70k to invest, buy to let?

[Pesty]

NickCQ said:

Pesty said:

I’d know what to do with 1 million

I appreciate you were probably joking, but what would you do?

Nonwasnt joking.


Pretty much the same but with less fear.

I grew up poor, I have no fear of it but I don’t want to go back there.

I’m in a great position as it is.

But with 1 million I’d happily invest much more in the schemes mentioned in this thread and not worry if I lost some as I’d always have a decent house in the uk tonfall back on.

Doing or not doing isn’t my issue, it’s risk I’m averse to. With more cash there is less risk of ending with nothing.

Put it thus way I’m driving around in a hyundai terracan I bought from eBay for 2k and I love it.

It does everything I need. I might buy a land cruiser or g wagon with 1 million but I wouldn’t go flash.
I’d just invest more and not worry if it paid off.

I’d certanly retire t my villa in Spain

[bernhund]

Pesty said:

NickCQ said:

Pesty said:

I’d know what to do with 1 million

I appreciate you were probably joking, but what would you do?

Nonwasnt joking.


Pretty much the same but with less fear.

I grew up poor, I have no fear of it but I don’t want to go back there.

I’m in a great position as it is.

But with 1 million I’d happily invest much more in the schemes mentioned in this thread and not worry if I lost some as I’d always have a decent house in the uk tonfall back on.

Doing or not doing isn’t my issue, it’s risk I’m averse to. With more cash there is less risk of ending with nothing.

Put it thus way I’m driving around in a hyundai terracan I bought from eBay for 2k and I love it.

It does everything I need. I might buy a land cruiser or g wagon with 1 million but I wouldn’t go flash.
I’d just invest more and not worry if it paid off.

I’d certanly retire t my villa in Spain

There'd be a lot to consider. The most important probably being your age as £1m isn't like it used to be! Here in the south east you wouldn't be buying the flashiest of houses before you ran out of cash. Retirement could be for many years too, so I actually think it would be a much more difficult decision to make than for the £70k, though of course a nice problem to have!

[JulianPH]

Pesty said:

NickCQ said:

Pesty said:

I’d know what to do with 1 million

I appreciate you were probably joking, but what would you do?

Nonwasnt joking.


Pretty much the same but with less fear.

I grew up poor, I have no fear of it but I don’t want to go back there.

I’m in a great position as it is.

But with 1 million I’d happily invest much more in the schemes mentioned in this thread and not worry if I lost some as I’d always have a decent house in the uk tonfall back on.

Doing or not doing isn’t my issue, it’s risk I’m averse to. With more cash there is less risk of ending with nothing.

Put it thus way I’m driving around in a hyundai terracan I bought from eBay for 2k and I love it.

It does everything I need. I might buy a land cruiser or g wagon with 1 million but I wouldn’t go flash.
I’d just invest more and not worry if it paid off.

I’d certanly retire t my villa in Spain

Only on PH can someone talk about how they would invest a newly found million before mentioning they have a villa in Spain!!!

[Pesty]

bernhund said:

There'd be a lot to consider. The most important probably being your age as £1m isn't like it used to be! Here in the south east you wouldn't be buying the flashiest of houses before you ran out of cash. Retirement could be for many years too, so I actually think it would be a much more difficult decision to make than for the £70k, though of course a nice problem to have!

I’m working out how to retire now without a million I wouldn’t buy another house mine is good enough for my needs.

I could do it but I’d need to rent this house out and she won’t leave her mum sigh.

As I’ve said I am more that willing to live carefully. Stuff us just stuff

[Pesty]

JulianPH said:

Only on PH can someone talk about how they would invest a newly found million before mentioning they have a villa in Spain!!!

Villa is a bit if a stretch. I don’t know why they call them villas.

It’s a nice little place and I’m very lucky, don’t imagine some huge ostentatious place. It suits my needs.

I’m just trying to work out how to spend some time there.

[JulianPH]

Pesty said:

JulianPH said:

Only on PH can someone talk about how they would invest a newly found million before mentioning they have a villa in Spain!!!

Villa is a bit if a stretch. I don’t know why they call them villas.

It’s a nice little place and I’m very lucky, don’t imagine some huge ostentatious place. It suits my needs.

I’m just trying to work out how to spend some time there.

I was pulling your leg!

[M3333]

Pesty said:

bernhund said:

There'd be a lot to consider. The most important probably being your age as £1m isn't like it used to be! Here in the south east you wouldn't be buying the flashiest of houses before you ran out of cash. Retirement could be for many years too, so I actually think it would be a much more difficult decision to make than for the £70k, though of course a nice problem to have!

