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?

Mortgage and pension. Pay off some of the mortgage to free up income. Overpay into your pension because everyone underestimates how much retirement costs to maintain a comfortable lifestyle.

Do you have children? If so are they likely to go to university? We were in a similar position to you and put it in s&s which then gave us money to cover uni accommodation and plenty left for us to have nice holidays and do nice things. We were already mortgage free.

if you’re not doing AVCs and are paying higher rate income tax when you’ll be a lower rate tax payer as a pensioner you’re losing 20 percent tax relief right there.

Before paying extra into your pension you need to make sure you fully understand how your pension works and it would then be sensible to work out what monies you need/want in retirement. Once you have done that, you will then have a better idea as to if your current pension projection and your state pension will meet your needs/how much more you want/need to put into it. Unlike a pension pot, the teachers pension will die with you, although there is probably a dependents pension which may or may not be important to you.

I decided against putting additional monies into my NHS pension and looked to fully utilising ISAs etc which I could then access monies when I wanted to rather than as a small monthly payment as part of my pension. It also would have taken years to get back the additional monies I had invested with no guarantee that I would live long enough to fully benefit.

I've got three different friends who all managed to hold on to their 'starter flats', when they bought something bigger together with their partners. They're all renting out their flats and it's been brilliant for all of them, I'm jealous as hell.

Is this different to BTL?

"I’m a higher rate tax payer and the calculations online say £17k a year. So do I need to prioritise this or is it decent enough?"

Only you can make that decision in reality. But don't forget that when you get to 67 you also get the state pension as well. That is currently £11,973 per year.

So at 67 you would be looking at an income of £29k per year in current terms.

Anything but BTL.

Presumably they own them outright, so no mortgage?

I wonder if they have done the calculation as to what they would earn on the cash if they sold up? Also capital gains tax on second properties has risen, so they will be hit by that when they sell.

Some of the new laws regarding tenants rights and renting out properties are still working their way through legislation, so they may get some nasty surprises later when the terms under which they can rent change etc.

"Is this different to BTL?"

No it isn't. But did they do this quite some time ago?

I suspect that it is more likely that it has been "brilliant" in the past but a lot less so now.

One other big thing that they will need to contend with whenever they come to sell is capital gains tax.

Let's suppose that they've owned that flat for ten years or so, the value of the flat will have increased a lot over that time. They will then have to pay either 18% or 24% CGT on the increase in value of the property from the time that they moved out and started letting it.

As many pp say not btl it’s far too much hassle and you can get better returns. Don't let the last 6 months of market movement put you off investing. If you haven’t recouped losses in last month or so it’s actually more to do with the £/$ exchange rate. I would look at the rates you are paying on car finance and mortgage. It will probably be worth it to pay off the cars but you can make more in S&S ISA than you can save on mortgage if you spend a bit of time researching the right investments.

I echo the PP who say don’t invest in BTL now, you’ll lose more than you gain.

Pay off more off your mortgage and if you intend to stay in your house for a longer period, think about what you can do to decrease costs/increase earning potential in the short and long-term.

For example, solar panels with batteries. Obviously there’s a cost up front, but after approximately 7yrs that’s paid off and you’ll consistently have cheaper electricity (so lowering your outgoings).

Increase driveway space/ add a garden room and rent it out.

Friends I know live near a tube stop and cut back some bushes in their front garden and increased their driveway and now have a passive income from hiring that space to commuters.

Similarly a friend rents out their garden annex on Airbnb.

The long term goal is to make your outgoings as small as possible (pay off mortgage, reduce utility costs) and increase income (rent out room, driveway space) etc so you not only have greater disposable income in the short term whilst you’re working, you also protect yourself if either of you lose your income (loss of job, disability, illness etc) oh and pay the maximum amount each year into your pension and ISAs to avoid tax.

Ummmmm for example - they sell for 100k more that they paid for the property, even without any relief and capital expenses, they'll still pocket 82k or 76k, considerably more after costs over the years

What exactly is wrong with paying tax on gains? its still a lot lower than if you earned that amount.

Recent turmoil in markets will continue as long as Trump is in power, so another 3.5 years.

I’m a higher rate tax payer

then you'll save more in tax than a basic tax rate payer, if you put more in your teachers pension - certainly look in to additional payments and remember the more you put in now - the longer it has to work. Usually you decide how much extra for each year at a time. you can do more to start and gradually reduce - as you have the lump sum to fall back on for extras

Recent turmoil in markets will continue as long as Trump is in power, so another 3.5 years.

much as I dislike rtump - ive made more money on S&S since he took over in January

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

I didn't say anything about regular savers?!

The stock market is low, making it a good time to get in. Use a recommended broker, don’t just wing it. Alternatively, put it in a high yield savings account, there’s some good ones available. If you BTL, by the time you cover all expenses, it just about washes its face and there’s no guarantee you’ll walk away with anything more than your initial investment.

Oh I did say "regular savings" - sorry! I meant normal savings (not a regular saver account).

Have a look at AJBELL investment platform. They have been recommended by Which. They have lots of educational resources for the investors with all levels of risk appetite and experience. They have regular accounts, ISAs, SIPPs. I also think they have bonds too. I am not interested in bonds. I wouldn't go into buy to let. I think you just need to get some proper education on stocks and shares. Also consider subscribing to Money Week. You get 6 issues for free. We are still on 1.24% mortgage rate as Money Week started talking about inflation 12 months before it hit the UK. The subscription paid for itself many times over

I'd get a btl property to let out. I'm an experienced LL with 11 btl houses and in process of buying number 12. If you know what you are doing the rewards can be high because of you buy interest only you will cover mortgage and any maintenance and gas and electricity certificates whilst bringing in £300-400 pcm. At the same time over 10 years some of my properties have doubled in value. I prefer to see what my money has bought me.

If you do chose to get a btl property buy through a ltd company not as individuals as more tax efficient if higher earner.

I use AJBell, they have their own funds too which are low cost.

Are your a btl LL? I am and I think your advice is poor. Most of my houses are interest only, but not all of them. If I pay £400 mortgage I can charge £800 pcm rent. If bought through a ltd company the mortgage interest can be written off against tax. As more btl investors drop out of the market rents will only go upwards. Some of the houses I bought 10 years ago through my ltd company have more than doubled in value. Plus during this time I've enjoyed a monthly income or approximately whatever the mortgage is in profit. If I advertise a house at least 20-30 people want to rent it. EA vets all tenants carefully for affordability and credit score and I get a home owning guarantor for each property let out. I very rarely have a house empty more than 1 month in a changeover of tenants but most tenants have stayed with me for 5+ years. I keep all properties well maintained because I want them to go up in value and I can deduct maintenance costs from the tax bill. I managed them myself so choose tenants I like. If I got a really troublesome tenant I'd simply sell the property and buy a different one.

I use AJBell funds in my SIPP too

No it isn't, FTSE100 is at nr all time high, S&P and DJ all have almost recovered to early March highs.

Trump could do anything over the next 3/4 years, causing further turmoil, now i'm not saying avoid S&S but it is not risk free and investors should be happy to invest over the long term & be prepared to see substantial losses at times.

@caringcarer is dead right on BTL, in the right area, with a small mortgage or better still none, it can work, rents are only going one way & imvho a lot of the rumoured legislation wont happen, its not in the Govts interests to have even more LLs leave the sector.