Best way to invest £190k to generate a monthly income

[ftogpx]

Morning all. My dad has just asked me for some investment advice and I'm not sure what the best solution is for his needs. I was hoping those of you with more knowledge and experience might be able to provide some advice. The background is as follows:

My dad is 70 and has just come in to a lump sum inheritance of £190k. He lives abroad permanently and currently doesn't have any property or assets in the UK. He is a lower rate tax payer. Due to some poor pension decisions in the past, he doesn't have much in the way of a pension, and he would like to use the £190k to help generate a steady monthly income. His risk appetite is quite low (having been burned in the past) and I would prefer he put the money in something that was relatively lower risk. He would like to generate £1000/month gross (or gross yield of 6%).

Given my lack of knowledge (and imagination!), my first thought is that he should buy a property outright and rent it out. The aim would be monthly income rather than future capital appreciation. I appreciate there are risks associated with this (non-paying tenants, void periods, maintenance) and the associated buying costs, but I'm struggling to see a more viable option (especially as he doesn't own any UK property - though he won't be classified as a FTB as he sold a property back in 2013).

If he went this route, the question is where he should buy to maximise his returns (whilst minimising the chance of attracting nightmare tenants). My preference would be for a small house rather than a new build flat (with their extortionate service charges) but I guess he needs to be flexible at this price. As I live just outside London I can't think of anywhere in the SE where his £190k would buy a suitable property. If it was commutable to me, I could manage the property for him, but anything further afield would require an agent to manage it. I had thought about buying in a university town - you can get more property for your money, but then there's the risk and hassle of renting to students!

I'd be extremely grateful for any thoughts on the BTL route, or other suggestions/investments you think might be more viable than the property route.

Many thanks

[City_boy]

The starting point is that 6% income is incompatible with ‘low risk’.

So what is the priority, 6% income (at a commensurate level of risk) or low risk (and to maximise income within that constraint)?

[selmahoose]

City_boy said:

The starting point is that 6% income is incompatible with ‘low risk’.

So what is the priority, 6% income (at a commensurate level of risk) or low risk (and to maximise income within that constraint)?

Sidicks is talking nonsense (as usual, oh well, never mind etc)

BTL you say?

Think up North, commercial, well managed by good firm.

Often enough they're offered for sale using 10x annual rent as the guide price.

Not that long ago I sold a freehold site used as a carwash for a very similar sum to what you've got. There was a queue to rent it (at £2k a month) a queue to buy it (including a couple of PHers) and over the course of the years it was rented my sole involvement in it amounted to a handful of short phone conversations with the commercial surveyors who acted as its managing agents (and who I never even met viz-a-viz).

ETA: Here's one I posted on another thread the other day. As expected, it didn't sell (yesterday) at auction and if I was in the buying mood I'd have that in a heartbeat, offering 225 cash right now, 24 hours to accept, and expecting to have it a day later at 250.

http://www.futurepropertyauctions.co.uk/property_d...

There's yer dinner!!!

Edited by selmahoose on Wednesday 5th December 12:44

[number2]

With £190k and c. 1.5% interest a year he should be able to take c. £1k a month for 20 years before eroding the whole pot... which takes him to age 90.

Happy to stand corrected on my fag packet calcs. Also there's no mention of not wanting to use the capital...

[mike9009]

You can buy a lot of fruit machines for £190k.

I always think a single property portfolio is a risk. Tenants could trash the place, not pay, not able to get tenants, severe building issues stopping rental income etc. etc.


Could you buy a few (three?) lower value properties to reduce some of the risks?

[FredClogs]

selmahoose said:

http://www.futurepropertyauctions.co.uk/property_d...

There's yer dinner!!!

Edited by selmahoose on Wednesday 5th December 12:44

That's at least the second thread you've posted a link to that auction... Are you the agent?

6% with no risk is indeed a fantasy in today's economy.

[superlightr]

number2 said:

With £190k and c. 1.5% interest a year he should be able to take c. £1k a month for 20 years before eroding the whole pot... which takes him to age 90.

Happy to stand corrected on my fag packet calcs. Also there's no mention of not wanting to use the capital...

As above. Put it in UK bank and draw down. Keep it flexible for fun things as and when he wants it.

[selmahoose]

mike9009 said:

You can buy a lot of fruit machines for £190k.

I always think a single property portfolio is a risk. Tenants could trash the place, not pay, not able to get tenants, severe building issues stopping rental income etc. etc.


Could you buy a few (three?) lower value properties to reduce some of the risks?

Haven't "the government" recently decided that fruit machines are a bit too lucrative and created some cock n bull legislation to force them to be less so?

You're sort of right about a single property portfolio, but certain properties reduce the "risk" to very very low.

In the one I posted, in terms of the "risks" you mentioned, do you think there's even a small chance that Remploy would trash it, or default on rent for example? Or, having established a stable base, be interested in quitting it? Rent - stopping building issues are rare and almost always foreseeable prior to purchase via inspection, and the ability to get tenants is often tied to the quality of the property which in the posted example is actually quite high.

And of course there are far better too.

But a well selected property isn't necessarily a greater risk than three - some would say it's 1/3rd the risk. And sometimes dealing with the right single unit merely illustrates the fallacy of benefit from diversification.