I’m working out how to retire now without a million I wouldn’t buy another house mine is good enough for my needs.

I could do it but I’d need to rent this house out and she won’t leave her mum sigh.

As I’ve said I am more that willing to live carefully. Stuff us just stuff

I would love a million in cash in the bank.

I would totally simplify my life and enjoy lots of free time, no stress, pack a rucksack and travel. Probably even downscale the current house to something smaller, semi retire choosing work i only wanted to do which i enjoyed. Invest most of the money for a small but modest return.

Id most probably just jump in my motorhome and just hit the road for a few months. Stay on certified locations or wild camp and live a very simple but fulfilling existence exploring as much as i could on my own terms. Park up somewhere nice and like it? Fine just stay the week and relax with walks and a book! Im getting old

As i am getting older i am realising expensive material things are more hassle than its worth. Really cant be arsed with social climbing. Id like to have the basics in place and the time to explore and do what i want without the fear of ever being very poor and struggling.

Hopefully that will all be obtainable before my body creaks to much!

So a million would buy me freedom and time. Bliss.

[Croutons]

This is turning into the "if I win the lottery" thread...

How's the purchase progressing op?

And is your agent quoting 10%, 10% + vat, or 10% + vat + tenant finding fee?

[DSLiverpool]

Pesty said:

After selling a few assets I’ve ended up with around 70k

I know nothing of finance or investments or shares.

I’m not a risk taker just doesn’t sit well with me. I don’t undertsand or would dare buy shares.

If I leave it just sitting in the bank I know enough to realise inflation with deminish it over the years

So that leaves me buying somewhere and renting it.

It’s all I can think of, money has never been one of my motivations I’m thinking get a return and if I need money in future I can sell and probably not lose anything.

Pitfalls, is going into something like that going to be a huge headache for a novice?

£50k in premium bonds, £5k in a S&S ISA to play with (keep big might be safe), £15k on a Jeep.

[sidicks]

DSLiverpool said:

Pesty said:

After selling a few assets I’ve ended up with around 70k

I know nothing of finance or investments or shares.

I’m not a risk taker just doesn’t sit well with me. I don’t undertsand or would dare buy shares.

If I leave it just sitting in the bank I know enough to realise inflation with deminish it over the years

So that leaves me buying somewhere and renting it.

It’s all I can think of, money has never been one of my motivations I’m thinking get a return and if I need money in future I can sell and probably not lose anything.

Pitfalls, is going into something like that going to be a huge headache for a novice?

£50k in premium bonds, £5k in a S&S ISA to play with (keep big might be safe), £15k on a Jeep.

1) Inflation will diminish the return / value of premium bonds too - expected returns are very low.
2) Property is not necessarily low risk and is illiquid - if you need to access your money quickly then you would expect to take a significant haircut as well as incur other transaction costs.

What investment time horizon do you have?

Edited by sidicks on Wednesday 25th July 18:04

[bernhund]

Croutons said:

This is turning into the "if I win the lottery" thread...

How's the purchase progressing op?

And is your agent quoting 10%, 10% + vat, or 10% + vat + tenant finding fee?

It wasn't intentional. I genuinely wanted to know whether it would be wise to spread £1m around in the same type of investments as £70k or whether a sum like that would be treated differently.

[DonkeyApple]

bernhund said:

Croutons said:

This is turning into the "if I win the lottery" thread...

How's the purchase progressing op?

And is your agent quoting 10%, 10% + vat, or 10% + vat + tenant finding fee?

It wasn't intentional. I genuinely wanted to know whether it would be wise to spread £1m around in the same type of investments as £70k or whether a sum like that would be treated differently.

In short, yes. You’d just be able to diversify better. But it really does depend on some key factors such as how old you are, what wealth you already have and what you earn. And other little factors also come into play such as your health, size of family and aspirations. Ie you may have two children and such an amount of money would allow for them to be privately educated etc.

If we take a very basic set of fixed parameters such as someone who earns around the national average of about £30k a year, is in their 30s, already owns a family home, has a wife and a couple of children and lives a pretty normal life with normal expenditures and would expect to be working until around 70 then what you would typically look to do is invest all of it into a secure, sensible, blended portfolio. The key here is the long game. You are 35 and have another 35 years of working and possibly another 20 years of not afterwards. You have a wife to support and children to raise, even parents to protect in their dotage. Invest for this 50+ year horizon and £1m is a huge amount of money that will shelter and raise your entire family and wine you a quality of life you never dreamt of, do what most people do and buy a larger house, maybe a once in a lifetime holiday and maybe a nice car and bang, it’s all gone in an instance. The reason being that they have not increased their personal income at all but have just increased their living costs massively. They will be living well beyond their means with the running costs of the house and car ripping through what’s left of the money and be back where they started in just a few years but probably divorced and in a soiled bedsit paying rent to a PHer

The key is to create a stable ‘income’, yield, while leaving the capital growth well alone to ebb and flow with economic cycles but to keep pace with inflation. It is this ‘income’ that is key along with the recognition that this income will continue long after you retire so it also will be your pension so not needing to invest in a pension will give you increased spending power today, along with the additional ‘income’.

