What would you do for maximum return on £65,000?

[HollowTalk]

I'm asking on behalf of a friend here.

My friend is downsizing and after paying everything off she'll have about £65,000 left. She is 60 and wants to do something with that money for the next few years.

As she's not in the south east, one option is to buy a small flat and rent it out. However, this probably wouldn't be in her own area so she'd need to pay management fees. There are flats like this student flat in Manchester which apparently give a 6% yield.

The details on this are:

Rental Amount is £135 per week, x 48 weeks for Academic Year 2019-2020 *
Lease is 999 Years from 2013 *
Ground Rent is £350 per annum *
Service Charge is £1924 per annum *
Lettings Fees are 8% +VAT

So, she'd take about £4,000 per year after ground rent and service charge, then letting fees and VAT would be another £400, so she'd get about £3,600. She wouldn't have to pay tax due to the nature of her existing job.

If you were in her position, would you buy this sort of thing or would you do something else? She does have family in the area who could deal with a disaster, but then that's what the letting agent is for anyway.

Any ideas would be gratefully received.

You would need to add the below costs for the flat;

Landlord insurance
Electricity & gas safety checks
Stamp duty if she already owns a property
The leaseholder may add on some extra costs
Survey before purchase

Costs if the property is unoccupied like council tax & utilities

Is the 6% guaranteed ?

Does your friend have a private pension ?

She possibly needs some to find a financial advisor

Interest rates on savings are currently very poor under 1%

Pre covid, I would say spend it on something that you would enjoy, like a round the world holiday

Perhaps, spend some & save some

Being a landlord, especially a student one, is a lot of work for only £3.5k a year.

It's a difficult amount of money, so I would see a financial advisor.

Yes, I think it wouldn't be worth it, financially.

She certainly doesn't want to spend it! It's her only security.

Student rentals are very sought after around the uni where I work as there aren't enough locally to go around. It wasn't great last year though. The university reimbursed students for university owned accommodation when Covid hit (despite many leaving their possessions behind). It led to all the private renters hassling their landlords for refunds and trying to get the university involved. They got a firm "we can't refund for privately rented accommodation or force your landlord to do so" but they continued to hassle landlords and letting agents for months then put lots of negative reviews online. I imagine it was incredibly stressful for the landlords.

I'd put it into an ETF

You can get some that pay a monthly amount of cash

@HollowTalk

I'm asking on behalf of a friend here.

My friend is downsizing and after paying everything off she'll have about £65,000 left. She is 60 and wants to do something with that money for the next few years.

As she's not in the south east, one option is to buy a small flat and rent it out. However, this probably wouldn't be in her own area so she'd need to pay management fees. There are flats like this student flat in Manchester which apparently give a 6% yield.

The details on this are:

Rental Amount is £135 per week, x 48 weeks for Academic Year 2019-2020 *
Lease is 999 Years from 2013 *
Ground Rent is £350 per annum *
Service Charge is £1924 per annum *
Lettings Fees are 8% +VAT

So, she'd take about £4,000 per year after ground rent and service charge, then letting fees and VAT would be another £400, so she'd get about £3,600. She wouldn't have to pay tax due to the nature of her existing job.

If you were in her position, would you buy this sort of thing or would you do something else? She does have family in the area who could deal with a disaster, but then that's what the letting agent is for anyway.

Any ideas would be gratefully received.

Don’t do it, big mistake. Just google student pod investments and you’ll soon find lots of potential problems; poor resale value, high costs, low rent due to long void periods, etc..

Invest the 65k in a 6 month cash fund for emergencies, pension and low cost trackers.

Thanks very much - she's decided against the student flat now. There's no way to know whether student life will get back to normal in the next couple of years.

She's going to invest in S&P500 for five years and rethink things.

Thanks for all your advice.