Investing a lump sum to generate an income

johnnyredgate

I have recently been made redundant as a result of health issues, this in effect has left me retired at nearly 50 as I am limited in what I can now manage so I need to find ways to generate an income from investing capital that I have inherited recently. I would have in the region of £100k to possibly £150k to invest. I have recently purchased one buy to let property, and own another rental property buy am cautious about what I can take on due to my health so am not sure about buying any further property, although these two are with letting agents. The one that I already owned has a poor rate of return, and I seem to spend a significant proportion of the income on maintenance each year.
Interested in any investment suggestions that would give an income, prepared for capital to be fairly well tied up in order to do so. I have looked into student pods, hotel room fractions, as well as storage pods, all of which people seem to be cautioning against on here, unfortunate as on the face of it they looked like good options to generate some income. Someone on another thread suggested worldwide projects as a better bet than storage pods?

bigadaj

We're still trying to find out what they mean bu projects.

Not many fans of buy to let on here, though people can do well with good judgement, hard work and luck. The premise for btl seems to be historically that yo cover your costs from rental and the rely on capital growth for profits, though the outlook for house prices doesn't look great.

Most people here might recommend investments into funds of shares, with your requirements looking at income shares, ie those that pay a gold dividend. Funds are easier to manage than individual shares, there are several recommendations for reading on here including s after investing by tim hale, this might give you some suggestions for constructing a. Portfolio.

You can consulat an ifa, and find a local one on unbiased.com, but there will be fees and charges to do this.

The problem currently is that interest rates and yields are so low that any money you generate with a large risk to capital will be low.

So assuming you have the midpoint of capital, you will be doin well to generate a lot over five or possibly six grand a year, probably with a moderate level of risk but also a reasonable prospect for capital growth.

kidmugsy

If you feel you want to generate an income from equities, I suggest that you look at the writings of "Luniversal", a rather prickly soul, but one who has consistently interesting things to say on the Motley Fool forums. In particular he likes what he calls B7, a 'basket' of seven investment trusts that are oriented to paying a growing income "best for people facing retirement on a bad pension". For example, open the link below and scroll down to posting number 19807 where you will see a table of the yields, and other figures, of some investment trusts. If you like his style you can look around for one of his posts where he identifies the particular trusts in B7.
http://boards.fool.co.uk/building-a-b8b7-basket-12788634.aspx?sort=whole

kidmugsy

Aha, here are posts where "Luni" defines his baskets.
http://boards.fool.co.uk/basket-of-seven-year-eleven-12575018.aspx
http://boards.fool.co.uk/basket-of-eight-year-12-review-12649269.aspx

He recommends B8 for anyone who needs more income now rather than over the years.

BLB53

AS you already have income from property, you may want to consider the stockmarket.

There are some good sources of info on the web like the income board pointed out in the above post - also some articles on Monevator. Have a look at some of the posts on income at diy investor - here's one recently on using investment trusts http://www.diyinvestoruk.blogspot.co.uk/2013/04/investing-for-income-part-2.html but you could equally choose some blue chip shares if you have some knowledge of investing.

I would not put all of the money into stocks and shares but its always good to diversify so you have several strings to your income bow.

atush

Given you have 3 properties already (I assume you own your own), and are in poor health, I don't advise buying more. In fact, if one is not generating an income due to maintenance issues, you might think to sell it at the end of the tennacy? Eggs, baskets, and all that means you need diversification.

So, you have property and you need cash (for living on and maintaining the properties) so you should look to equities as mentioned above.

A good basket of income funds/ITs could be the way to go with a large tranche of your investment pot. The dividends should be safe, and increasing year on year and if the capital goes up or even down should not affect you (and your income).

johnnyredgate

Thanks for the replies, definitely got some homework to do, there is a lot to learn about, really helpful to have the signposting in your posts. I would like to have some idea of the direction I should invest in before seeing an IFA so that I can ask more specific questions ideally. Not something that I have had to think about before having been in secure employment for a long time now, and have just built up some savings etc but now really do need to ensure that my capital earns for me. I will have a civil service pension of £7000 when I reach 60, so would not need so much income then, and that would probably be the time to consider selling property.
I can't see the tenants of the house that I should sell leaving for sometime, they have been there for many years and now have a young family too, may see if they are interested in buying once the government mortgage support becomes available though.. Have also invested a lot in PV panels for it 18 months ago to top up the rent income a little.

holly_hobby

Your tenants should be on an AST (6/12 mth renewable tenancy agreement) - I am puzzled as to how they have apparently ended up with what appears to be a lifetime tenancy "they have been there for many years and now have a young family too" ??

