Inherited 140k- what would you do? Get a little buy-to-let property or invest in S&S???

[icantwaitforsummer]

Recently inherited 140k, would love some advice from experienced people, what you would do with this amount?

For info, married mum of 44, mortgage of 300k, both have pensions. No real debt other than cars on finance. Have one ISA that is full and dabbled in shares with £1000 S&P 500 and Vanguard ETF global, which is doing poorly and at a loss.

Husband and I have been thinking about getting a little buy to let property for 200k, interest only mortgage and just manage ourselves for 15 years. This appeals to us as you can ‘see your investment’ in bricks and mortar, Dad was a builder so doing bits doesn’t scare us.

BUT I have researched and stocks and shares seems better for long term gains. But you invest and it just ‘disappears’ into the magic invisible investment world and that’s so scary.

Im not very experienced with S&S and my little play around investing £1000 last year hasn’t done well, I know you have to leave it for years, but I think I will be so stressed if it’s now 100k+ invested, I would be watching it all the time. I think I would find it more stressful than a physical investment or is that just ridiculous because other people do it?

The general advice is usually to get rid of debt first and the interest it costs you, so overpaying the mortgage to some extent makes sense. If you want to consider the relative merits of pension / investments, it might be worth consulting a financial advisor. They would take a percentage, but could advise on S&S ISAs that are managed funds and low-moderate risk if your aim is long term growth.

Another ex-landlord here saying NOT A BUY-TO-LET for all the reasons already mentioned by other PPs. I just sold mine last year after 10 years.
The landscape is very different from when I bought it (after my parents died and left me an inheritance). It made financial sense in the first 5-6 years, but after that I would have been better off sticking the money in a global index-tracking fund (which is what I've now done with the money from the sale).

You don't need to make any rushed decisions. The general rule is to pay off your most expensive debts first. How much are you paying for the car finance? Can you end it early without penalty?

What's you mortgage rate? Sometimes mortgages are the cheapest forms of borrowing and it makes sense to keep a mortgage of e.g. 3% if you can get a return on your cash of 5%.

Topping up pensions and ISAs for you and the kids also good.
If you want time to research more and decide you could even stick £50k (each) in Premium Bonds for a year and hope you win - at least you won't lose your initial sum.

There is some terrible advice being given here - other than ‘don’t get a buy to let’.

Over a 15 year period an investment in S&S is likely to outperform a BTL / paying off some of your mortgage / a savings account etc.

You don’t need to pick stocks yourself - put it in a tracker fund, these can be very low cost and are managed by someone else. It also allows you to use your ISA allowances to ensure any growth is tax free.

Sorry, but I really don't think £140k is worth engaging a financial advisor. They will end up taking at least £5-6k in fees just for talking to them!

Best to take time and also wander over to the forum at Money Saving Expert and see what other people recommend (this question gets asked a lot, and although everyone's circumstances are different, the broad advice principles tend to be the same).

Thank you for these replies. It’s seems everyone says avoid buy to let.

Ok, but this is my worry, if I just focus on paying off my mortgage, which I could do with this inheritance and then the pension lump sum at 57. But then what? I’m 57 and have no income other than a small pension a year, about 15k a year.

If I invest in S&S, or a property I have an asset that will keep paying me as well.

That would be the dream, retire at 57, have a little pension coming in each month, mortgage gone, maybe a little 2 day part time job, but also a little asset or shares paying a bit more monthly, whilst I wait for state pension.

Is that unrealistic?

My husband owns a flat that he kept when we bought our house. We rent it out but we don't really make much on it so it just ticks over. I inherited a large sum from my grandad a couple of years ago. I've used some of it to do renovations to our new house and to buy some nice things but the rest I invested with the help of an IFA. Every year they move money over to ISA's which we've put in both our names to maximise what can be moved. It's invested in funds within the ISA's.

BTL are a massive hassle and even when they are all running smoothly the returns are awful. Also doing it on an interest only mortgage makes them doubly bad - how will you pay the mortgage when your tenant decides not to pay you rent anymore?

As an ex landlord I would strongly advise against BTL. I had two lots of mortgages and homes to take care of and loads of hassle. When I sold the BTL I was able to overpay my residential mortgage by 20% a year (as were the terms) and paid the rest at the end of the term. There’s a calculator on money saving expert which was really useful. The other option is to get rid of cars on finance if you can. It always works out way more expensive. These are a debt you really don’t need and will free up money each month

Before starting to throw money at any debt including the mortgage you need to take in account interest rates (plus any early repayment fees). It doesn’t make sense to clear debts if the interest rate on the debt is less than the rate you can get on savings. Don’t forget that you will also need to consider tax implications if you put the money into a vehicle which is not tax free.

Get advice from a financial advisor. Ours advised us not to pay down our mortgage when we got the occasional lump sum eg from a bonus.

