good school and managed just enough to avoid being an estate agent or job recruiter. Speak to more than one and only after a few will you begin to get a feel for spotting the well spoken window lickers versus those who actually listen to your answers and structure their responses based on who you are.

It's farcial that punters have to make life-changing financial decisions where there is a high risk that their professional adviser is an idiot.

How does a punter filter out the idiots?

[EddieSteadyGo]

DonkeyApple said:

The final bit of information to consider is that very many IFAs are fking idiots. Grubby little salesmen who only aren’t selling windows because they attended a good school and managed just enough to avoid being an estate agent or job recruiter. Speak to more than one and only after a few will you begin to get a feel for spotting the well spoken window lickers versus those who actually listen to your answers and structure their responses based on who you are.

Harsh but true

[bitchstewie]

V8 Fettler said:

It's farcial that punters have to make life-changing financial decisions where there is a high risk that their professional adviser is an idiot.

How does a punter filter out the idiots?

I would say do your own homework and trust but verify.

If I was lucky enough to have £650k I wouldn't speak to a single IFA and simply do what they suggested.

I can fully understand the value of an IFA in making sure you're planning financially correctly i.e. you have enough to live off and you're maximising allowances, but once you get down to the nitty gritty of selecting funds I see too many threads online where an IFA seems to have dumped a client into a "box" with whatever providers portfolio's they offer and makes quite a good ongoing return from that.

[croyde]

V8 Fettler said:

It's farcial that punters have to make life-changing financial decisions where there is a high risk that their professional adviser is an idiot.

How does a punter filter out the idiots?

People are always telling me to seek out an IFA and stop making my own financial decisions but when pressed they can never recommend one.

Just try a few and see which one you feel safer with, seems to be the general advice.

How much is that gonna cost me?

[red_slr]

I have one. I only use him for my pension.
I pay base price plus platform charge plus advice charge. Its all a %.

It all adds up to about £1200 IIRC. Same for my wife.
So £2.5k per year for a couple.

Not cheap but I do get, what I think, good returns.
Their online system is also fairly good. I will be stopping the pension payments in a few years when I take early retirement so will need to look at lower cost options then.

I do my own ISAs and other investments etc.

[DonkeyApple]

V8 Fettler said:

It's farcial that punters have to make life-changing financial decisions where there is a high risk that their professional adviser is an idiot.

How does a punter filter out the idiots?

An IFA works for you. He is in your employ.

Most people chose their IFA by just opening the door and letting him come in, make himself at home and just buy whatever he is selling.

But he is an employee and you must treat them like any prospective employee. You need to interview them and interview enough to stand a chance of finding the right employee who is going to work properly for you.

But first you need to know what the job is that they will be doing. You can’t start interviewing for a role if you have not yet defined what that role is.

The landscape is changing rapidly for IFAs as comm is gone and other remuneration types drive completely different behaviour and so it’s never been more important to educate yourself, define the role, set the questions and interview enough to weed out the weak and unsuitable.

The other way to look at this from the perspective of those with average wealth is that you don’t need to buy products from an IFA (most aren’t independent anyway but tied to a product vendor so genuinely cannot offer independent advise just sell what they are regulated to sell) the market for self directed investment products is pretty impressive nowadays but what you do need to buy is the advise on how to diversify and how to utilise all your tax benefits.

It is probably fair to argue, in simplistic terms, that the performance difference between sticking all your money into blue chip index ETFs will yeild the exact same return as paying an IFA to create a complex blended portfolio. But the real key is not per se the underlying investments but ensuring that these assets are held in the most tax efficient manner and that you utilise every wrapper advantage. That is the advice that is catagorically worth paying for as that is what can make you tens of thousands over your retirement.

[sidicks]

DonkeyApple said:

An IFA works for you. He is in your employ.

Most people chose their IFA by just opening the door and letting him come in, make himself at home and just buy whatever he is selling.

But he is an employee and you must treat them like any prospective employee. You need to interview them and interview enough to stand a chance of finding the right employee who is going to work properly for you.

But first you need to know what the job is that they will be doing. You can’t start interviewing for a role if you have not yet defined what that role is.

The landscape is changing rapidly for IFAs as comm is gone and other remuneration types drive completely different behaviour and so it’s never been more important to educate yourself, define the role, set the questions and interview enough to weed out the weak and unsuitable.

The other way to look at this from the perspective of those with average wealth is that you don’t need to buy products from an IFA (most aren’t independent anyway but tied to a product vendor so genuinely cannot offer independent advise just sell what they are regulated to sell) the market for self directed investment products is pretty impressive nowadays but what you do need to buy is the advise on how to diversify and how to utilise all your tax benefits.

It is probably fair to argue, in simplistic terms, that the performance difference between sticking all your money into blue chip index ETFs will yeild the exact same return as paying an IFA to create a complex blended portfolio. But the real key is not per se the underlying investments but ensuring that these assets are held in the most tax efficient manner and that you utilise every wrapper advantage. That is the advice that is catagorically worth paying for as that is what can make you tens of thousands over your retirement.

I think this is important - most people seem to assess (in hindsight) the advice given by an IFA based on the resulting investment outcome, which is entirely wrong. Few IFAs are properly qualified to analyse investment markets alongside economics to identify the right asset classes to invest in at the right time. Even fewer can accurately predict the future...

What they can do is:
- Understand your risk appetitive and structure a high level asset mix consistent with those requirements
- Identify which investment / savings / protection products might be suitable for you, given your personal situation and objectives
- Advise on the most efficient way of accessing products to meet those needs.

[JiggyJaggy]

Have you thought of investing in a small business which is looking to grow further? Im sure companies like ourselves would be willing to place closer to a 5-6% return on monies rather than the lower 2-3% you get from BTL etc...

[sidicks]

JiggyJaggy said:

Have you thought of investing in a small business which is looking to grow further? Im sure companies like ourselves would be willing to place closer to a 5-6% return on monies rather than the lower 2-3% you get from BTL etc...

At what rate can you borrow from a bank?

What security would be provided to the lender?

[DonkeyApple]

JiggyJaggy said:

Have you thought of investing in a small business which is looking to grow further? Im sure companies like ourselves would be willing to place closer to a 5-6% return on monies rather than the lower 2-3% you get from BTL etc...

That’s VC investment and you wouldn’t do it for 5%! Or do it at retirement age with funds that are needed to generate a living income.

If a business can’t borrow conventionally at 5% then it needs to be giving away equity and security and paying double figures.

You wouldn’t lend to a firm at 5% that isn’t in sound enough shape to borrow from a formal lender at that rate.

[JiggyJaggy]

sidicks said:

At what rate can you borrow from a bank?

What security would be provided to the lender?

Starting to look into bank lending now, many banks weirdly do not prefer to lend to companies who are car dealerships or similar.

Re security to any lender (bank or pirvate) would be against fixed assets such as property.