£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!

@Sexykitten2005 you are wrong. You CAN get a 2/3 bed for 200k in Rochester. I have used the method above as well. Just opened Rightmove and first thing I click on.. you guessed it. 2 bed house: www.rightmove.co.uk/property-for-sale/property-67432198.html

There's one for 180k as well: www.rightmove.co.uk/property-for-sale/property-73260953.html

That's just two. There are plenty more

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.

This is exactly what I did too. It works well!

OP speak to a financial advisor before doing anything especially if it's the first time you have such a sum to invest. Property can go up and down but If you're in it long term then it can def pay off. even if prices go down, over the next 25 years they would go up again.

If you bought 4 properties than that is 4 times the stamp duty, 4 times the work looking after them, 4 times the management fees if you are using an agent etc etc.

Take it to a wealth management firm such as Hargreaves Lansdown or Brewin and Dolphin. They’ll invest it for you and produce a nice income, although I don’t know what their minimum fund is.

If you want to be brave you could buy a flat in a northern university town. But everyone who says that BTLs are expensive and a major hassle is right.

Now is not the time in the economic cycle to be leveraging yourself up to buy buy-to-lets. And it is not a passive income - if you are managing them yourself it can be a big job.

If you want a passive income, buy a multi asset income fund. These invest in a diversified range of assets (including a bit of property, usually, but also bonds, global equities and cash), which yield an income from dividends, interest and rent. You don’t have to do anything - the fund manager decides how to allocate your money between all the different possibilities, and will adjust it over time to keep it on track. The good thing about this is a) it is diversified so if the U.K. economy/property market tanks post Brexit (for example) you haven’t lost everything. And b) someone else is paid to do the worrying for you about what you should invest and when.

Check out Money Week or Money Observer - they have Best Buy tables at the back which will show you the possibilities.
Look at the fees and charges (for a multi asset fund you don’t want to pay anymore than 1.8% all in, including the platform fee) and also the fund’s risk rating. Some funds are run a bit more aggressively and are therefore riskier. Without getting too technical, if you take more risk you have a higher possibility of losing all your money, but in return for taking that risk, you get paid. So funds which will give you a very high income, like ones which only invest in bonds issued by emerging markets, for example, will be more risky and you could lose everything.

In terms of income, a decent multi asset income fund could give you something like 4% net of fees at the moment - so £8000 per year on an investment of £200,000. Which is considerably better than keeping it in a cash ISA, and probably less risky than buying a U.K. equity tracker fund.

If you read all the above and panic, you should see an independent financial adviser. You don’t NEED an adviser to buy a fund like this - but they can explain it all in detail and they will also assess your risk profile to make sure you invest in something appropriate for your attitude to risk and how much you can afford to lose.

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

Holiday lets are only seasonal though. And dealing with holidaymakers and all the issues that come with it is a big hassle. You’d do better to have it on a long term rent.

Now is not the time in the economic cycle to be leveraging yourself up to buy buy-to-lets. And it is not a passive income - if you are managing them yourself it can be a big job.

I agree, Brexit is not the time for property speculation.

I'm not sure I'd trust an independent financial advisor. How 'independent' are they really?

I am often conservative about things like this, unless there's a lot of other money you're hoping to have in.

At a 5% rate, with an additional contribution of £100/month, you're going to have about £944,000 after 30 years, or around £47,200/annum without touching the capital.

Or if you can pay £200/month, after 30 years it's just over a million. If you can wait 35 years at £200/month, that's more than £1.3 million.

And that's really without doing anything, other than not touching the money and investing it with a reasonable, conservative index fund. If you get one pegged to the S&P, which is a more aggressive and undiversified strategy, you're looking at roughly a 10% return. In that case, with £100 month going in, you're looking at nearly £3.7 million, which even drawing down 5% (so, moving it to conservative index funds at that point), you're clearing nearly £185k a year. [Fun: at that rate, with 35 years and £200/month, you're looking at £6.27 million.]

None of this is guaranteed, and also the world has to not fall apart. But still: it's what I would do.

In other words, get ye to a decent financial planner and squirrel away a tiny bit more to add to this nest egg every month.

I agree with the advice about diversifying. BTL can be profitable (even with Brexit uncertainty I believe), but you need to put time and effort into it. First you need to keep up with the law and all the changing tax rules, second you need to manage the rentals or pay someone to manage for you, and third you need to keep the property in good shape. If you have something for the long term, then you may end up having to spend substantially to renovate it after tenants have been living there a while.

If I had that money and no other investments, I'd invest some in a fund (preferably in an ISA), and use the remainder to put the deposit on a BTL property with a mortgage.

Is there not a place you’d love a holiday home? If it is an inheritance, maybe the person who left it to you would have loved the thought of you enjoying it. You are young and could have years of pleasure, with extra rental when you’re not using it to cover the costs. But that is from the ‘live each day to the full’ mantra, rather than the get an income one...

I would invest in my own business

Or buy an apartment in a very popular holiday resort, rent it out for most of the year at €300-400 a week. Depending on the apartment. Hire a cleaner for 2 hours every time someone leaves.

You could get 3 good rentals in our area for that and afford to use a management agency and make a profit from your investment.

Buy my stbx husband out of our house for me? I'll pay you back when I sell it. £30,000 should do it.

I would suggest buying in a different area to where you live. Here you could get a 3 bed semi for £190K and rent it out for around £750 a month.

You have to pay extra Stamp Duty now on second property, so factor that into your costs.

Look on Rightmove, see what you could get for your money. Then find a decent agent in that area to manage it for you.

“At a 5% rate, with an additional contribution of £100/month, you're going to have about £944,000 after 30 years, or around £47,200/annum without touching the capital.”

@Nancydrawn The OP has £200,000 to invest, is that right? So how can she possibly make £47k per year without touching the capital? Am I missing something here?

Not all holiday let's are seasonal. We have just started letting out our holiday cottage (which we bought with an inheritance) to give us an income in retirement. We have already got bookings for November, December and January as well as a couple for spring/summer. It's in a popular area for walkers and has excellent pubs, cafés and restaurants nearby.

Actually commercial property might be worth a look rather than residential and you can ring fence it into a pension as well so you def need someone who knows what they are talking about - a decent financial advisor

OP please ignore the advice you’re getting on here. All of it. No-one here is both qualified and authorised to give you advice, certainly not without carrying out a full fact-find. Go and see an IFA.

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.

You're absolutely right firesuit - it was advice given to me before driverless cars. The other argument was that some garages are suitable for getting planning permission to build on but given Brexit and everything else, I'd say that this is much too speculative at the moment.

You don’t actually need an IFA if you go straight to wealth mangement firms. They have their own financial advisors.

You’d be sensible to get one if you’re weighing that against property investment.

@kumquatquince ignore it all, except those of us telling the OP to get professional advice!

pickleup thank you - really interesting and does make sense