200k to invest

[SillyNavySnail]

I am about to sell a small house I lived up before I met and moved in with my partner, which owned outright and rented out to friends for the last 4 years. Now worth 150-160k.

I also have inheritance, I have been stashing in locked away high interest accounts, moving some into my pension and s&s ISA each year.

I also paid for an extension on partners home, effectively buying 20% of the property. He pays the rest of the small mortgage. That setup will stay like that.

I was originally thinking go use my money from the sale (after cgt), plus my inheritance savings, with a 75k mortgage, buy a £250k property in a more desirable area and rent again. On paper, I'd earn slightly more in top savings accounts, but property is also an asset that will increase in value. I've accounted for cgt.

However, would I be better investing in SP500 etc, which is a risk, but not necessarily more than property (I flipped 3 houses in the past btw)

I have two children under 3. I opened an s&s ISA for both and put in 1k to both.

This money is for my retirement and their future. But, who know if in the future I may need to buy another house for us to live in if relationship breaks down etc. Or if my family will move in the next 5yr. That's one reason I'm perplexed with what to do

Many thanks

Given you're not married and have young children, I'd be focussed on my future security so, depending on prices in your area, would be looking to buy a (small) family home which would be easy to rent and which I could move into with the DC if I had to. That would matter to me more than potentially getting a better return. You don't want to be in a position where you want to leave but can't as the markets are down.

If you haven't already I would put £50,000 in premium bonds, tax free and you could win big. You can do PBs for children too. I find it a good place to leave some money I might need, quick access to. I'm not sure about S&S at the minute a lot of conflict around the world and US elections. Property always seems like a good bet and if you've rented before you know what you are getting into, although rules on renting seem pretty harsh on landlords these days almost impossible to get bad tenants out.

I have quite a bit in P2P lending risky but high rates. Look at: https://p2pindependentforum.com/
For information only I recommend nothing, just a possible alternative for money you are willing to risk, there were some real cowboy firms out there and there may well still be! Do your research.

The exception to that would be if you are planning a wedding soon and will be selling your partner's current place and buying a new one together and need your money to put towards that. In that case, there is no point in tying your money up in something longer term like property

There are tons of properties for that in the north!

Hi, it's not that simple. You often can't just evict tenants quickly and easily. Also, if I did buy property, it wouldn't be a different value property to what I'd buy to live in myself. I.e likely no garage and a £250k rental, definitely garage (I run a garden business with lots of machines) and a £350k property for a home.

Not married, but in the event of a split, partner would need to buy me out of our house anyway, currently around 100k for my 20% share. Which that goes up/down at the same rate as other local property

I am thinking of putting a small amount in p2p through an isa. Just listening to a finance podcast now which mentioned that, thank you

Premium bonds aren't worth it now though. things changed around maybe 5yrs ago and there's no real value in them anymore. Such incredibly low returns. My s&s ISA has been performing very well for years, and still is, and I can draw money out of that in an emergency

Getting into property now is madness - the returns are just not there any more and you can guarantee this govt will see us landlords as rich pickings. See an independent financial adviser to talk through your tax efficient options including putting all or part of this money in a pension fund - we all completely underestimate what we will need for a comfortable retirement

Property returns are poor and legislation increasingly restrictive. CTG is likely to rise. And property value doesn't actually grow as fast as you might think once you account for inflation.

PB rates have actually been pretty good for the past couple of years, but are now dropping again. Possible home for an emergency stash, but not for the whole lot. Certainly not for anything you want to put in the children's name's - a JISA or getting them.started on a pension are much more inflation proof.

If you dont think you're likely to need fast access, I'd be using a GIA rather than savings accounts for the bulk of it - and drip feed from there into ISA and pension as you are doing.

Yes I think overall I would agree with this.

The only thing to consider is how easy it would be to get tenants out if and when that time came

The plan for buying property though also includes an increase over 10/20 years though, not just the monthly return.

Also this is buying without a mortgage so no interest to consider.

That increase can vanish when you adjust for inflation though.

Average house prices adjusted for inflation:

Now £265k
2014 £291k
2004: £311k

Pre 2000 they were lower, and there was a rise from the 1970s to the end of the 20th century:

£129k in 1975
£139k in 1985
£135k in 1995
£179k in 2000

and a big jump to

£240k in 2002 and
£311 in 2004.

But most of the rise since the mid 70s was in that odd millennial jump, it's not by any means a steady trajectory. And since then the fiscal landscape has changed substantially, with very different approaches to interest rates, inflation, lending policies etc.

So the past 20.years of decline is at least as likely to predict future trends as the previous century's rise.

remember there is likely to be capital gains tax to pay (albeit you will be able to reduce the liability for the months when you were living there as your primary residence)

Thank you for comments

There will be a mortgage if I buy another property, I'd only a buy a much better property in a much more desirable area than my current house, which is why I am selling it now my friend has moved out. If it was a decent area, I'd just find new tenants.

I bought that in 2016 for £78, spent around £10k renovating, it's now should sell £150-160. I would buy a property for around £250k, with a 75k mortgage.

There is cgt to pay on current property and would be if I bought another property.

My worries/concerns, worse case is. Relationship could end, in which case I'd need a huge chunk to buy a £300k+ family home. Even on around £40k, with overheads, 2 kids etc etc I'd struggle with a large (700/month etc) mortgage. Pension contribution etc would have to drop from 600 to virtually nothing.

However I invest this money, property or otherwise, will become part of my pension. For the last several years my s&s ISA is performing way better than my pension, both through vanguard.

What I'm thinking, is suggest to my partner I pay off the bulk of our mortgage, paying off 20% of the property value (90k), taking my share of our property to 40%. Means he'll be paying much lower mortgage, more money for the family (we could pay some of this into kids ISA/savings acc) and his personal savings. And if we ever did split up, I've got equity from 40% of the house price, enough for a good deposit for another house.

Then I have around 110k left. Keep 10k easily accessible, in April put 20k into ISA. Leaving 80k. Perhaps 70k into shares elsewhere, 10k I can take a higher risk on

you really do not seem confident this relationship is going to last Op

i would plan on it not

Do you work?
Does he?
Who earns more?

I'm looking at worse case scenario, I have 2 children and am not married. I'd be stupid not to look at worse case

absolutely

what does your partner think you should do with the money?

Is marrying out of the question?

Working?

I think OP and all women actually are wise to plan for worse case scenario, why wouldnt you. Everyone should protect themselves financially and have plans in case they need to end a relationship

You obviously have good experience with property already. I'm a strong advocate at focussing on what you know, you'll also be better prepared to deal with the more stressful times that are inevitable with any investment.

We both work. He works more, I work 3 days a week. I have two young children, wouldn't work much more (odd extra day at a weekend).

He earns more, around 50k, I'm self employed but forecast around 38k this current tax year. We both put money for bills, nursery, days out, camper van overheads and campsite, stuff for the kids etc into a joint account, proportionate to what we earn.