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?

Sounds like your stocks and shares investment is weighted toward the American market (S&P) and you bought not long before Trump was elected. It was bound to have a bigger effect than if you had a more balanced spread. Consider that you would want to invest in more sectors to hedge your risk.

I personally would put more into a pension for the tax relief as it doesn't sound like you need it now. Potemtoally pay off some mortgage. Then invest the rest into isa's to have ready money if someone loses their job etc.

Watch the ‘Making Money’ podcast. Very informative about how to invest

Agree with everyone (or almost everyone!) - don’t do BTL. It’s a stress and not particularly lucrative for a single property. A whole portfolio of them is a different kettle of fish altogether!

with 140k I’d overpay mortgage, pay into S&S isa for myself and DH, make additional pension contributions and put the rest into fixed rate bonds or similar high interest accounts. then next year Id top up the ISAs and the pensions and the mortgage and repeat.

Maybe put money into the kids names depending on the circumstances.

, its not in the Govts interests to have even more LLs leave the sector

blackrock are buy entire developments off plan - to rent. There isn’t going to be a shortage of landlords - just a different type

Agreed. And a lot more people sleeping in tents as a result, I suspect!

Ok you need to ignore your investment experience of one year, that’s not how investments work! The rule is very basic - leave money in market and you WILL make money. The other rule is leave it to the experts.

Use a platform such as nutmeg or vanguard, choose your risk levels and leave the money there.

Yes I agree. One of the flats will have at least quadrupled in value, meantime the mortgage has been fully paid off by the tenants. My friend gets income every month, and even factoring in CGT she'll get a big chunk if she decides to sell. The flat is in Edinburgh so she has limitless choices - rent, sell, air bnb, or her teenager may want to live there. It's been a hassle at times with maintenance etc but when her current tenants move out she's going to do a full upgrade before re-letting. It's been a total godsend. How can owning property in a decent area ever be a bad thing? Tax is paid on income, and income is always welcome!

Buy to let rent should pay for all or most of mortgage,
vs our increase better then savings etc
giid luck oh and lucky you

The income isn't income if it goes mostly to the banks as interest for your BTL. For example post Truss, my mortgage went up to £775, and tenant paid £825. You see that as profit of £50 pcm, the government counts all of that £775 as income (which it isn't as it's mortgage payments) now subtract your building insurance (£25 pcm) now subject your self assessment Tax on your income (£125pcm) That's rental income of £825 is now costing you as a landlord £925pcm. That's before a tap leak or broken oven. We are losing minimum £100pcm. Yet everyone hates LL. 55% of rentals are single LL properties, only 8% of all Rental stick is run by businesses.

..but thats the thing isn't it? you borrowed when rates low, never accounted for historical interest rates of approx 5% and then are now in arrears when rates inevitably went up.

As i said earlier, no one should borrow on retail interest rates for a BTL business but if you're mortgage free, its a still a very secure income.

Aside, people don't hate LLs, they just hate the scummy ones who treat tenants very badly.

You "did" the stock market wrong then. It's hard to lose money over time unless you make terrible decisions. A diversified global fund, rather than individual stocks, with money drip fed in gradually to ride out any shocks (such as the orange wanker's tariff fiasco), and an understanding that it's to be left there for AT LEAST 5 years, if not 10, is a good idea.

OP, £140k is a relatively small amount of money these days, although very nice to have. In your position with nothing solid behind you (ie. no house owned outright, cars on finance), I would NOT touch buy to let with a bargepole. That is for people who are in a much more solid financial position than you in my opinion. You still don't have an owned roof over your head. Your mortgage is still high. Where is your sinking fund for your own house if it needs major repairs at some point, never mind on a rental that you have another mortgage on?

It sounds like you were unlucky with your timing of your S&S. I was too when I put some money into S&P500 in a general account just before Trump did his tariff damage. But I will leave it in there as I know it will recover. The money I had in my S&S account before COVID took a hit and have since recovered and made a lot of money. I gave DS £1000 on his 18th and he put it in a Vanguard fund just before Putin invaded Ukraine. Just bad timing. He left it there and it has recovered and now doing well.

There is sometimes an argument for not paying off some of the mortgage in one big go, if, instead of making steady overpayments of the mortgage every month you drip feed it into investments instead.

I just wouldn't put all your eggs in one basket. There is a lot to think about. Ideally you want to be rid of any high interest loans eg the car, because they would just eat any profit you make on savings interest or investment returns.