Edited by selmahoose on Wednesday 5th December 13:48

[selmahoose]

FredClogs said:

That's at least the second thread you've posted a link to that auction... Are you the agent?

6% with no risk is indeed a fantasy in today's economy.

Nope, not the agent, though I'm on their client list.

"no risk" does not exist. Even doing nothing and lying in bed with the duvet pulled over your head runs the risk of bed sores.

But 6% with low risk is easily the reality for many, and not only in property.

Example? The Cashplus 4 year(?) bond offered a couple of years ago at 7%.

[NickCQ]

ftogpx said:

a more viable option (especially as he doesn't own any UK property

If he owns overseas property he will still have to pay the additional stamp duty charge

Tax man said:

You must pay the higher SDLT rates when you buy a residential property (or a part of one) for £40,000 or more, if all the following apply:
it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world

https://www.gov.uk/guidance/stamp-duty-land-tax-buying-an-additional-residential-property#hr-notapply

[BoRED S2upid]

Can’t you get fixed income bonds that come close to 6%? A selection of those and decent funds although much higher risk could get him close without eroding the £190k. I doubt he wants to become a landlord at that stage in life and living abroad.

Edited to add return won’t be monthly but more likely biannually but is there much difference.

[joshcowin]

Properties in Thanet are reasonable, there is a strong rental market and a decent return, he wouldn't have to tie all his money up to get a place that would rent for £700+ a month

[bigweb]

My company runs the Social media for an Estate Agent in Liverpool

Follow his Instagram as there are always Sub £80k properties being posted on there which will achieve you a rental income of £500+

https://www.instagram.com/lyonsestates/

[selmahoose]

BoRED S2upid said:

. I doubt he wants to become a landlord at that stage in life and living abroad.

Do you know what owning a decent commercial property managed by a good commercial property agent requires in terms of landlord involvement?

Nothing. (okay, maybe - and that's maybe - a 5 minute conversation once a year). O and I forgot, downloading an emailed statement once a month and forwarding it to an accountant once a year.

Recommended for the over-70s

[superlightr]

selmahoose said:

FredClogs said:

That's at least the second thread you've posted a link to that auction... Are you the agent?

6% with no risk is indeed a fantasy in today's economy.

Nope, not the agent, though I'm on their client list.

"no risk" does not exist. Even doing nothing and lying in bed with the duvet pulled over your head runs the risk of bed sores.

But 6% with low risk is easily the reality for many, and not only in property.

Example? The Cashplus 4 year(?) bond offered a couple of years ago at 7%.

Don't feed the Parrot or whatever troll name he posts under this time. He was trying to turn £10k into £200k in 2 mths. Changes names often too.

Edited by superlightr on Wednesday 5th December 14:18

[JulianPH]

FredClogs said:

selmahoose said:

http://www.futurepropertyauctions.co.uk/property_d...

There's yer dinner!!!

Edited by selmahoose on Wednesday 5th December 12:44

That's at least the second thread you've posted a link to that auction... Are you the agent?

6% with no risk is indeed a fantasy in today's economy.

I'm a bit confused. If the tenant is sat on £14.6m of cash in the bank, why did they not buy the property themselves rather than continue to lease at 12% a year...?

[selmahoose]

superlightr said:

Don't feed the Parrot or whatever troll name he posts under. He was trying to turn £10k into £200k in 2 mths and asking for help and posts a load of bollx generally. Changes names often too.

lol@ the "letting agent" who thinks "The key to successful BTL is increased capital value".

And nope, the remaining £10k (£15k as it turned out) after paying the first instalment of a £260k debt was available to get the balance of £200 paid off over 12 months.

Today is a rare and well deserved day off from the so-far successful efforts to do just that.

But you've just reminded me..... DESOLATE!!...where are you?? I have 1500 motors waiting to earn us some commission for insuring!!! And a bigshot calling me a bullstter for failing to come up with his promised improved plan! (only kidding - he never believed it was possible from the start).

Accuracy m'boy. Accuracy. And I've reverted to the username I began with on PH. Don't you remember it? You'd have just been starting out on your "letting agent" adventure around then.....

[Sheepshanks]

selmahoose said:

ETA: Here's one I posted on another thread the other day. As expected, it didn't sell (yesterday) at auction and if I was in the buying mood I'd have that in a heartbeat, offering 225 cash right now, 24 hours to accept, and expecting to have it a day later at 250.

http://www.futurepropertyauctions.co.uk/property_d...

If that's so mind-numbingly brilliant as it appears, why wasn't there a battle over it at the auction?

[selmahoose]

JulianPH said:

I'm a bit confused. If the tenant is sat on £14.6m of cash in the bank, why did they not buy the property themselves rather than continue to lease at 12% a year...?

You might get some explanation via this:

https://beta.companieshouse.gov.uk/company/0945702...


Or you could always trying phoning their estates management dept and asking.....

[NickCQ]

Sheepshanks said:

If that's so mind-numbingly brilliant as it appears, why wasn't there a battle over it at the auction?

This is a bit like the story of two economists walking down the street.
One says to the other: 'look a £50 note lying on the pavement'
The other replies: 'no, it can't be a £50 note otherwise someone would have already picked it up'

Sometimes markets are inefficient, I could well believe that was true for awkward bits of commercial property sold at auction.