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  • FIRST POST
    • Jonobo92
    • By Jonobo92 14th Jun 17, 11:18 AM
    • 8Posts
    • 1Thanks
    Jonobo92
    Graduate with investment funds, but clueless!
    • #1
    • 14th Jun 17, 11:18 AM
    Graduate with investment funds, but clueless! 14th Jun 17 at 11:18 AM
    Hey there,

    New poster here, and also a fresh university graduate looking for advice!

    Basically, I'm leaving university this July and have £90.000 to invest more-or-less as I see fit; however I'm not exactly sure where I would see the most returns.

    My current plan is to spend £30k on a BTL house worth c. £65k, and then have the tenant's rent pay it off over, say, 10 years and then sell the property, hopefully at a profit, making £35k-£40k in the process. This is only really £4k a year though when it's broken down and I'm wondering if there are better ways to invest? I've read online too that there are new laws being implemented that make BTL a little less promising.

    With the remaining £60k I was going to look at buying a cheap property at auction and then developing it and selling it for a profit. Roughly £45k property, £15k development if that seems realistic?

    Would I be better buying a property at auction for, say, £75k, and then developing it with the remaining £15k and sell it on for hopefully greater returns?

    I'm really new to this whole thing, so I don't fully understand all the available tax relief options (or lack thereof), or other investment opportunities like REITs, however I'm trying to learn. I'm equally open to other investment options too.

    Thanks in advance.

    tl;dr How should I invest £90k in property?
Page 1
    • Lokolo
    • By Lokolo 14th Jun 17, 11:24 AM
    • 19,702 Posts
    • 14,698 Thanks
    Lokolo
    • #2
    • 14th Jun 17, 11:24 AM
    • #2
    • 14th Jun 17, 11:24 AM
    Why do you want to invest in property?
    • rentmekid
    • By rentmekid 14th Jun 17, 11:28 AM
    • 51 Posts
    • 25 Thanks
    rentmekid
    • #3
    • 14th Jun 17, 11:28 AM
    • #3
    • 14th Jun 17, 11:28 AM
    why not invest in property?
    • HouseBuyer77
    • By HouseBuyer77 14th Jun 17, 11:28 AM
    • 860 Posts
    • 823 Thanks
    HouseBuyer77
    • #4
    • 14th Jun 17, 11:28 AM
    • #4
    • 14th Jun 17, 11:28 AM
    Probably better off with the savings & investments boards.

    Still why so obsessed with property? You have a significant sum to invest, and a good piece of advice is diversify. You seem to be planning on putting the lot in the UK property market. Do you really want all your eggs in one basket like that?

    Do you have any property development skills or contacts in the trades that will allow you to get work done cheaply? Making a profit in development is not straight-forward.

    The other thing to point out is property is an active investment, indeed developing/being a landlord can easily be a full-time career, how much time are you willing to spend on tending to your investments?
    • saajan_12
    • By saajan_12 14th Jun 17, 11:34 AM
    • 638 Posts
    • 419 Thanks
    saajan_12
    • #5
    • 14th Jun 17, 11:34 AM
    • #5
    • 14th Jun 17, 11:34 AM
    There are lots of other investment vehicles, and any sensible portfolio would diversify in a range of sectors including equities, bonds, etc. Specifically regarding your suggestions,

    1) BTL: where would you live? most BTL mortgages require you own your home and have an income, as well as some age requirements. If you're inexperienced, there is a steep learning curve regarding legal requirements as well as dealing with queries, repairs etc, which can be difficult alongside a job.

    2) 'Flipping' a house: What do you think your value add would be here? i.e. why would someone who wanted to keep the house not buy at the cheaper price and renovate themself rather than pay the higher price including your profit? Answer: often because they don't have the time / ability to renovate cheaply. So, what makes you think you will have the time / ability to renovate cheaply? The profit here is from knowing reliable tradespeople or being able to do some of the work / contracting yourself. Do you have that?
    • DumbMuscle
    • By DumbMuscle 14th Jun 17, 11:35 AM
    • 196 Posts
    • 289 Thanks
    DumbMuscle
    • #6
    • 14th Jun 17, 11:35 AM
    • #6
    • 14th Jun 17, 11:35 AM
    Do you currently own a residential property which you live in? If not, you're not going to get a BTL mortgage. Assuming you're looking at buying locally, you seem to have enough cash to buy your own house outright, so why not do that (and you can still do it up to get more money when you sell it)?

    Being both a landlord and redeveloping a property (to a standard where you can turn a profit) sounds more like a second job than an investment.

    Do you have a job lined up that will give you a steady income? What are you planning to do with the money long-term?
    • G_M
    • By G_M 14th Jun 17, 11:38 AM
    • 40,500 Posts
    • 46,332 Thanks
    G_M
    • #7
    • 14th Jun 17, 11:38 AM
    • #7
    • 14th Jun 17, 11:38 AM
    Re the BTL, a steep learning curve indeed. Read:

    * Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

    Topics covered:

    * Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

    * Deposits:
    payment, protection and return

    * Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

    * Rent increases: when & how can rent be increased?