With £1m you’d probably look to do something really very simple such as split it evenly between a blue chip equity portfolio and a few sensible and secure property investments. You aren’t looking for megabucks, you don’t want to take excessive capital risk in exchange for higher yield as you’re in this for the long haul. Likewise you don’t want to go hunting for high capital returns. It’s just all about being boring, average, hugely tax efficient and cheap to maintain.

You’d probably buy 2/3 solid BTLs with maybe up to 50% gearing, which would probably yield you around 5-6% net of running costs, gross of taxes? And invest in blue chip, global indices as tax efficiently as possible which would probably generate a yield of around 3% net of costs, gross of taxes.

As you can begin to see the yields are rather low and we can probably estimate that the whole portfolio would generate between £30-40k income a year. Forget about the capital growth. That could be up 20% or down 20% but over the 50 years it’ll grow ahead of inflation to keep you fully protected and secure. It is your rock upon which your security is secured.

£30-40k a year gross does not sound very exciting at all but in reality it is absolutely immense. It’s a doubling of your annual income but more importantly you don’t have to save for the future which means your spending power has gone through the roof. From your original income of £30 odd k you probably had very little spending power and we having to save a significant % into your pension. Let’s guess that overall you probably had barely £5k spending power after bills and in reality possibly nowhere near that. You now have that £5k, plus the £3+k pulled from pension investing, plus £30-40k income (gross) from your investment portfolio.

It is that spending power that transforms your life, not Mickey Carrolling the capital. You suddenly have the spending power equivalent of someone earning well over £100k and it is that that gives you your freedom. You can chose to pay to educate your children or invest on their behalf, or let your wife stop working, or retire early, or indulge your hobbies, or give more to charities, pay to have your neighbour smacked every Tuesday at 4pm, lease a silly car, save a deposit for a larger home, whatever makes you and your family happiest. Sit down each year together and plan how to invest that extra income as a family.

£1m is nothing if you spend it but it is an absolute fortune if you invest it really boringly.

[JapanRed]

I don’t know why all the hate for BTL. I’ve had 1 BTL in Barnsley since 2012 and am considering buying a few more properties.

I’m not sure whether I’ve been lucky or not with previous tenants. I’ve had one that I asked to replace the flooring in the kitchen and also replace the bath (melted a tea light candle into it ??) which they did. Also had the odd call out due to white goods not working (all I do is call a plumber or electrician etc - doesn’t take up much more of my time than a phone call and a couple of texts). Can’t say I’ve ever been woken up at 2am but they wouldn’t get through anyway as I have my phone on silent. I don’t use an agent. I’ve never had a tenant not pay (one sometimes asked for a couple of days grace which was fine but always paid within 4-5 days of the due date). The house has never been empty. It consistently nets 5-6% which isn’t huge but allows me to overpay the mortgage on the place.

I will have £120k to invest in April 2019. Where else can I get a guaranteed 5-6%. Ive got a small amount of money in the stock market (Nutmeg level 10 risk) but this isn’t making me anywhere near 5-6% and is in my opinion higher risk than BTL.

Im willing to listen if anyone has a convincing argument for me to put my money elsewhere other than BTL...


Edit: I’m 33. Married with 1 child but will have more children soon. Plan to retire at 55. Higher rate tax payer.

Edited by JapanRed on Thursday 26th July 09:45

[DonkeyApple]

red_slr said:

2 chicks at the same time, man.

[Deesee]

JapanRed said:

I don’t know why all the hate for BTL. I’ve had 1 BTL in Barnsley since 2012 and am considering buying a few more properties.

I’m not sure whether I’ve been lucky or not with previous tenants. I’ve had one that I asked to replace the flooring in the kitchen and also replace the bath (melted a tea light candle into it ??) which they did. Also had the odd call out due to white goods not working (all I do is call a plumber or electrician etc - doesn’t take up much more of my time than a phone call and a couple of texts). Can’t say I’ve ever been woken up at 2am but they wouldn’t get through anyway as I have my phone on silent. I don’t use an agent. I’ve never had a tenant not pay (one sometimes asked for a couple of days grace which was fine but always paid within 4-5 days of the due date). The house has never been empty. It consistently nets 5-6% which isn’t huge but allows me to overpay the mortgage on the place.