I'd want to make sure my emegency fund was robust.

I'd want to make sure my pensions were as good as they could be because of the tax relief advantages.

I'd want to be thinking about the stage of life my children are at and whether parental contributions to uni costs are on the horizon, and earmark some savings for that.

You could drip feed 20k a year into a S&S ISA over a few years - shop around for some high interest savings accounts, mixture of easy access and longer term ones, so that each financial year you have access to £20k to drip feed into your ISA. (This is as long as your mortgage interest is low.) Some people would put all the rest in a general account and do a "Bed and ISA" every year shifting 20k across to their S&S but I'm not sure I'd do that in your position. I'd prefer some cash reserves in a high interest savings account elsewhere.

You would use all that money up in just 7 years just filling your ISA up each year. You would be very surprised how quickly 7 years will fly by.

My S&S ISA (global tracker with Vanguard) which I've had for 6 years is up 55%. I've put the full 20k in each year.

Conversely I threw 18k in a general account all in at once to S&P500 just before the tariff crisis and watched in horror as it lost a huge amount over a short time. It's coming back up now though. Still not in the positive but I won't take any out and it will definitely be making money eventually.

FTSE Global All Cap is a really good option for you. It's basically a bit of everything, world wide. S&P slightly more risky at the moment because of the US focus and the fact we have a lunatic in power in the US so who knows what's going to happen while he's in charge. Some investors who have more of a financial cushion than you and a mortgage fully paid off would maybe see the low points of any period of volatility as an opportunity to invest for the long term though with the hope (high probability) that in 10 years time it was worth doing.

Pay some of the mortgage. Don’t buy a buy to let. You don’t make enough money and when you sell it you have to pay property gains tax.
Pay a chunk of the mortgage off and put the rest in ISA’s and premium bonds.

OP wouldn't pay any tax on gains inside her ISA.

Only if she opened a general investment account outside the ISA tax wrapper.

The savings allowance is for bank/building society savings interest. Returns on investments are treated differently. If OP had money in investments outside of her ISA ie in a general investment account and they made money in a tax year then she would be liable for tax on any dividends (the dividend allowance has come down quite a bit and it's now only £500 - you need to pay tax on any dividends received above this), OR if you sell investments from a general investment account and make a profit then you are liable for capital gains tax upon selling them.

Be careful if you have investments in a general investment account as there are 2 share classes - income and accumulation - both of which are treated slightly differently when calculating tax for capital gains. Income class is easier to calculate gains.

With respect, a letting agent is always going to tell someone to invest in a house and let it out.....

You don't always get your money back with a house. I know people who have bought new build houses or flats who have sold years later and on paper it looks like a small gain but when factoring in inflation they've actually made a big loss. If someone is going to buy a BTL, you REALLY need to do your homework on property values of similar houses in the area, and the likely increase in value over time.

OP also doesn't need an IFA for such a small sum. OP sounds like they would do just fine by reading the right information on various financial forums. Also sounds like they have a moderate attitude to risk to me. They don't need a FA to charge them money to tell them that.

It is foolish to refer to all investing as "gambling". Day trading is different. If you go all in without reading up about investing, that's different. With some solid background reading and educating yourself first on what not to do, investing can be very fruitful.

Don't worry, there is special "temporary high balance" protection for 6 months for lump sum inheritances put into a bank account. Is it a fixed term account? It's unlikely there will be issues anyway....

Pray, tell us how. Did you put a load in when the market tanked and have made big gains on the upturn?

Then you're in a completely different financial situation to OP, if you are a landlord of multiple houses, aren't you? They are your safety net. You can just sell one. OP would own neither of her 2 houses outright, and one of them is the roof over her head. If there is a bad tenant on the BTL would she just be able to sell it, like you would, if the value had dropped? With sales costs etc she would be potentially looking at quite a loss.

Poor advice from you, in my opinion, for someone who is not at all in a similar situation to you.

I don't own my btl houses outright. They still have a mortgage on them. It's possible to rent for approximately double what you are charged for mortgage because you've paid 25 percent deposit.

I’ve had rental properties for more than 25 years. I’m doing OK . We use a reliable local letting agent. If you only have one property and need a mortgage, I would not bother due to interest rates, tax, changing rules about EPC not to mention difficulty with evicting tenants who damage the place or fail to pay the rent.
At the moment my S&S portfolio is doing far better.