Investment Opportunity

[madderthanapissedonchicken]

If someone offered you an investment opportunity: you put in 20,000 to see a return in 5 years, how much would you expect to see back.

This would be someone close to you and you would be doing it to help them out, but also make some money yourself

Alarm bells would go off.

What experience does the friend have in investing? Why does it benefit the friend if you invest, it should benefit you?

Is this an investment that is regulated or some too-good-to-be-true scam?

Is this 'investment opportunity' regulated by the FCA? Are they offering a 'guaranteed' return? Investment opportunites to 'help someone out' generally don't help the person doing the investing

Nothing, I would expect nothing back in those circumstances

Is this investing in their business?

Could they borrow from a bank instead? If not, I wouldn't even think about it.

I'd expect to never see them again! I wouldn't expect them to know the first thing about investments and I'd invest my money in a bank or an ISA, not with someone I knew. You're just gambling otherwise.

Investment opportunity? Which also happens to “help them out”. Aye right.

I’d only hand over 20k under these circumstances if I was fine with getting nothing back, not even my original 20k.

I’d do it if they have a long and successful track record of building businesses, and if I had enough money to act as an angle investor. Also if I had the acumen to check out their business plan, and see if it was better than other opportunities.

It's nothing dodgy.

It's buying a house through a government scheme. Under the rules of the scheme the house can then be sold after 5 years at which point the money (£20K) borrowed would be returned, with extra of £XX amount

I didn't go into details as I just wanted to know if this was an immediate family member offering you this and asked you to say how much extra you would like to receive back, what do you think would be reasonable?

I take it it’s a council house being sold at a discount.

There is a risk that you may not be able to sell for how much you think. And your friend may not be able to afford to buy something else in 5 years time especially if they give you a share of the equity.

For a house, a percentage of the increase.

But house prices can fall as well as rise, they may not want to move when the time comes, and they house they want to buy next will also have gone up.

Joint ownership of a house can get very messy. And there may be tax or eligibility implications if you already own (and if you don't, you'd lose first time buyer status).

Yes that's right.

£100K discount.

Do you mean there'd be a risk if house prices were to crash massively?

What percentage would you think would be reasonable?

They would want to move. The house isn't in the area they want to live, and this is a way onto the housing ladder.

It would only be there name on the house, so the money would be a loan until house is sold so would affect first time buyer status etc

Immediate family member = my child, I’d loan them the 20k interest free.

Any other family member, I’d want the equivalent percentage increase in the house price. With a clause in there that I get at least 5-8% return guaranteed, even if the house price doesn’t increase more than that, or if prices crash through the floor.

And it want it drawn up legally, which may cause issues if they’re buying a council house.

What percentage would you think would be reasonable?

The percentage you are putting gin.

Rather than waiting five years, could they afford to pay you back over that period? Say at 7% APR?

What is value of house - £100k discount off a £200k house is very different from a £500k house?

5-7% would be reasonable. To make up for it not being in your own bank, assuming it's not your own child? Then I'd be interest free.

£100k discount off a £230k house

Under the scheme a discount not usually needed. But the mortgage needed on the remainder, after discount, is £20K less than what they need for the house

If there was a way it could happen do you think lend £20K, receive £25K back would be a good enough deal?

Or would you think more £30 k back?

Five years? 30k back

Thanks 👍

Are you prepared to lose the 20K?

Sorry, I don't follow this at all.

Why are they getting a discount if the scheme doesn't normally give one?

Do you mean the mortgage they can get from an official lender is £20k less than the discounted cost of the house?

@NoBinturongsHereMate sorry! Yes I meant a deposit wouldn't usually be needed. But the maximum mortgage they can be lent is £20k short of the discounted cost of the house, which is why they are looking for £20k

Ah, so you'd be putting up a deposit and they'd get a mortgage for the rest? No mortgage company will permit that unless you provide a signed letter confirming the deposit is a gift, not a loan.

Yes I know it would need to be confirmed as a gift.

Just looking on opinions as to what people would think is a reasonable amount to receive back