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Advice on what to do with inheritance

Options
My mum died two years ago and left me a house worth around £230,000. The insurance has paid off the mortgage so I own it outright. The house is in Newcastle and I live in London with no intention of moving back.

I'm 31 years old and live with my girlfriend in a shared, rented flat in central London. People say I'm mad because I should just sell up and buy down here but part of me doesn't want that responsibility.

I'm currently renting the house out to bring in a bit of extra income while I try and go freelance.

Ideally I want to be doing something useful with the money but to be frank I am terrified of it.

Although it would probably be difficult to get a mortgage because I've just gone self-employed (although my girlfriend is in full-time employment), I like the idea of getting our own place.

However, I can't help feeling that this is the sort of opportunity which could set me up financially for life if I play my cards right.

I know some people (buy-to-let moguls/property developers/stock-market whizz-kids) would kill to have this sort of opportunity but I am terrified of losing it. What do I do?

This may sound like the whingings of a spoilt child but for the last two years I've been shocked by grief into inaction and it's only in the last six months I've started getting my life back.

Please help.

PS. I'm posting this on other threads as well because it falls under lots of other categories.

Comments

  • Chrismaths
    Chrismaths Posts: 931 Forumite
    It all depends on what you want the money to do for you, and how much responsibility you want to take on board. As I see it you have these options:

    1. Do nothing.
    Rewards: If the housing market rises, the house will be worth more money.
    Risks: If it falls it will be worth less. You'll also be paying council tax and have all the responsibility for looking after the property.

    2. Keep the house and rent it out. As you live in London, you'd probably want to get a managed let so you didn't have to fix things that break.
    Rewards: You'll get a rental income - work it out as a percentage of the value of the property. If the housing market rises, the house will be worth more money.
    Risks: Void rental periods (time between tenants), bad tenants, maintenance bills, falling housing market.

    3. Sell the house, buy yourself a property in London.
    Rewards: Your own house, plus if market rises, more money. No more rent money.
    Risks: Maintenance of your house, if you need a mortgage for the excess, this is secured on your property. Falling housing market.

    4. Sell the property, and put the proceeds in high interest cash deposits.
    Rewards: £11,000 per year of gross interest - if you pay BR tax this reduces to £8800, HR = £6600 so net returns of less than 4%.
    Risks: Inflation eating into the value of your capital, bank going bust (unlikely)

    5. Sell the property, and invest the proceeds.
    Risk and rewards: Completely dependent on what you want.

    One way to analyse you attitude to risk is to ask yourself "I'm investing for x years, during which I won't touch the money. How much do I want to guarantee myself at the end of that time?". The longer the time period, the more risk you can afford to take - the shorter the time period, the less risk. What you are left over with, you can afford to take some risk with, in order to get a better potential return.

    What you chose depends on what you want the money to do for you.
    I'm an Investment Manager. Any comments I make on this board should be not be construed as advice, and are for general information purposes only.
  • HGLTsuperstar
    HGLTsuperstar Posts: 1,904 Forumite
    Put it this way, if the house is just sitting there empty, and no mortgage on it, why aren't you renting it out on short-term lease while you make your mind up!
  • Yes....thats why he said;-
    I'm currently renting the house out to bring in a bit of extra income while I try and go freelance.

    I don't have much advise to offer you, but I am sure others will be a long very soon.

    regards
    pot
  • Ian_W
    Ian_W Posts: 3,778 Forumite
    Part of the Furniture 1,000 Posts Photogenic
    Chrismaths has basically outlined your options but if you go with 3-5 and sell the house, what you do with the money could be mix n match. In other words, they're not mutually exclusive, you could use some for a decent deposit on a house in London, keep some in savings accounts [better stiil a cash ISA] for easy access and invest the rest for longer term growth in equity based funds [again using your ISA allowance as much as you can].

    All those are options - as is starting a pension [never too young], buying a holiday home abroad, investing in art, buying gold etc, etc, etc. The point is you have loads of options and you have to research them and decide what feels right for you. If buying a property in London doesn't feel right ATM, don't, provided you don't spend it all you'll be able to do that when you feel ready.

    Although it's come about in a tragic way you have a start in life many who've worked damned hard for many years can only dream of, thanks to your mums efforts. I'm sure she would be pleased to know that she's helped with your life so don't be terrified of losing it, enjoy it.
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
    I'm currently renting the house out to bring in a bit of extra income while I try and go freelance.

    It's come at the right time then, hasn't it, as it gives you the back-up income to allow you to try out the freelance idea.

    So just keep doing what you're doing now, until you know if the freelance thing is working out and you're going to make good money and be successful.

    If so, and you then have what looks like a secure ongoing income, you can sell the property and put a chunk in the bank for a security back-up fund, and use the rest as a house deposit.

    Or something like that, depending on how things are working out at the time.

    No need to panic, just follow your instincts, you're doing the right thing.
    Trying to keep it simple...;)
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