I will have £120k to invest in April 2019. Where else can I get a guaranteed 5-6%. Ive got a small amount of money in the stock market (Nutmeg level 10 risk) but this isn’t making me anywhere near 5-6% and is in my opinion higher risk than BTL.

Im willing to listen if anyone has a convincing argument for me to put my money elsewhere other than BTL...


Edit: I’m 33. Married with 1 child but will have more children soon. Plan to retire at 55. Higher rate tax payer.

Edited by JapanRed on Thursday 26th July 09:45

2x lifetime isa, the top up the other 32k in Isas, put as much as you can into pension as high rate tax payer. Free money!

[sidicks]

JapanRed said:

I don’t know why all the hate for BTL. I’ve had 1 BTL in Barnsley since 2012 and am considering buying a few more properties.

I’m not sure whether I’ve been lucky or not with previous tenants. I’ve had one that I asked to replace the flooring in the kitchen and also replace the bath (melted a tea light candle into it ??) which they did. Also had the odd call out due to white goods not working (all I do is call a plumber or electrician etc - doesn’t take up much more of my time than a phone call and a couple of texts). Can’t say I’ve ever been woken up at 2am but they wouldn’t get through anyway as I have my phone on silent. I don’t use an agent. I’ve never had a tenant not pay (one sometimes asked for a couple of days grace which was fine but always paid within 4-5 days of the due date). The house has never been empty. It consistently nets 5-6% which isn’t huge but allows me to overpay the mortgage on the place.

I will have £120k to invest in April 2019. Where else can I get a guaranteed 5-6%. Ive got a small amount of money in the stock market (Nutmeg level 10 risk) but this isn’t making me anywhere near 5-6% and is in my opinion higher risk than BTL.

Im willing to listen if anyone has a convincing argument for me to put my money elsewhere other than BTL...


Edit: I’m 33. Married with 1 child but will have more children soon. Plan to retire at 55. Higher rate tax payer.

Edited by JapanRed on Thursday 26th July 09:45

No reason why you shouldn’t invest in BTL if you are comfortable with the illiquidity and risk profile. Your returns aren’t guaranteed though.

[xeny]

JapanRed said:

I don’t know why all the hate for BTL.

I don't do it because:

It's hard to do tax efficiently.

It's not very liquid

It involves a degree of hassle

In the SE returns really depend on changes in property prices

It is typically leveraged which significantly increases the risk, which IMHO tends to be underestimated anyway as the poor price discovery for residential property (due to the lack of liquidity) makes the price appear less volatile than it actually might be.

[DonkeyApple]

JapanRed said:

I don’t know why all the hate for BTL. I’ve had 1 BTL in Barnsley since 2012 and am considering buying a few more properties.

I’m not sure whether I’ve been lucky or not with previous tenants. I’ve had one that I asked to replace the flooring in the kitchen and also replace the bath (melted a tea light candle into it ??) which they did. Also had the odd call out due to white goods not working (all I do is call a plumber or electrician etc - doesn’t take up much more of my time than a phone call and a couple of texts). Can’t say I’ve ever been woken up at 2am but they wouldn’t get through anyway as I have my phone on silent. I don’t use an agent. I’ve never had a tenant not pay (one sometimes asked for a couple of days grace which was fine but always paid within 4-5 days of the due date). The house has never been empty. It consistently nets 5-6% which isn’t huge but allows me to overpay the mortgage on the place.

I will have £120k to invest in April 2019. Where else can I get a guaranteed 5-6%. Ive got a small amount of money in the stock market (Nutmeg level 10 risk) but this isn’t making me anywhere near 5-6% and is in my opinion higher risk than BTL.

Im willing to listen if anyone has a convincing argument for me to put my money elsewhere other than BTL...


Edit: I’m 33. Married with 1 child but will have more children soon. Plan to retire at 55. Higher rate tax payer.

Edited by JapanRed on Thursday 26th July 09:45

There’s not hate for BTL. What people are doing is questioning the suitability in given circumstances.

For example you say guaranteed 5-6% return in £120k.

But it’s not guaranteed for starters. Secondly what is that 5-6%? What’s it net or gross of?

The simple truth is that when you drill down on the numbers of a BTL professionally, not using man maths the ‘winning’ element isn’t so winning in comparison to alternatives.