I really want to be brave and put a chunk into stocks and shares but look how rubbish what I have invested is doing, it’s puts me off!

Sorry I think your plan of retiring at 57 is unrealistic. BTL for all the reasons articulated. And while you could get some income if you invested wisely in shares, remember it’s taxable. You might do well, but what’s the average return? 10% might be in the ball park… so £14k taxable. Out of which you have to pay mortgage. But shares can also go down.

There is a great video on YouTube by James Shack, he explains things really clearly. Basically whether it is better to pay off your mortgage early depends on the interest rate.

If your investment would grow at a higher rate than your interest rate, then you are better off investing now, and you can always use some of the investment later on to clear your mortgage if you have to.

S&S Should be a better bet over the long term eg the next 15-20 years. But for the short term they are a bit risky due to the situation with Trump. Having said that some individual shares are doing well.

I assume the £140k value is clear and there isn't mortgage to be repaid from the estate that will bite into it?

In that case I would keep the property and rent it out. Put 65% of the rent into an investment account or S&S (keep 35% in easy access savings to cover repairs, periods without a tenant etc). If you rent out for £1000 a month and put £650 a month aside in S&S which grows 8% annually in 10 years that will be £113,000.

In several years time you will have that PLUS the property itself will have increased in value (average of 73% over last 10 years).

Then if you need to stop work early, or health problems arise you will have a lovely cushion behind you .

If you pay down your mortgage you will only have a gain of whatever the mortgage rate is eg 4 or 5%

That's because of Trump's tarriffs. Bad timing!
You have to think very long term with S&S, hold your nerve and not look at it too often.

Once you've paid off your mortgage, you could invest the money you're saving in stocks & shares funds etc to build up a worthwhile portfolio for the future. I think that's what you're missing. The last thing you should be doing if you do use the inheritance for paying off the mortgage is just spend what you'd otherwise pay on your monthly mortgage instalments!

This is the right objective advice. It’s not necessarily the right advice for OP if she knows she isn’t happy with volatility and is likely to panic sell.

Pay some into your pension (not your DH’s, yours) and put 20k in a S&S ISA.
Have a think about the rest.

I wouldn’t do BTL. Increasingly costly and if govt is serious about housing costs and planning reform then that will limit appreciation.

If you can bear to invest and forget it then I’d buy shares via a low-cost ETF. You are young enough not to need the money immediately. My personal view is that valuations will rise a lot but it will be a very bumpy ride over the coming years/decades.

Especially good if you can do so by paying more into your pension (very tax efficient).

If you are more risk averse then either pay down debt, or put into pension and invest in a lower-risk portfolio.

You really need to have a least a 5 year investment window if you want to invest in S&S!
You have unfortunately been hit (as have we all!) by Trump's tariff madness in the US which is creating market uncertainty.
If you're going to be checking your S&S every 5 mins then this really isn't for you!

How old are your children? Will you be funding them through university?
Have you taken out ISAs for them?
When you say your ISA is 'full' do you mean for this year?

My personal advice would be to park the money somewhere 'safe' i.e. high interest savings accounts (not more than £85k in a single bank or building society group) and /or Premium Bonds, then give yourself at least six months to read around, get advice from forums and try to understand your options and devise a plan.

I’ve recently sold my parent’s flat and the invested money is the same amount as the rent was without any hassle.

In that case I would keep the property and rent it out.

She doesn't have a property - other than their own home?

S&S is always risky, should go up over the long term, but it is volatile and the way the world is at the minute I wouldn't be putting that money there. It depends what the interest rate on your mortgage is, if it's very low I would put the money into high fixed rate bonds assuming the rates are higher than the mortgage rate, take the interest as income and keep the capital to pay towards the mortgage when you want to. Check the rules on lump sum payments off your mortgage if you choose to go that route, there often are limits and good times and bad times to do it, possible penalties.

Are you higher rate tax payer? If you are worried about pension then investing in your pension now makes the most sense.

Your concerns over investment is because you have chosen a self managed fund whereas if you invest in a pension, you may get additional pension tax relief and it will be managed for growth.

Remember any income from rental will be taxable.

I would review your pension, speak to money helper and look online at their calculator. Money invested in S&S over 10 years will do well over that period of time. A year or 2 is not a good period to invest.

...'put £650 a month aside in S&S which grows 8% annually in 10 years that will be £113,000.'

That is a very big assumption, it might grow at 8%, it might grow at 4% or not at all. Past performance is no predictor of future performance, and 10 years is not a big time scale for S&S.

I always recommend people work through https://flowchart.ukpersonal.finance/ to help decide priorities

Both MoneySavingExpert.com and www.reddit.com/r/UKPersonalFinance/ are useful sources of discussion to gain more knowledge/ get ideas.