    * Repossession: what if a LL's mortgage lender repossesses the property?

    * New landlords: advice, information & links

    * Letting agents: how should a landlord select or sack?
    • ReadingTim
    • By ReadingTim 14th Jun 17, 11:52 AM
    • 1,816 Posts
    • 2,634 Thanks
    ReadingTim
    • #8
    • 14th Jun 17, 11:52 AM
    • #8
    • 14th Jun 17, 11:52 AM
    Are you related to this poster, here?

    You won't be getting a BTL mortgage.

    tl;dr you can't
    • Jonobo92
    • By Jonobo92 14th Jun 17, 12:06 PM
    • 8 Posts
    • 1 Thanks
    Jonobo92
    • #9
    • 14th Jun 17, 12:06 PM
    • #9
    • 14th Jun 17, 12:06 PM
    Hi again,

    Thanks for all these quick and extensive responses.

    I should really have made my position a bit clearer, my brother currently owns and lets two properties himself in our hometown, and so that is what drew me towards that idea.

    I'll also be living with my brother in his house all expenses paid, and the BTL could be bought under his name, or through his property company?

    Fortunately, I have an unlimited amount of time on my hands to be an active landlord, and to renovate, however in terms of trade-skills, I can paint and remove furniture - so I realise the costs may mount up paying tradesmen.

    Would I perhaps be better buying a £65k house outright, getting c.£450pcm rent and then save/invest the other £25k elsewhere? Or are BTLs still worthwhile when they're paid off?

    Where else could/should I invest my money, I don't really know of any stocks or bonds that do well etc. Should I pay an investment manager to do it all for me?

    Thanks again for all the posts/advice/links etc.
    • aneary
    • By aneary 14th Jun 17, 12:17 PM
    • 415 Posts
    • 286 Thanks
    aneary
    I would watch a few episodes of homes under the hammer.

    You find that 'Cheap' properties (the value you are looking at) have a very small margin in price between wrecks and renovated. If your skills are limited to moving furniture and painting you are going to make very little money as yes you will have to pay trades people who have the skills you don't.

    What did you do at Uni? Why not get a job, buy a home mortgage free and do that up to the standard you want slowly.
    • Jonobo92
    • By Jonobo92 14th Jun 17, 12:34 PM
    • 8 Posts
    • 1 Thanks
    Jonobo92
    Ah ok, thanks; so assuming property renovation is completely out of the window, where should I put my money?

    Owning my own home doesn't interest me as my brother's place is more than enough for us to live in comfortably, I'd really just like to put all of the money to work in a way that returns me the most profit.

    I studied English Language and Linguistics, and though I've been offered a job abroad teaching English, I'd rather explore my investment options at home first.

    This may be wrong but as I see it, if I put a £30k deposit on a £65k house, paid it off over 10years and then sold the house for £65k again, that would be profit of £35k, or £3500 per year before tax. Are there any other investment avenues that could return £3500pa from a £30k deposit, or have I completely missed the mark with those sums?

    Thanks again.
    • AdrianC
    • By AdrianC 14th Jun 17, 12:46 PM
    • 14,766 Posts
    • 13,125 Thanks
    AdrianC
    my brother currently owns and lets two properties himself in our hometown, and so that is what drew me towards that idea.
    Originally posted by Jonobo92
    So you have access to somebody with experience, who you trust, and who can give you advice focussed on your specific local market.

    Why ask us?

    I'll also be living with my brother in his house all expenses paid
    That's very generous of him...

    and the BTL could be bought under his name, or through his property company?
    You mean you would lend or gift him the money for him to buy another property.

    I would watch a few episodes of homes under the hammer.
    Originally posted by aneary
    Daytime TV should not be a great surprise to a student.

    His brother will, I'm sure, be only too happy to recommend a local plant hire firm to provide a suitably-sized digger and dump truck to move a large enough pinch of salt into place...

    Owning my own home doesn't interest me as my brother's place is more than enough for us to live in comfortably
    Originally posted by Jonobo92
    Do neither of you plan to have a partner at any stage?

    This may be wrong but as I see it, if I put a £30k deposit on a £65k house, paid it off over 10years and then sold the house for £65k again, that would be profit of £35k, or £3500 per year before tax. Are there any other investment avenues that could return £3500pa from a £30k deposit, or have I completely missed the mark with those sums?
    It would not be profit of £3500/year. You seem to have forgotten about the interest on the mortgage (around £120/mo at 4%), the costs of maintaining and improving the property, and any other costs arising.

