Should I invest in a property to let?

[yetanotherdaytoday]

I am about to inherit* some money. It's enough for a cheap studio flat in my town, or a 1 bed if I go a little further afield.

If I don't invest it, I could easily spend it topping up my income as we're always living one paycheck to the next, and it'd be gone in a few years.

I'm thinking about buying a small property with it and letting it.

Is there any reason I shouldn't do this? It seems to make sense to me as it'd provide a modest income, and be an asset I could cash in at some point, or leave to my own DC.

Has anyone got any tips about being a landlord? Thanks.

(*Full disclosure, my mother inherited the money after my father died, and she has said she wants to give me and my siblings a large cash sum).

Good point, I'd invest in myself with training etc and then high interest the rest.

Shame NS and I closed their 6.2%

I'm a landlord but we treat it as a part time job. That means profits after tax are mostly ploughed into the building to keep it going (older high maintenance property) and any left go towards topping up an income. We are lucky in that when we have needed to invest in repairs we earn enough from our day jobs to do that but tbh it's a lot of work, don't go into it unless you are prepared to do it. For us it's a long term investment. Been landlords now for about 20 years and the property is worth a good amount more than when we got it. We are intending to use the rent as our pension income in due course as one of us doesn't have a pension but I suspect we might end up handing it to one of our kids eventually instead.

My London flat doubled in price over the decade I owned it. The equity was enough to buy a modest family home outright in the town I now live in, so I bought in cash and I have never mortgaged it.

I don't earn a huge amount and DP has health issues which mean he can't do the work he's trained for now, and his income is unreliable as a result. I fund the family at the moment.

It's possible (and I hope) DP may get back to work full time in the future, but I'm not relying on that or counting it in any thoughts about future income.

The trend won`t be up from here though, not unless interest rates go back to zero.

https://www.bankofengland.co.uk/boeapps/database/Bank-Rate.asp

I have a BTL and I’d say you need a buffer of at least 10k in case things go wrong - mine is paid off when my eldest child is university age and is an investment to put all children through university without braking my back in my 50s and 60s

I'm sorry about your DP.
Even more reason for one or both of you to retrain.

I've had CFS for 20 years so needed to invest in myself when I realised things weren't improving as my original career was no longer an option.

It's good advice, I could take that out of the lump sum and buy somewhere a bit more affordable than the town I'm in.

The next town down the road is cheaper, for example, I'd save £10k or more on a similar property there.

Sorry, I don't understand?

If I buy a flat now, for £80k, in 40 years it's going to be worth a lot more than £80k, no matter what happens with the interest rates in the short term.

Please show me anywhere in the South East where prices have stayed the same over 40 years - or 20 even?

I've a few rentals as also had some money I came into and looked into all possible bonds and stocks and decided on lets
But btl has killed me , as well as service charges - so have sold one but have kept my freeholds which I think are better investments if mortgage free

Know your property
Know your rental yield/area and who you can get
Do you research

Being good at the old diy helps too

Property in this way will also earn money in this country but you need a long term view

Weigh up the likely capital growth, rent and cost of maintenance and any service charges (you must pay these, not your tenant). You will be taxed on the income minus allowable expenses. You may want to pay for a managing agent, at the least you might expect to get a tenant through an agent and they will charge around 10% of the annual rent to do this.
Then consider how much you could earn from this money through bonds or investing in other ways (I wouldn't recommend stocks unless you are familiar with the market - brokers can take a fair chunk in commission and fees).
Finally, buying a property is not liquid - should you need the money for some unforeseen need you can't access it, though you may be able to take a mortgage against it.

High interest savings account OP (or index funds if you're relatively young).

With an interest account you'd be making about 5000/year on100,000 invested. It would be taxable, but still a decent risk free return. And no hassle.

There’s all sorts of things you can do with money! We have had property we let out and it’s now sold and profit given to DDs. Now we have most of our portfolio in pensions or ISAs. Pensions are a way better investment. They are also not subject to CGT or IHT.

Definitely don't do it... it'll be a money pit. It's not easy money. Changes in taxes, eviction laws and energy efficiency rules has seen private landlords selling up in their droves.

As a landlord you have to put your tenant first. This can mean spending money on something for your tenant ahead of your own family. Are you prepared to do that?

This is why I self manage. I have a pretty low opinion of the rental EA’s and don’t believe they’re a particularly effective buffer or help.

Again - I’m aware most disagree.

How far away is the town? Our property is 3 to 4 hours drive so getting there to do small repairs etc is an all day job and often requires hotels. Do you have the time and inclination to get there and sort issues?

Yes, this. Did you receive the money via a deed of variation on the will? Or was the money left to your mum and she's just decided to give it to you? have you considered deprivation of assets implications?

@Mazuslongtoenail I totally agree. Unfortunately my brilliant local agent was bought up by a chain and I'm abroad so can't do much myself.

In that case I would look at airbnb rather than btl. There is still work involved, however without the responsibility and risk of providing long-term housing.

OP, do you have some trusted tradesmen who’ll be able to go at short notice to deal with problems, such as leaks, tripping electricity, repairing the boiler, and general property maintenance? Tenants, rightly, won’t put up with having to wait several days or weeks for such things to be rectified and it’s your responsibility, not theirs, so they won’t be doing running repairs for you!

If it's not too far from where I live then yes, I have this covered.

It's a 20 minute drive.

The finances of the gift are another question entirely.

Suffice to say, my mum is financially savvy, has taken advice and had still decided to give myself and my siblings this gift. I'm not going to go into the details of that on this thread as it'll be a massive derail!

I would say yes an investment property is a good idea - but not now !
Lock your savings away in the highest interest rate account you can find for at least 12 months. Better purchase prices are coming and in the meantime you will get a good return.

Should also add the returns are better with airbnb

I would put the money into property but not a one bed flat, you won't make a good return compared to a house, better to use a decent deposit on 2/3 bed house