How would you invest £200,000?

[user1468007267]

We have just been told we can access £200,000 of inheritance money. We would like advice on the best way to make this grow.
Buy a property and rent it out? Make it into an HMO? Air b n b?
Buy a property, do it up and re sell?
What would you do and why please?
Minimal risks and don't need the money straight away.
TIA

Investments, from a decent financial advisor, not housing.

Property seems like a good idea, but being a landlord is my worst nightmare and I don't believe the returns would be worth the effort. Property is a good bet generally, likely to always go up. But I suspect the period of massive growth is over. So a decent investment in stocks, spread over different sectors would be less effort and give a good return.

If you put your current position in ChatGPT it will give you a very well explained rundown. I asked it re property vs investments and it did a good comparison, factoring in likely growth and tax implications and showed the reasoning. It was very good info. (And investing came out above property for a short answer).

I would invest in stocks and shares funds, not property. With property, you need to maintain it, find tenants, hope they don't trash the place and have nothing coming in if there are gaps in tenancy. Diversify your portfolio, so if one sector does badly, they don't all follow.

How old are you and what’s your pension / tax status? You can put up to £60k in a pension each year and the fact you get tax relief makes it generally always an excellent investment.

The first thing I would do is speak to an independent financial adviser. It's free and they can give you lots of options.

We use a mix of stocks and high interest savings accounts.

Please seek professional advice before making any decisions.

Regarding property investment:

An HMO could be a good option if you have experience in property development and strong contact and relationships with tradespeople - will save you a lot of money and headaches.

As for Airbnb, I would advise caution unless you can secure a property located in a prime area with consistent visitor traffic and a strong local economy that creates demand for temporary accommodation year round (contractors, local authorities, locum doctors, etc.). The market for Airbnb rentals has become quite saturated, and not as profitable as influencers on social media make them out to be. Many are simply trying to sell courses.

On figures:
Consult a professional first.
I don't know how old you are, but given you said you don't need the money soon. You might consider lending your LTD Company the £200,000 with interest, and then having it repaid over a period, example say 15 years. You would be liable for tax on the interest earned, but please fact-check this and do not take it as professional advice.

If I were to pursue this strategy, I would focus on BTL properties in an up-and-coming city/Town with relatively low property values. Building a small portfolio of say 4 properties with decent deposits and low mortgage repayments
Recoupyour initial £250,000 instead of taking a salary over the agreed period, while building equity. You can pass the properties on or exit the market.

no one can give you any meaningful view as we know nothing about you or your wider financial situation and objectives.

You mention different property investment but also minimal risks. Just my personal view but those two things don't really go together, unless you really know what you are doing - which with no disrespect if you are having to ask MumsNet then I'm assuming you don't.

See a financial adviser. I’ve owned a rental property and I strongly advise against this. The potential hassle is just not worth it. Plus, when you sell you’ll be stung with capital gains tax.

Initially find a savings account so I could earn some interest, at 4.5% I'd be making £9K pre tax. I like lower risk so I wouldn't fancy property - to me lots of things could go wrong. I think as others have said investments for long term growth but I wouldn't know where to start with that! Get some advice for a chunk like that to make sure it works for you.

First put the money on deposit. You can get 4.25% currently in easy access so £8.5k pa or £700 per month.

Next buy flat and let it out. It’s regular money; the only work is when someone vacates and you need to find a new tenant and occasionally fixing something; you will make a small amount of positive equity each year. Don’t use an agent as they will take a big chunk. Use Open Rent to market your flat and they have lots of other services too. Around me you would get a 2 bed flat for £200k that you could let for £1,250 per month so £15k pa so after tax £12k.

Not Airbnb/ holiday let = lots of work, risk of low bookings some years, no income in winter, one bad review and you’re screwed. Only really viable if you do the cleaning and laundry yourself. Ditto repairs.

Ive done both.

How you enhance your finances with this depends on lots of things; whether you have debt/mortgage, what life stage you're at (retired? not yet retired but wanting to retire early?), whether you have other assets already and what kind, whether you have children to support, etc.

As a risk-averse person, what I'd imagine doing is socking it immediately in high-interest accounts across multiple banks (because over 85,000); putting as much as possible into an ISA, some into my pension to support retiring a bit earlier, earmark some for my mortgage, aiming to pay off the 10% I can without penalty each year; and put almost all the rest into a mix of investments.

I would talk to an IFA or three first.
I wouldn't touch property with a barge pole, either holiday let or long-term rental.

We are in similar situation and we are planning to buy a property and rent it out. Even if vacant at times and repairs needed, it will still bring in more than a high interest account and probably more than investing which also has its own risks.

