Where to park a million pounds...

[AndyC_123]

Hi

Appreciate this is a dick post to some, but looking for some advice/pointers from those with more financial experience than myself...

Limited business currently has £1m cash in bank. Brings in about £180-200k net profit per month. I am sole director and shareholder.

Business owns property and land value circa £2m, be about £700k left on mortgage. Mortgage is on variable rate so has had a fair few jumps, cost around £7500/month.

Just wondering what to do with this money really. Pay off mortgage? But then if an investment opportunity came along I might not have enough cash to pounce.

Can't really expand current business operations much more as we are pretty maxed out. Don't have the time for any other serious business interests. No desire to buy any toys or holidays etc, no family to speak of.

Like the idea of buying land but very rarely available, return on renting it out is poor but I would expect values to increase significantly in coming years.

Buying houses might be a better bet? But nightmare tenants could be a problem?

Would be a bit worried about buying shares/financial investments, don't know enough about them?

Cheers

[AndyC_123]

Terminator X said:

How does one set up such a business?!

TX.

Combination of timing, luck, experience and hard work I guess

markiii said:

on those figures it will take you 5 months to amass another £1mill in the bank, so i'd pay off the morgage personally

Any savings accounts I look at have a lower interest rate than the mortgage so that does seem to make sense.

Al Gorithum said:

Congratulations on the successful business mate.

If you're netting £180k-£200k per month, you can pay the mortgage off in 4 months without touching the £1m right? That's what I would do.

I've been in that position, and this is what I did:
1. Kept whatever monthly liquidity is needed in an instant access account.
2. Open interest-bearing 32 day notice accounts in as many different banks as poss and put £85k in each.
3. Open investment accounts with 2 or 3 fund managers, and let them do the work.
4. If/when any investment opportunities arise, give 32 days notice.

Good luck mate!

Thanks. What do fund managers cost and what sort of yields would you expect them to bring in?

Higher the risk higher the reward type scenario?

Mr Pointy said:

Will you marry me?

You'd probably be left disappointed

[AndyC_123]

PositronicRay said:

100 acre farm.

Would snap it up if one came up locally. Land at £15k an acre now though.

trickywoo said:

https://www.pistonheads.com/gassing/topic.asp?h=0&...

If you spend £1m a month isn't £1m in the bank simply operating capital?

Not sure. Sales last month were £1.25m. It's a trading type business, buy stuff and sell it for more. Profit in the middle, which is accumilating.

Scootersp said:

Is the business your life? I suppose I mean would you miss working, is it work that gives you the most purpose?

I only say this as it looks like you could step back (are you crucial in it's operation now?) and it'd largely run itself especially if you have employees you trust and could promote.

Basically it would mean you foregoing some money/profits to give you time? Even if that's for new business opportunities?

Yes I'd say it is my life and not a lot to do without it. Can never imagine retiring.

I could step back a bit as have a decent team now but don't really want to.

gotoPzero said:

This is a good point. I assume the business has only recently started to make this level of profit?

I would probably leave it as operating capital till the end of the year as the current financial outlook is not great.

Then early next year if we have had a soft landing I would then look at it by which point it should be closer to 2.5 million and I would be paying the mortgage down and moving the balance into the best account I could find that would allow multiple withdrawals.

Touch wood we seem ok, NP FY20 £400k, FY21 £500k, FY22 £1.5m, current FY23 projection (alhough only 2 months) in £2.4m. New site came late 21 hence the jump.

fourstardan said:

Yes OP your a dick but have you thought about being a bigger dick and buying some Bitcoin lol.

Thats some decent wedge coming in.

Property is one option but won't you end up spending more time managing them?

Definitely no bitcoin, yes wouldn't have time to manage them.

jayxx83 said:

Fill up a pension pot now no limits on size. Bit boring but good as part of an overall strategy.

To be fair I would be looking at property deals. Buying retail parks where they may be opportunity to build more commercial units / out of town housing developments etc.

All the higher end shops like gails etc are looking for sites to build their drive throughs etc.

Get a good buying agent to find you deals and have a solid planning consultant on board to explore angles.

A very very successful person told me many years ago. Buy first, think later!

As long as you can see things going on around your proposed purchase, then really it should all be an inevitability in time.

Pension is something accountant says every year, haven't got one yet.

I've looked at high street units but could be quite risky? Good idea to look at retail parks.

[AndyC_123]

R33FAL said:

If you need it to be low risk, you put it in government bonds with short-dated maturities that yield (at the moment) around 4%. The idea of spreading it around 12 banks to keep within the £85k cap is laughable and not a practical solution- sorry.

4% wouldn't be too far off savings accounts at the moment? Or would it be better?

jeff666 said:

Buy land,

they aint making it anymore.

Trying, hard to get hold of. Most folk sitting on it and renting it out.

Simpo Two said:

Buy a boat. There's sure to be one that will cope with an acceptable amount of that profit

One thing I did treat myself to last year, love it when the weather is good.

Deesee said:

Your Banks money market team should be able to place that on deposits to balance off Swaps/Sonia.. You should get some healthy 1/3/6/12 month quotes.. Spread the capital in segments so you always have cash maturity (just in case its required).

Or pay your corp tax in advance 0.5% pa..

NB, you could buy OEIC within the business (or groups of Businesses).

Start withdrawing cash personally and you'll have a tax bills like Rishi's.

Any hobbies, Horse Racing (buy a Horse)?

Edited by Deesee on Thursday 23 March 10:29

Thanks, will speak to bank.

Corporation tax is painful. Trying to max out annual investment allowance etc but end up buying machines we don't really need just to reduce the tax bill.

Just googled OEIC, looks interesting.

Friend has a race horse, looks a very expensive hobby!

dingg said:

Get yourself to portugal, gain nhr (its easy) , pay yourself in monthly dividends for 10 years, free of tax... result....

Leithen said:

Pay off debt, relocate to zero dividend tax country.

Do you actually have to move to these countries to do that?

[AndyC_123]

adamfawsitt said:

You didn't really explain:

1. Your risk appetite
2. What you are looking for in return for any investment - income / capital appreciation / etc.

If you want income I wouldn't mess about spreading the money across so many banks - buy T Bills, you will get 5% and it's bombproof in terms of risk

Edited by adamfawsitt on Thursday 23 March 14:53

I love a risk but only when I can predict the consequences... Some investments seem too easily manipulated by the big fish, although that could be my ignorance.
Income is nice but no real need for it, capital appreciation makes more sense to me. Rent some land out that yields about 1.5% but the land value increase far outshines that.

Will look at T Bills thank you

Mr Pointy said:

Oh look, the OP has made one post & vanished.

Been working sorry hun. This marriage will never work.

Al Gorithum said:

I'd speak to folk such as Intelligent Money (this forum's sponsor), Vanguard etc. Personally I'm risk-averse so like to spread it around, but each to their own. Remember that investments can go down.

Will have a look at them, thank you