Property or pension?

[SicklyYellow]

I'm about to inherit around £150k
I'm self employed, late 50's, no pension.
Should I use this money to invest in a flat to rent out/use for retirement or invest in a pension?
Thanks.

What are your other circumstances?
Own your house?
Savings?
Paid enough NI contributions for full state pension?
Married? If so Status of spouse’s pension and savings
What was your retirement plan before you got the inheritance?

I will only have the state pension so bought a small one bedroom flat outright to rent out. I use a managing agent - 10% of the rent is his fee.

I couid have had a mortgage but didn't want the stress of needing to pay a mortgage if the flat was empty. I chose very carefully, especially the location, near transport links and a huge supermarket, parking and a communal garden and a very long lease length.

It's not been empty through lack of tenants yet.

It has also increased in value.

Own house, but still owe £80k on that. Can't overpay or do lump sum for next 3 years. Paying that off at £1,000 a month.
Savings around £30k. Currently invested in stock market and in serious decline, so don't want to touch those.
Will have full state pension as Will Dh.
He has no private pension or savings. Also has own business. Between us we seem to be able to live fairly well day to day, but no extras for savings.
Also have One Dc18 to support through uni.
Been pretty rubbish at financial planning, so really need this inheritance to work in the best possible way for our situation.
Any advice most welcome.
Thank you.

Talk to pensionwise - free government advice.

Meaningful Money podcasts are excellent, I would listen to some of those.

pension will have tax advantages, especially if you are higher rate tax payers - you will get the tax back effectively. Or if non tax payer you still get a % added. There are annual limits depending on earnings and it’s complicated so do research/get advice.

ISA will give you tax advantages on the way out - ie no tax when withdrawing.

you might want to balance paying off mortgage/pension/ISA

but all depends on your goals and risk tolerance.

Investing in a buy to let means investing in a business.

You need to run your numbers: calculate all the costs (upfront costs, legal costs, renovation, agency fees, taxes), estimate realistic gross rental income, and calculate how much you make under different scenarios (what if the property stays vacant for x weeks, what if the boiler breaks down, etc).
You cannot do that on the back of a fag pack, you need a proper spreadsheet.

Have you done that? if you wouldn't know where to start, don't do it, you'd be investing in a business without understanding the implications.

Property. You already have £30k in savings.
Generally prices go up so you keep the capital plus the gain (minus cgt if you sell ) whilst taking an income.

It is irresponsible to give this type of definitive answers without any context.

What are you on about? It's my opinion.

If someone asks you: which are better between Volkswagens and Kias and you simply answer "Kias - it's my opinion", without adding anything else, is that a very useful answer?

Maybe no universal answer exists and it all depends on the profile, needs, etc of each person?

I'll answer how I like.

It might be a bad time to get into property for investment, although that depends on the yield of the property you buy - we could be at a peak in the market right now due to concerns about rising interest rates and a potential recession looming, although you're at an advantage if you can buy a property without a mortgage.

But you also need to think about whether you want to be a landlord and spend time doing repairs or sourcing tradespeople to do them.

Problem with investing would be that if we do have a recession, investment products might not have time to recover before you need the money. But you do have the tax relief, which is an instant boost to your money.

I'd probably split it between a pension, S&S ISA, 2/3 fixed rate savings product as a self offset against the mortgage with the intention of using this money to overpay/pay off the mortgage when you can, some cash savings to help DC with uni or possibly house deposit (some people buy flats for their DC to live in at university and often buy a 2 or 3 bed place so they can rent out the other rooms, so that could be an option worth exploring).

Other things to consider is are there any big purchases that you could benefit from? Home improvement, especially energy efficiency measures like solar panels? Electric car to save on petrol/diesel?

Possibly spend some of it on something like a bigger holiday than you normally take?

If you don't need the income right now I'd invest in property with a small mortgage that would be covered by the rent (best to make sure only 8-10 months of rent maximum needed - leaves spare for in between times and repairs) and then continue paying off your own home. Then when it is mortgage free it will provide you with an income in retirement.

We have a property which we rent out (albeit to family on mates rates as we charge them half the market rent) but our cash investments are getting us a return of about 6% which I think it's hard to get through renting out, and you don't have the maintenance headache to deal with as well. I think if I had to choose I'd probably invest (but do get good Independent financial advice!) I also suspect landlords will be stung with extra taxation soon but we'll see!