What sort of a return can I get on £650k?
Discussion
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
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
Phooey said:
xeny said:
Not risk free - I'm pretty sure they're referring to this concept https://www.mrmoneymustache.com/2012/05/29/how-muc...
Ah ok, I thought I'd heard the "4% rule" mentioned somewhere... I didn't want to be missing out on something 
I'll have read of that later, thanks
j80jpw said:
Don’t forget the potential increase in value of the current property if you keep it and rent it out.
Yes, although that's looking a bit hit and miss at the moment!However, we are leaning more towards this route at the moment, mainly because if we get bored with life in norfolk we can always move back.
Btw, I have no financial knowledge at all, which is why I asked the question in the first place
anonymous said:
[redacted]
Thanks, appreciate the suggestions.We are not pensionable age yet. I'll be 64 this year and the wife is 62. Once we get there, living off of our income will be no problem, having been paying in all our lives.
We had maxed out on Premium Bonds on and off over the years, although that amount has been drastically reduced recently due to extensive house renovations! We once won £25k on money I put aside for the tax man many years ago. so you never know.
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. 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
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 f
king 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. 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.
sidicks said:
Ali Chappussy said:
No disrespect to our wonderful members, surely you should be talking with a IFA, not us lot!
There are a few IFAs on here who can provide high level, indicative information to help inform the OP before he sees an IFA!Gassing Station | Finance | Top of Page | What's New | My Stuff