£200,000

[SplashingAroundTown]

Bit of context, I have £200,000 inheritance and would like to use it to set up some sort of passive income. Ideally buying a flat outright to rent out but I wondered if anyone had any other genius off the wall ideas?

I have a small mortgage so don’t really need to use the capital to pay it off - much mor interested in a long term investment that will provide an income.

AIBU to ask? Hope not!

Speak to a financial adviser . There's new rules about owning more than one property. It might not be quite such a good idea as you'd hoped !

Good point. I was hopeful that if I could buy somewhere for cash it might be ok. But yes, need to check it out. (Also, am a Londoner so cant imagine buying more than a garage for the money...!)

What new rules about owning more than one property?

How long do you have before you retire? If you're fairly young you should be investing for growth, not income. Income generating investments like bonds will only pay a small margin above the rate of inflation. Growth investments in the long run will return well above the rate of inflation.

spread it out, use 50k as deposits on 4 BTL mortages then you 4 x rent, buy in Chatham/Rochester area close to London to commute and a 2/3 bed terrace will be 200k
we started off with 4 and now have 9. the rent pays for the next deposit. Then live off the rent or sell for your pension.
you can only sell every 2 yrs to pay less capital gains.

Somebody once told me that - in London especially - a garage can be a good investment. People with posh cars like renting them, there's very little upkeep required but with older ones, you do have to make sure that they're not too small. The ones built in the 1950s-70s were designed for much smaller cars than today's Chelsea tractors...

@birdladyfromhomealone Please can you explain what you mean about selling after 2 years to not pay much CGT?

I have a good 30 years till retirement...

Interesting and a bit scary to consider buying 4 properties.

MNO you’re probably right about garages being a good investment here!

The best way to manage the risk of investing is to diversify. So I don't think it's a good idea to have it all tied up in real estate, or any other single category of assets.

For those who think property prices can only move in one direction,

www.cnbc.com/2018/10/30/southern-california-suffers-its-worst-housing-slump-in-over-a-decade.html

Prices eventually reach the point where there supply exceeds demand, particularly when rising interest rates make mortgage money more expensive.

MissConduct - absolutely. I find it hard to believe £200k decent properties in the SE here would crash much though?

FrankIncensed
we only sell a house every 2 years to use our tax allowance to offset CGT.
we both own, so 22k per year goes as tax free along with any improvements.

Property is not "passive". If you get good tenants it's fine. If not... nightmare abs endless hassle.

Sorry but you won’t get a 2/3 bed house in Chatham/Rochester for 200k. That is hilarious. Try 250 minimum and unfortunately higher if you don’t want to do any work on it thanks to Londoners coming in and doing BTL. The locals say cheers for pricing us out

Please, please go to speak to someone who is qualified to give you financial advice. The costs of BTL property (additional stamp duty, reduction in mortgage interest relief, management costs, void periods etc) are widely underappreciated, as are the risks of being highly levered in a falling property market. Property investment is not the no brainer it once was, you need to explore all of your options with someone able to understand your objectives, risk tolerance and wider circumstances.

Splashing, I've owned property since 1992 in the New York city suburbs, another highly desirable area. Twice I've seen substantial price declines. Real estate can still be a good investment vehicle but it's not bulletproof.

When prices go up your returns are magnified by the fact that you're borrowing the money. You get the increased value of the property, not the mortgage lender. However, as many people here found out in 2008 if your property is suddenly worth less than the mortgage amount the lender still expects to be paid in full. And your investment is now illiquid unless you can pay off the balance of the loan or are willing to default on the loan.

I would put it in stocks and shares, draw down 4% a year in a fund that should do at least 6-7% + a year, so you are covered for inflation. So you should be able to get an income of £8k a year or thereabouts to start with. Hopefully it will grow, and requires absolutely no effort unlike a BTL.

A garage/parking space won't turn out to be much of an investment if most people switch to using driverless taxis, because that's cheaper than owning a car.

As an accidental landlord, I wouldn't advise it as an investment, especially in London. It's a lot more work than we anticipated, and after tax and fees and maintenance costs the return on investment is not worthwhile.

If you do want to invest in property, you can invest in relevant stocks & shares instead. Or if you really want bricks and mortar, there are other cities in the UK with cheaper house prices and higher rental yields.

I have no suggestions for you but buy to let is, IME anyway, an enormous amount of stress for a paltry return.

If you get a bad tenant you're looking at months of hassle, no income, and mounting legal costs to get the fucker(s) out.

You should put at least a decent chunk of it into a pension fund, one managed by a reputable company. There are limits to how much you can put in each year depending on your salary, and the government tops it up by your tax rate. So if you put in £8k, the government adds £2k to the pot to take it up to £10k (assuming you are on 20% income tax rate). Over 30 odd years that's long enough to smooth out the ups and downs of the stock market.

But do see a qualified and registered financial adviser, and whatever you do if you DO decide to invest in a pension, ISAs, Unit trusts or whatever, that the investment is regulated.

I would want a lot more than a garage for 200k. It would almost be better to waste it on holidays and bags.

Buy a holiday cottage on the south coast, then rent it out on Airbnb. You'll also get very cheap holidays out of it.

Birdlady what happens to your tenants when you decide to sell up?

Nobody needs 9 properties when there's a housing crisis.

We live in the London area but have bought flats in really nice parts of Norfolk. They were all between £125-150,000 and are let through an agency. It works well for us.