£200k to invest - what would you do ?

[northernladuk]

Be careful with these alternative ISA investments. They have zero protection. I would put them higher risk than shares or property. If there are a large number of defaults you lose your money.

I'd personally have something like a HL ISA with some low to medium risk funds in the hope they'd make more than peer to peer income and avoid the peer to peer ISAs.

So I think we are on the same page?

[DimPrawn]

20 years is quite a long timeframe, so I'd personally go for a broad equites and bond ETF or fund with low costs, that pays a decent yield.

Take a look at something like:

How to build an income portfolio out of cheap 'tracker' funds
The cheap tracker funds that aim to mimic Warren Buffett (or other investing strategies)

Over a long period, there may be some ups and downs, but it's hard to beat this approach.

[northernladuk]

It is a long time as DP says so I assume the OPs mate has already covered paying his mortgage and debts off and throwing half of it at a new house that will enhance his life and still be there for old age when he can downsize after kids move out and the like. Also giving lump sums to the kids to set them up as well.

If that were me I'd be making sure my parents and kids were sorted before investing whatever is left.

No good having 200k + returns in the bank when he's old and end up being the richest person in the graveyard.

[northernladyuk]

It is a long time as DP says so I assume the OPs mate has already covered paying his mortgage and debts off and throwing half of it at a new house that will enhance his life and still be there for old age when he can downsize after kids move out and the like. Also giving lump sums to the kids to set them up as well.

If that were me I'd be making sure my parents and kids were sorted before investing whatever is left.

No good having 200k + returns in the bank when he's old and end up being the richest person in the graveyard.

They're not your parents, and they're not your kids.

[northernladuk]

They're not your parents, and they're not your kids.

Crikey. There might have been a better way to drop this bombshell on me surely?

[northernladyuk]

Crikey. There might have been a better way to drop this bombshell on me surely?

From whose perspective? That was minimal effort.

[stonehenge]

It is a long time as DP says so I assume the OPs mate has already covered paying his mortgage and debts off and throwing half of it at a new house that will enhance his life and still be there for old age when he can downsize after kids move out and the like. Also giving lump sums to the kids to set them up as well.

If that were me I'd be making sure my parents and kids were sorted before investing whatever is left.

No good having 200k + returns in the bank when he's old and end up being the richest person in the graveyard.

That's probably what I would do if I came into £200k. Mortgage rates may not stay this low forever.

Buying a nicer house, and/or being mortgage free, would give me a lot more satisfaction than investing the money.

[mattfx]

OP I am in a similar situation to you. This is not in any way advice, just my opinion and an illustration of how I'd like things to pan out for myself.

My strategy is admittedly, very property focused with the aim of getting out of IT and hopefully, full time employment by the time i'm in my 40's.

This year I will purchase 2 BTL's at approximately 130-140k (offer accepted on my first one 2 weeks ago) in an area that yields 700/month for that type of property. The deposit for these houses is in the region of 35-40k depending on purchase price. Once you've accounted for solicitors fees, refurbs etc you're looking at an investment of approximately 50k. (tip - finding converted houses which have been split into flats means ground rent and service charges are usually nil - increasing yield.)

The actual breakdown of my first purchase gave me an ROI of 8.77% and an annual profit of £4000, if my math works out and assuming the value of the property doesn't decrease.

Next year, all being well with the low maintenance AST flats I will look to buy a bigger house for the purpose of multi letting. the cost of which will be almost double but, allows for much greater cash flow.

Once I've got those under my belt, i'll be looking at an annual profit of £16-18000. Admittedly, it won't set the world alight.

However, come year 3 and again, assuming all has worked out.. There will be enough gas in the tank to purchase another property with the profit made from those houses. Furthermore, assuming there has been some capital growth and that I have bought below market value, come remortgage time I will be able to release some equity to fund a further purchase or, join the two sums together and get another multi let for max cash flow.

Rinse and repeat and you've still got a large cushion in the bank and a growing portfolio of properties. Assuming 4 successful repetitions of this, you'd end up with 8-12 properties over the course of 10-12 years. We already discovered an achievable profit of £18,000 p/a based on 3 properties, so if you had 8 you could assume an annual profit 40,000+. This would be enough for some (most) to get out their day job and do something else, with minimal hands on effort.

You could take a way, way more hands on and far more aggressive approach to the above, but I want to be reasonably hands off and treat the income as passive, where possible.

The other 50K ... spread between ISA's (Zopa and HL Stocks and Shares would be my choice). Or, buy yourself a nice car, pay off a chunk of the mortgage and focus on the property. Admittedly this is an all eggs in approach, but even if the market crashes and values pummit, rental demand will still remain high, you may just have to alter your strategy or be a little more flexible on tenants.

If you're going to venture in to property ensure you speak to an accountant about the perks of doing it via a limited VS doing it as your own purchase. The tax benefits of going ltd. seem abundant to me, but every persons circumstance is different.

Probably all very optimistic, but, hope this helps.

[northernladuk]

(tip - finding converted houses which have been split into flats means ground rent and service charges are usually nil - increasing yield.)

But also come with a host of other problems. The increase in yield just isn't worth the potential pitfalls IMO so I've stayed away from those setups.

The actual breakdown of my first purchase gave me an ROI of 8.77% and an annual profit of £4000, if my math works out and assuming the value of the property doesn't decrease.

Nice. Have you taken tax in to account there as well as any future changes including reduction of mortgage interest as an expense for example? Landlords are being hammered at the moment which creates quite a bit of uncertainty. I'd also expect a massive correction in house prices over the time period you are looking so there is the gamble of what the market looks like at the specific time you are exiting.

If you can achieve those numbers the you've done very well but I'd also work a plan for the worst and make sure that fits your long term goals.

Don't get me wrong. I'm a big believer in property as well but the years have taught me it rarely follows the best case plans.

[Zigenare]

I'll never sell the house where my mother was born, and where I hope to live forever until I die as a rich man! We can get by quite well on four thousand francs! I'll buy a mule, a load of miner's tools, and some dynamite to blast this damn rock! In a year I'll pay off the mortgage, and we'll be set!