What to do with 50K?

[ZolaBuddleia]

Have inherited some money and really want to use it wisely. In our area I could buy a 2 bed house for 80K and rent it out (v good rental market), would get at least 420 pcm rent but obviously don't have enough to buy the house outright.

What other types of investment should I be considering? Want to be one of those people who uses money to make money!

[ZolaBuddleia]

Thanks so much LaTrucha. Point taken about a long term investment.

We do get a tiny amount of tax credit (both me and DP low earners at the mo), but I suppose losing it is unavoidable, given that I don't have plans to spend enough of it to get below 16K.

[leaderscorp]

Investing your money in a property is always an option. You can also apply for a mortgage and use the money as a down payment. However, you need to make sure that you have the capabilities and the resources to pay off your loan in order to avoid problems in the future.

[slhilly]

Zola, can I suggest you re-post your question on some financial sites eg Motley Fool or MoneySavingExpert.

My thoughts:

• paying down high cost debt is the most important thing to do. Credit cards, bank loans (except mortgages)
  
• you are already exposed to the housing market, so I would not immediately think you would want to increase your exposure by doing a BTL
  
• I would be very very cautious about taking on any kind of actively managed portfolio. It is inherently difficult for an active fund to beat the market in modern equity markets, which are pretty efficient. I would go for a low cost passive tracker. I would look at a split across UK, EU ex-UK, Japan, emerging markets and US, with most money in the UK to manage exposure to currency fluctuations.
  
• I'd use ISAs for stocks and shares
  
• I'd make a decision about whether you are focused on growth or income, and invest accordingly

[lljkk]

Paying down your mortgage is probably the best bet, guaranteed savings and much much larger gains than you can usually get from any other form of investment (without high risk of losing it all).

The conventional strategy with BTL is to pay a minimum deposit, get an interest-only mortgage, and then rely on house price rises to make an actual profit later; this has to do with the tax situation for BTL properties. So instead of one BTL property you could maybe get 2 or 4 of them. Look carefully at the legal situation.

If you were my friend IRL I would be telling you without reservations to take it off your mortgage (assuming no horrible early repayment fee). Suppose that takes £350 off your monthly mortgage payment; I would invest the £350 monthly into an investment vehicle like a shares ISA or into your pension. This will buffer the risk of rising or falling share prices, and give you option to pursue other investment options or even cut your working hours in future.

[ZolaBuddleia]

Thanks everyone for the advice. I have lots of learning to do. The situation is slightly complicated by the fact that our house is teeny and we'd like to upsize a bit. I'm wondering about completing the work on our house then renting it out (negative equity) and buying another house to live in.

[lljkk]

Put the numbers thru a spreadsheet and I don't think you'll find that's as profitable as other options. Good luck whatever you decide :).

[BLOO3Z]

Premium bonds are a good option but seems to be the higher amounts which win reguarly my aunt has one £50 for the last there months, you would never get that return in the bank at present.

I wil be watching this post with interest as ive just posted on property diy with similar question re buy to let.

I dont think you can go wrong with property but you do have to have the funds to do it up and for LL insurance and maintenace. Also to get your head around that it is a 10 years plus investmenet where you will get your money back hopefully to cover the cost of the property and then stull have said property to sell too.

[BLOO3Z]

won not one

[MooncupGoddess]

Premium bonds are paying a very low rate at the moment, only 1.5%.

What's your mortgage rate, OP? Unless it's ridiculously low (like 0.5%) you may be best off using most of the money to pay down the mortgage. Especially given you're in negative equity which is problematic for various reasons.