PH has a very long history of man maths BTL where proponents ignore the risks and costs and quote gross figures. It’s that aspect that people are negative on not the underlying investment principle.

[bernhund]

DonkeyApple said:

bernhund said:

Croutons said:

This is turning into the "if I win the lottery" thread...

How's the purchase progressing op?

And is your agent quoting 10%, 10% + vat, or 10% + vat + tenant finding fee?

It wasn't intentional. I genuinely wanted to know whether it would be wise to spread £1m around in the same type of investments as £70k or whether a sum like that would be treated differently.

In short, yes. You’d just be able to diversify better. But it really does depend on some key factors such as how old you are, what wealth you already have and what you earn. And other little factors also come into play such as your health, size of family and aspirations. Ie you may have two children and such an amount of money would allow for them to be privately educated etc.

If we take a very basic set of fixed parameters such as someone who earns around the national average of about £30k a year, is in their 30s, already owns a family home, has a wife and a couple of children and lives a pretty normal life with normal expenditures and would expect to be working until around 70 then what you would typically look to do is invest all of it into a secure, sensible, blended portfolio. The key here is the long game. You are 35 and have another 35 years of working and possibly another 20 years of not afterwards. You have a wife to support and children to raise, even parents to protect in their dotage. Invest for this 50+ year horizon and £1m is a huge amount of money that will shelter and raise your entire family and wine you a quality of life you never dreamt of, do what most people do and buy a larger house, maybe a once in a lifetime holiday and maybe a nice car and bang, it’s all gone in an instance. The reason being that they have not increased their personal income at all but have just increased their living costs massively. They will be living well beyond their means with the running costs of the house and car ripping through what’s left of the money and be back where they started in just a few years but probably divorced and in a soiled bedsit paying rent to a PHer

The key is to create a stable ‘income’, yield, while leaving the capital growth well alone to ebb and flow with economic cycles but to keep pace with inflation. It is this ‘income’ that is key along with the recognition that this income will continue long after you retire so it also will be your pension so not needing to invest in a pension will give you increased spending power today, along with the additional ‘income’.

With £1m you’d probably look to do something really very simple such as split it evenly between a blue chip equity portfolio and a few sensible and secure property investments. You aren’t looking for megabucks, you don’t want to take excessive capital risk in exchange for higher yield as you’re in this for the long haul. Likewise you don’t want to go hunting for high capital returns. It’s just all about being boring, average, hugely tax efficient and cheap to maintain.

You’d probably buy 2/3 solid BTLs with maybe up to 50% gearing, which would probably yield you around 5-6% net of running costs, gross of taxes? And invest in blue chip, global indices as tax efficiently as possible which would probably generate a yield of around 3% net of costs, gross of taxes.

As you can begin to see the yields are rather low and we can probably estimate that the whole portfolio would generate between £30-40k income a year. Forget about the capital growth. That could be up 20% or down 20% but over the 50 years it’ll grow ahead of inflation to keep you fully protected and secure. It is your rock upon which your security is secured.

£30-40k a year gross does not sound very exciting at all but in reality it is absolutely immense. It’s a doubling of your annual income but more importantly you don’t have to save for the future which means your spending power has gone through the roof. From your original income of £30 odd k you probably had very little spending power and we having to save a significant % into your pension. Let’s guess that overall you probably had barely £5k spending power after bills and in reality possibly nowhere near that. You now have that £5k, plus the £3+k pulled from pension investing, plus £30-40k income (gross) from your investment portfolio.

It is that spending power that transforms your life, not Mickey Carrolling the capital. You suddenly have the spending power equivalent of someone earning well over £100k and it is that that gives you your freedom. You can chose to pay to educate your children or invest on their behalf, or let your wife stop working, or retire early, or indulge your hobbies, or give more to charities, pay to have your neighbour smacked every Tuesday at 4pm, lease a silly car, save a deposit for a larger home, whatever makes you and your family happiest. Sit down each year together and plan how to invest that extra income as a family.

£1m is nothing if you spend it but it is an absolute fortune if you invest it really boringly.

Well that answered it nicely! Thank you. There's clearly a lot to consider outside of the money too.

[Pat H]

DonkeyApple said:

Lots of very interesting stuff.

Thanks for taking the time to post all of that.

DonkeyApple said:

As you can begin to see the yields are rather low and we can probably estimate that the whole portfolio would generate between £30-40k income a year. Forget about the capital growth. That could be up 20% or down 20% but over the 50 years it’ll grow ahead of inflation to keep you fully protected and secure. It is your rock upon which your security is secured.

Quick, genuine question.

How do you know that it will grow ahead of inflation?