Early-retirement wannabe

atush

bones1958 wrote: »

Thanks for comments so far.

Should maybe clarify re the rental property. It's rented out for £750 pm and after some landlord expenses and factor expenses, nets myself and sister £325 pm each. Think that's what you've assumed from your comments. Is that a yield of approx 3%?

Would I be better off selling the property and finding an alternative means of investing my £110k share?

The yield is approx 3% less income tax at your highest rate less any void periods and major expenses, replacements, damage

atush

Stirfry wrote: »

I should add I also worked for a Bank. How do we get over being risk adverse?

why would working for a bank make you risk averse?

RBS and other casino banks put us into a worldwide crisis with their gambling?

You need to read up on risk, and all types of risk. Some people think that cash is risk free- but it isnt.

stephennt

bones1958 wrote: »

Thanks for comments so far.

Should maybe clarify re the rental property. It's rented out for £750 pm and after some landlord expenses and factor expenses, nets myself and sister £325 pm each. Think that's what you've assumed from your comments. Is that a yield of approx 3%?

Would I be better off selling the property and finding an alternative means of investing my £110k share?

Before selling you'd want to look at whether your expenses are too high, or whether the current rent is too low for the area/property.
If you think you are achieving the maximum possible yield then you could probably do better investing elsewhere.

Ray_Singh-Blue

bones1958 wrote: »

Investing money for higher rate of return has not been an option open to me over the years. Maybe the 'working for a bank' effect has made me more risk averse and taking a risk fills me with apprehension, rightly or wrongly. I prefer to take a safer more or less guaranteed approach. Should I stick with thinking this way or take a punt?

You seem to have your lifestyle and finances dialled in, the result of 40 years of work and sensible living. Why would you want to take more risk now, in retirement? Enjoy the golf!

AnotherJoe

Stirfry wrote: »

At just under 3.5% it seems a bit low, but remember they have not had to pay fees to buy the Property, and they get to hold on to the Family home for a bit longer.

We moved from our Family home in September, the proceeds from the sale and an earlier Inheritance sit languishing in long term fixed savings accounts paying between 1 and 3% interest. We are considering Buy to Let as an income/investment. jamesd makes a convincing argument about P2P but we are totally risk adverse, I suppose it is being comfortable with what you know and understand.

Why on earth do you think BTL is low risk?
-Tenant stops paying rent for months.
-Tenant wrecks the place.
-House prices fall
- Unforseen expenses to maintain
-Tax changes make it even less profitable than now.
- CGT to pay on profits

At least with P2P you have your risk spread amongst multiple "tenants", its not all or nothing like a tenant for your BTL, the headline returns are higher by a fair margin, and you'll never be run up at 3am to say there's a problem you need to get fixed immediately

This is aside the ongoing hassle from the rules and tax forms

jamesd

Stirfry wrote: »

We are considering Buy to Let as an income/investment. jamesd makes a convincing argument about P2P but we are totally risk adverse, I suppose it is being comfortable with what you know and understand.

That's definitely being comfortable with what you know: P2P of the sorts I'd suggest is a good deal lower risk than BTL.

jamesd

bones1958 wrote: »

I take it there is an element of higher risk with this type of investment?

There's definitely higher risk than in an FSCS protected term deposit account. There is no FSCS protection for the investment value of investments, in general. There is for some other things like fraud but that is also not present for P2P.

bones1958 wrote: »

Investing money for higher rate of return has not been an option open to me over the years. Maybe the 'working for a bank' effect has made me more risk averse and taking a risk fills me with apprehension, rightly or wrongly. I prefer to take a safer more or less guaranteed approach. Should I stick with thinking this way or take a punt?

Not a punt, but an experimental investment to get more familiar with what's available.

Consider the "Basket of Secured Loans III" investment at Ablrate that is currently £312k towards a million Pounds of desired borrowing. The borrower lends money to car dealers for stock, with FCA regulation of that business. Interest rate is 12%, maturity is 18/12/2019. Purpose is to continue expanding the business. Protection is provided in these ways:

1. The cars are security, the loan is no more than 70% of CAP retail value.
2. If a dealer defaults and the borrower is still in business, the borrower will swap out the defaulted one for anew one with no lender loss.
3. The asset are all owned by a special purpose vehicle, a company set up just to hold those assets, independent of the borrower, and the loans are also secured on all assets of this SPV.
4. There's an additional corporate guarantee by the main borrowing company.

