WWYD with £500k

[Nofilter]

Hi,

I've sold one of my businesses and wondering what to do with the capital. I don't need it - I'd like it to support further down the line.

I still have a couple of smaller businesses to live from so not needed in that respect.

I have a separate fund to buy our next house in an area near DD 16 Months new school but waiting until next summer for that incase another buy out happens and we can get a bigger place.

What could this type of sum produce long term? I've met a financial adviser and identified I'm comfortable with medium risk. But scary thing it up really... wondering if I should go out and put £50k down on 5 houses BTL at least if anything happened with my earnings we'd have a back up in that respect and wouldn't just drain the capital??

Thanks in advance

Don't buy houses. There are 40% of people who don't own their home in this country and for more than half of them they ought to be able to afford to buy? They ate professionals with steady jobs and reasonable incomes, but they can't buy because of the greed of 30% of the country whose desire to own more than one house has pushed up prices unreasonably. Please don't contribute to this problem.

Personally, with £500k I would put at least half into a private pension plan on a generic managed fund, and split the rest into smaller chunks and spread those across some peer-to-peer lending sites with a preference to lend for new business start-ups or business investments - that way the money is doing some good towards boosting the country's economy rather than contributing towards damaging it further

Autocorrect hilarity - ate = are

I'd buy property - buy to let's
You'll always have an income off them

Property is an incredibly stupid investment. People only make money when they get lucky and the housing market goes up. Otherwise they are faced with all kinds of problems like tenants who don't pay, cost of insurance, property crash, maintenance/damage, untennabted periods, adverse changes in the local area etc. Just buy some safe sticks and double your money. Coca-Cola, Nike, Boeing. Another good investment is one that escapes capital gains tax etc. Art, emeralds, heat untreated rubies, first editions, vintage cars. Although be mindful of the costs of insurance. In your place I would 1. Make sure that I had enough cash/moveable property sitting there in the event of an economic downturn or political disaster and then just put the rest into safe stocks, maybe reserve a small amount for medium risk investing.

People tend to invest in what they understand (property, ISAs for example). I appreciate that long term investments such as pensions can be more complex for some people to understand but with that amount I would really recommend going back to an adviser. They can assess your short to long term needs and help you invest and save in the most tax efficient way.

I think many people fail to realise that buy to let is an actual job for some people. Probably because so many people 'dabble' in it trying to make capital gains. But it's a respectable career and can be done well.

But for you I doubt you'd have time to manage more than one properly, and letting agents don't really cut it for properly managing a portfolio.

I've put much of my capital into Scottish Mortgage Investment Trust and have seen an increase in value of 40% over the last 12 months which is pretty amazing.

30% of the country are not landlords.

Stock market is high and can only go down. Interest rates are well below stated inflation let alone the real figure. Property is risky as there are a lot of non paying trashers out there.

The UK government needs you to piss money away, so if you are more sensible than that your options are limited.

stock market is high and can only go down

I'd take issue with that on a globally based balanced portfolio.

If you find a good adviser they would put together a number of strategies, not least considering some of the tax plays you have available to you for the next 3 years. Find a Chartered IFA (not St James's bloody place).

I'm not a financial advisor, but personally I've found over the past 3years if you are interested in shares, and if you know where to look and how to research companies there are plenty of interesting high return opportunities within the mining sector. It's one of the few sectors that were absolutely decimated between 2011-2015 given its cyclical nature. They do come with more volatility however so if you are the type to have a panic attack when you see unrealised losses there is no point.

I'd go with the buy to lets. Can't go wrong in London, they will make you lots of money long term.

cant go wrong in London

I quoted the 30% from a talk I had recently heard but it didn't assert that 30% are landlords but that 30% own more than one property - which I took as lumping together both landlords and those who own a second home, which is even more damaging because as well as pushing up house prices it also doesn't add to the available stock of residential rental housing so also pushes up rental prices by restricting supply.

Apologies for quoting without fact-checking - I remembered the 30% stat but having Googled for a quotable source I find its not exactly that.

There are c. 27m households in the uk. (source). Of these circa 5m are owned by local authorities and housing associations for rental and 17m are owner-occupied by private individuals and 5m are privately rented, I guess 5m being roughly 30% of 17m may be where the 30% came from - I don't recall the exact phrasing in the talk I heard.

Obviously there will be a spread of the number of properties owned by each private landlord but 93% of private landlords own just one property (source)

It appears that it is actually around one in 10 adults who own more than one property (source) although more than half of those have their second and subsequent properties vacant either for their own occasional use or for investment purposes, and less than half renting the property our as a private let.

Apologies again for not fact-checking. I stand by my position that this boom in private landlordship (the number of dwellings being rented out by private landlords has doubled since 1996) is a cruel and selfish trend for which future generations will blame the current generation.

With that amount you really need to speak to an advisor to look at your long term needs and goals.

On a selfish note please don't buy to let/ investment. It only adds to an existing problem. High house values / high private rent. I want to write pages more on this but maybe a separate thread is in order.

You need to look at what term you're investing over.
Also- you said you're moving for schools, but are you not considering independent schools? That would take about half your sum (based on investing now and the interest earned.)

Why not use it to buy earlier now or are you saying that £500K isn't enough budget for your house? You could still use it as a significant deposit surely? Prices may well be softening but prime property will always be in demand if the price is right. There are rarely 'bargains' in prime locations.

Seriously, it takes some time to find a property you like in the right location - it took us 12+ months because we were extremely specific road wise and it took that long for something suitable to come onto the market. Next summer will roll along pretty quickly so I would keep the £500K liquid and start house hunting/stalking your target area.

We had an offer accepted in Sept ( 6yrs back) and had to wait for probate before the sale was completed 5 months later. Then we lived onsite for another 5 months while the house was renovated/extended to our specification. We basically had to build our own 'perfect' house but it was worth it in the end.

I would investigate something like the Vanguard LifeStrategy funds. They are a set of low cost fund of funds - a selection of their own market tracking funds. Or I would find a decent cheap investment platform (e.g. Interactive Investor), and use one of their ready made portfolios. Stick as much as you can in an ISA every year, and make sure you have a decent SIPP/pension.

Yes - also would looking into putting some in a peer-to-peer lending platform like Funding Circle.

In summary - I would do a few different things, and each year, I would try to transfer the maximum into my ISA.

With low interest rates, there's not much point in trying to keep your mortgage as low as possible. So long as you have ability to sell investments and pay it down if the mortgage rates skyrockets, you might as well take as big a mortgage as possible, and trade off the mortgage rate vs the rate of return on investments. I would change my view once mortgage rates go higher than 4%.

I think a number of different investments so that you don't end up with all your eggs in one basket. Don't know what you've got already but pensions are tax efficient so always a good bet. If you're under 40, then go with a LISA and do some other ISAs. I'm also in favour of BTL if you can get it right. I agree that doing it just for rent is probably not worth it but if you pick an area with a growth potential, then might be some money in it. But it is tricky with the new tax regime.

As you are planning to move house, you could generate a lot of wealth/equity if you pick a project. A property that can be extended and refurbished whilst increasing in value. That would kill two birds with one stone: you'd have a great place to live in and make tax-free profit when you come to sell.

see a financial advisor and ignore advice from randoms on social media

What dumbledore said!

I would agree with sahknowme that P2P lending is worth a look. It's an opportunity to diversify into an alternative investment, with the underlying assets not exposed to large market fluctuations, BUT, it does require research as it isn't devoid of risk.

If you "don't need" the money necessarily, then it could be a good way to earn good returns - P2P offers average of around 5% per annum.

Here's a good research resource if interested www.orcamoney.com/