Only invest money into something you fully understand. To me, it’s property. I can see it, touch it, it’s brick and mortar, I know how much I paid for it, know it’s market value etc. On the other hand things like the stock market or cryptocurrency are too abstract to me and I don’t really understand them, so wouldn’t invest in them. I vaguely know about the stock market but it’s kind of a volatile and unpredictable thing, as the value of different things can always change. You really have to learn and study it in order to confidently use it. And cryptocurrency is like Chinese to me so I wouldn’t touch it with a barge pole.

Renting out property can be a nightmare. I’ve had a tenant who stopped paying and refused to move out. The new laws are making things even more difficult. You soon won’t be able to evict a tenant. Some tenants are on the phone to you every five minutes. I had one who drilled a hole in the wall, to fit a curtain rail and hit a water pipe. He was straight on the phone to me. I’m just about to complete on the sale of the property and have a substantial amount of capital gains to pay.

Having done it, I wouldn’t advise anyone to be a landlord especially with the new tenancy laws.

On £200k it's probably worth paying an IFA if you aren't very knowledgeable, but what they will tell you will be based on:

https://ukpersonal.finance/flowchart/

considerations will include paying down mortgage or other debt (but depends on interest rate and what tax bracket you're in), considering any large purchases such as cars, home improvements or moving house, aiming to get a chunk into S&S ISAs (if you are married and haven't used this year's ISA allowance you could have £80k in S&S ISAs by early April next year, keeping half of it in the best instant access savings account for the time being). If you're higher rate tax payers, it might not be a bad idea to put £50k each in premium bonds if you don't already have any.

Whether to put some in pensions (but your age is relevant here) or just save/invest until you can get it into ISAs. You'll also need to consider the tax implications and if you have DC whether you want to save some of it for them.

Buying a property and especially not an HMO (are you mad, where on earth did you get that idea from?) is unlikely to be a good idea. I'd also step away from ChatGPT which at best is going to give you a badly written mash up of better quality information and at worst will give total nonsense/US based content so irrelevant to you assuming you're in the UK.

Perhaps don't rush into things and just put it in a cash ISA/instant access savings account for the time being until you think about it and perhaps get a bit more knowledgeble so you can get most out of your advice if you take it.

If this is inheritance from a deceased relative I am sorry for your loss. If someone is passing on money while still alive they might pay less tax by doing so gradually.

Without knowing your current income, commitments, dependents, marital status, life plans, pension arrangements no-one can give you good advice. But some general tips

Property needs an understanding of the laws around contracts and for rentals a great deal more. It's increasing regulated. Personally I wouldnt do it. You can, of course, invest by buying shares in builders. If I was buying property I'd buy a student property and look to rent to 3rd year or postgrads or property near a hospital.

If you havent already used your ISA allowance this year consider 20k each (you said "we" but how solid is the relationship?) in a cash isa. You should have at least 3 months outgoings in easy access cash. personally I think 6 months is better.

Paying off debts, including a mortgage, can be a good use for the money. If you own your own property a well planned extension can be a good investment or energy saving measures may reduce future outgoings.

Gilts can be a tax efficient low risk investment but dont be frightened of the stockmarket. www.cazenovecapital.com/en-gb/uk/wealth-management/insights/why-cash-is-riskier-than-stock-market-investing/

Also note that if you decide to put in fixed deposits split the funds between the various banking groups to get most protection. Think (as I’m not in UK) the protected amount is £80k per group. Eg RBS and Nat West are the same group so I wouldn’t put more than £80k in total between them.

I feel like I would buy a shop, something in an area where it’s unusual but would get clientel, for example a Afro hair shop stocking hair products in an area where there were black people but not necessarily a local shop in that area

Excellent advice.

Under the present rules you can each put this amount in a SIPP and get tax relief.

If you would like to have access to the money before you retire then open 2 investment ISAs. You are able to invest £20k each in each tax year.
I have ISAs held in Interactive Investor and invested in a global tracker.

I hold my children’s ISAs in a platform robo investor - Nutmeg. Since 2019 the Nutmeg investments have returned a total of 70%. My own choice investments in ii are at around 40%.

Our remaining investments are held with a financial advisor/ fund management team and have returned 30%.

During the ups and downs of the market the fund management investments didn’t seem to be any ‘safer’. So in comparison Nutmeg won hands down.

That is a woeful return on your investment if you're looking for long term capital growth.

A simple Vanguard Global tracker returned 99.2% since 2019.
A simple Vanguard S&P 500 index tracker has returned 149.5% since 2019.

By comparison:
UK property prices on average rose 25% since 2019,
and average rents typically returned an average of 3-5% per year of property value - excluding expenses. Excluding London that rises to about 7%.

£50k each in premium bonds.

£20k each in Stocks & Shares ISAs in a mix of investment funds to suit your risk appetite.

The rest in a savings account until next April to put another £20k each into stocks & shares ISA.

Buy some gold coins.