Alternatively, on the secondary market there's a loan to an invoice finance company paying 12% originally, available at a bit under 12% on the secondary market in reasonable quantity. These are secured on the goods and also have credit insurance of at least 90% of the amount lent on the invoice or alternatively, a letter of credit confirmed by a UK bank. So long as the borrower is in business it'll also cover any shortfall on an invoice payment. Maturity is 8/7/2018.

Switching platform to MoneyThing, there are many loans of ID AE* that pay 12%. The borrower is in the business of selling mainly used cars on HP to poor credit record customers. Protection for this includes:

1. The HP payment stream is to be at least twice the outstanding loan balance.
2. The loan is no more than 80% of the Glasses Guide retail value of the cars in used condition.
3. Each loan is for a package of cars and HP loans associated with them. If a HP purchaser defaults and the borrower is still in business, the borrower will swap out this for a new one with no loss to investors.
4. There's a charge registered at Companies House that identifies each vehicle individually, so the precedence in insolvency is at the higher end vs generic charges.
5. All of the cars have trackers installed.

Main recovery on these if the borrower failed would be the HP payment stream, with the cars a fallback for defaulting HP buyers. Loan term is 6 months with a renewal check box that you can tick to automatically buy into the replacement loan if you don't want to exit, assuming the borrower still wants the money.

You can find less interesting things as well. The business lending varies quite a bit depending on the specifics of the deal. The ones I've described are the sorts of thing I look out for because of the multiple layers of protection involved and they are the sort of thing that explains why I've got well over 100k in P2P at the moment.

Both Ablrate and MoneyThing have secondary markets where you can buy and sell loans. MoneyThing's is a bit faster moving at the moment but both work fine. You can probably sell something over £20k a day at MoneyThing during the daylight hours. But for either, exiting before end of the loan term shouldn't be an issue at present.

There are plenty of other options in P2P, though. Some have protection funds but pay less, others pay a pittance without much of a protection fund and anything in between. I've mentioned a couple that seem particularly interesting to me.

I have money invested in each of the loans I've mentioned, or a previous version of the same thing. There's a chance that you might buy off me on a secondary market but it doesn't currently look likely for any of the loans that I've mentioned.

jamesd

Stirfry wrote: »

I should add I also worked for a Bank. How do we get over being risk adverse?

By taking some risk, in a quite well diversified mixture of things, so that you don't have a painfully large amount of money at stake in any one thing. Takes a while to get used to it and some people might never be comfortable with the uncertainty even if that uncertainty is mostly on the up side.

That's also why I suggested 10% of the money initially: not horribly painful if things did go wrong and when you have more experience you can consider more or less, as seems appropriate for you.

bones1958

jamesd wrote: »

By taking some risk, in a quite well diversified mixture of things, so that you don't have a painfully large amount of money at stake in any one thing. Takes a while to get used to it and some people might never be comfortable with the uncertainty even if that uncertainty is mostly on the up side.

That's also why I suggested 10% of the money initially: not horribly painful if things did go wrong and when you have more experience you can consider more or less, as seems appropriate for you.

Thanks jamesd for the explanations on aspects of P2P. I'll look into this in a bit more detail and see if I can put some of my risk aversion to one side for a short while.

tigerspill

AnotherJoe wrote: »

Why on earth do you think BTL is low risk?
-Tenant stops paying rent for months.
-Tenant wrecks the place.
-House prices fall
- Unforseen expenses to maintain
-Tax changes make it even less profitable than now.
- CGT to pay on profits

At least with P2P you have your risk spread amongst multiple "tenants", its not all or nothing like a tenant for your BTL, the headline returns are higher by a fair margin, and you'll never be run up at 3am to say there's a problem you need to get fixed immediately

This is aside the ongoing hassle from the rules and tax forms

Absolutely right. I would consider BTL as very high risk. I have a number of BTLs and they can be a real pain in terms of finance and hassle.