    Work on a rough return of 4-5% before tax, and you're probably being optimistic. Then look around for other, lower-work and lower-risk, investments at around that return or better.
    Last edited by AdrianC; 14-06-2017 at 12:50 PM.
    • hazyjo
    • By hazyjo 14th Jun 17, 12:50 PM
    • 9,312 Posts
    • 11,753 Thanks
    hazyjo

    This may be wrong but as I see it, if I put a £30k deposit on a £65k house, paid it off over 10years and then sold the house for £65k again, that would be profit of £35k, or £3500 per year before tax. Are there any other investment avenues that could return £3500pa from a £30k deposit, or have I completely missed the mark with those sums?
    Originally posted by Jonobo92
    No mortgage interest?! Purchase/selling costs?
    2017 wins: Opera tickets; film preview; lipstick; Ideal Home Show tickets + afternoon tea & bottle of Champagne; 2 cases of NKD; notebook; bath rack; books; film Premiere; Broadchurch DVDs; lipbalms; hamper (food/wine/Echo Dot/Jo Malone goodies); Avon lippies
    • Crashy Time
    • By Crashy Time 14th Jun 17, 1:07 PM
    • 4,513 Posts
    • 2,046 Thanks
    Crashy Time
    why not invest in property?
    Originally posted by rentmekid

    http://news.sky.com/story/applications-from-eu-nurses-to-work-in-uk-down-96-since-brexit-vote-10913295
    • Jonobo92
    • By Jonobo92 14th Jun 17, 1:10 PM
    • 8 Posts
    • 1 Thanks
    Jonobo92
    Thanks for the responses, the dream was to spend a few years building a portfolio of properties that would eventually be handed over to a management service, creating as close to a passive income as possible. I realise this may well be just a dream!

    It seems I definitely need to revise the figures involved in purchasing/managing/selling property (basically all aspects!).

    Out of interest, how would you all invest the money, assuming you had £90k cash and already owned your own home? Would it be within property itself, REITs, or a different market altogether? (I assume as I am on this board there may be a bias towards property).
    • AdrianC
    • By AdrianC 14th Jun 17, 1:12 PM
    • 14,766 Posts
    • 13,125 Thanks
    AdrianC
    <points to Savings & Investments board>

    If you decide property IS the right solution, THEN come and ask here about specifics. Right now, you're jumping the gun.
    • DumbMuscle
    • By DumbMuscle 14th Jun 17, 1:15 PM
    • 196 Posts
    • 289 Thanks
    DumbMuscle
    This may be wrong but as I see it, if I put a £30k deposit on a £65k house, paid it off over 10years and then sold the house for £65k again, that would be profit of £35k, or £3500 per year before tax. Are there any other investment avenues that could return £3500pa from a £30k deposit, or have I completely missed the mark with those sums?
    Originally posted by Jonobo92
    Your total costs are:

    £30k deposit
    Plus £35k+interest from paying off the mortgage (assuming a generous 2% rate, you would pay £3,650 interest on a repayment mortgage, and £7k on an interest only)
    Plus costs from buying and selling the house (probably about £2k at a very generous estimate)

    So the house price would have to go up by £5-10k just to break even, before you even count costs to maintain the property, or the fact that all of the above estimates are wildly optimistic

    Your profit estimate doesn't just ignore mortgage interest - it ignores the money you are paying towards the mortgage! If you don't think that the bank will want their mortgage money back eventually, then I suggest you engage in peer-to-peer lending by giving me a loan on those terms!
    • Jonobo92
    • By Jonobo92 14th Jun 17, 1:16 PM
    • 8 Posts
    • 1 Thanks
    Jonobo92
    Makes sense, I'll head over there and ask for advice.

    Thanks for all the quick responses everyone.
    • aneary
    • By aneary 14th Jun 17, 1:39 PM
    • 415 Posts
    • 286 Thanks
    aneary
    Thanks for the responses, the dream was to spend a few years building a portfolio of properties that would eventually be handed over to a management service, creating as close to a passive income as possible. I realise this may well be just a dream!

    It seems I definitely need to revise the figures involved in purchasing/managing/selling property (basically all aspects!).

    Out of interest, how would you all invest the money, assuming you had £90k cash and already owned your own home? Would it be within property itself, REITs, or a different market altogether? (I assume as I am on this board there may be a bias towards property).
    Originally posted by Jonobo92

    I'd invest it in property however I have two things which you may not have, a father who is a carpenter with over 40 years of experience on commercial and private work so buy a house do it up and rent it out with a built in handy man. Second my mother is a solicitor so all contracts and most legal costs would be covered.

    If I didn't have parents in those positions I would probably have a mix spread in shares and savings but this would be a long term portfolio not short term.

    In your position being fairly young and having the opportunaty to make more money through employment I'd buy a home outright and hold some savings for a rainy day.
    • Crashy Time
    • By Crashy Time 14th Jun 17, 7:23 PM
    • 4,513 Posts
    • 2,046 Thanks
    Crashy Time
    why not invest in property?
    Originally posted by rentmekid

    http://www.independent.co.uk/news/business/news/us-federal-reserve-raises-interest-rates-by-further-025-a7790446.html
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