Of course the first consideration should always be to repay any os debts - as traditionally associated debt interest will always exceed that from investment return. (albeit we currently see historically low mge interest which may throw this on its head for the time being !).

Aside from that, you clearly need to diversify your portfolio, presently you are over exposed in property and cash (both generally having a low yield at present, although cash deposits have more security if apportioned with firms in line with FSCS max compensatory figs - currently 85k held with each provider. While property can be troubelsome as an ill-liquid/delayed disposal asset).

Whilst real growth will come from equity/asset backed investment, you need to balance this with low risk funds and your ATR, which will be determined by examining how much loss/risk you can absorb/duration you can leave invested to recoup loss - from those classes chosen and the capital (inc future recoup from income) you have available.

An IFA will discuss and examine in detail such factors, and your requirements and aspirations for your investment capital, along with as I say consideration of low risk (albeit lower return) investments/plans and retention of emergency funds - diversification is the key to a balanced portfolio of risk and returns and should be his aim and directive.

Hope this helps

Holly

FLAPJACK

"Redundant as a result of health issues".....I see as you will be getting a Civil service pension in the future, I take it you were made redundant from the CS.

As you have health issues could you not have applied for a Ill Health pension (Teir 1 or 2), at least if you had done so you could have already been getting an enhanced CS pension.

Maybe worth looking into.

rochja

£100-£150K is a relatively small amount to give a diverse range of investments which are large enough to minimise the effect of charges on nett income. In the current economic climate finding low risk high return investments is also a virtual impossibility. You could look at sites like Zopa which give you the opportunity to lend your money at an agreed interest rate to people who cannot or will not use traditional lending sources. This gives you freedom to control interest rate and period, and there are suprisingly few defaults. Investing in things like hotel rooms can give you side benefits in addition to the standard return such as cheap/ free breaks. You could also inject variety into life by setting up one of your btl as a well equipped holiday home and instead of letting it swap it for breaks for yourself through something like https://www.airbnb.co.uk/ or similar. The intangible benefits can make an investment with a low apparent return much more worthwhile

johnnyredgate

FLAPJACK wrote: »

"Redundant as a result of health issues".....I see as you will be getting a Civil service pension in the future, I take it you were made redundant from the CS.

As you have health issues could you not have applied for a Ill Health pension (Teir 1 or 2), at least if you had done so you could have already been getting an enhanced CS pension.

Maybe worth looking into.

This is complicated, my employer, a government agency rather than direct civil service, did apply for medical health retirement following recommendation by their occupational health provider. Capita look for any grounds to refuse however and therefore have not granted it, so no pension enhancements despite 13 years employment, before my problems started. Unfortunately I believe that there was a misdiagnosis at the time I was ill, however this is virtually impossible to prove, and doctors will all protect each other as I have found out. I am left with some difficult to manage symptoms which have severely affected my ability to work reliably, however Capita say that there is no pathological cause to them and that they may not be permanent despite suffering for the last 5 years, hence refusal to medical retirement. Due to being in the classic scheme I only need to be shown not to be fit to work at my substantive grade rather than of not being able to work at all too. I could appeal but it means trying to collect further medical evidence at my own cost, likely to be in the region of £2000 to £3000 to do so and then no guarentee of a successful outcome. This has left my employer saying that they do not have any suitable work for me based on their Occ Health advice, however Capita saying I am fit to work. Hence no job and no medical retirement. So yes I have been made redundant, originally as part of a staff reduction process due to gov cutbacks which showed that I was struggling to work at my grade (not a very high grade), however during this process jobs did become available and most people were placed so only voluntary redundancies taken in the end, and in fact a lot of temporary staff have been employed due to being left with staff shortages. I need to try and move forward as best I can, and so am now looking at alternative ways of securing an income which I can manage.