What would you do? Buy a house or a toy boy?

elljay

Hi, I'm putting this on the over 50 thread as I'm over 50 and it seems to be the sort of dilemma, ie being torn between wanting to have fun and needing to be sensible, that plagues people of my age.

In a couple of months I'll be receiving a gift of something between £50k and £75k. Tempted to blow my job and go travelling or something - really tempted. However, realistically I need to be better prepared and plan to do that in a few years time. What would be best to do with that money? My present situation is that I live in a rented house which I've lived in for years and don't want to leave (rent 390 per month), I'm separated, aged 56, work at 2 jobs + a pension (claimed early) which bring in around 1300 per month between them.

My inclination is to buy a cheap house and let it, - I'd need to get a mortgage to do that, and hope the rent received at least pays my current rent. However having read other boards on here I wonder if that really is the best thing to do as the housing market is all over the place at the moment and maybe there are better options for investing. As I'm incredibly grateful for this extraordinarily huge gift I also want to make sure that the person giving it to me would approve. And sadly the travelling/blowing it all on a toy boy idea would definitely hurt their feelings. Maybe some time in the future I'll do that. My dream would be to cut down on my working hours and have more time but financially I'll need to work till I drop I'm afraid, so an addition to my income either now or in the future would be crucial whatever the choices.

I little while ago I asked for advice on here about getting a mortgage at my age and the advice was unbelievably helpful, hopefully you'll be able to advise me again now my circumstances have changed.

What would you do?
Elizabeth

RichyRich

Hi

Congratulations on receiving the gift, if that's appropriate.

I am by no means an expert, but from what I understand of the Private Renting market, it will be difficult to rent out a house at a rent high enough to cover both the mortgage repayments and your current rent. Obviously this will depend on the houses involved and the particular circumstances, but I think that will almost invariably be the case.

There is a lot of talk of the housing market peaking. I must admit I subscribe to this school of thought (my dissertation project for uni was on the housing market and the prices do seem unsustainable - that's not to say that either I or anyone else's prediction is correct). For that reason if I were to consider investing in property I'd at least wait a few months to see what happens.

WhatI would do with the money is largely immaterial. However since you asked I'll give you my opinion. Dependent on the giver (obviously) I would tend to think of a gift as a gift to do what I want with unless conditions were expressly attached: e.g. if the person said "I'll give you this money as long as it goes on the deposit of a house" I wouldn't spend it on balloons and guinea pigs, but if they just said "Here's some money I'd like you to have" I wouldn't be overly concerned about spending it on a project they'd approve of. If they gave me it so I could enjoy it, I'd enjoy it in any way I saw fit.

So sorry it's not much of a helpful answer; I hope you receive some better advice; but something (I hope) for you to think around.

Rich

elljay

Thanks RichyRich - and no, you're wrong, this is an extremely helpful and commonsensical answer. thank you.

to clarify, I don't expect any rent I receive to cover both my current rent and new mortgage, I'd just want, just as a minimum, for any rent to cover the rent I presently pay out. ie, 390 per month.

And there are no conditions on the gift, it's just that I wouldn't like to hurt the feelings of the dear person who's giving me the money.

thanks again.

RichyRich

Sorry, I misread your original post. You did say you only wanted it to cover your rent and not the mortgage.

Have you considered asking your landlord if you could buy the freehold to your house? Maybe that would make more sense, not having to rely on rent to pay your own rent but rather dispensing with rent all together (if that makes sense).

Rich

Savvy_Sue

Would the travelling be seen as terribly frivolous if there was a 'cause' at the end of it?

Personally I couldn't see myself just heading off into the sunset to lie on a beach, BUT if the beach had been hit by natural disaster and I could share my skills when I got there, helping people rebuild their homes and their lives, followed by a holiday, then I could imagine it.

You never know, you might come back with a toyboy too! :rotfl:

papito

Just be careful to don't sit the money on a bank and suddenly start using it on a daily basis until is gone...Any investment, specialy a house will be a good idea. I wish you the best in your decision.

M3_Sussex

You could be sensible and have fun. Maybe buy the maximum amount of premium bonds (£30K), use up your annual ISA allowance (£7K), pay a years rent in advance (£4.7K) then go and have fun.
At least you will always have the hope / knowledge that you could win on the premium bonds and you will have not feel guilty that you have just 'blown' it all.

EdInvestor

I'd suggest this is a good trigger for a bit of long-term planning.

First of all, what's your situation going to be when you stop working?

When will your state pension(s) kick in and how much will they be?
Forecast here:
https://www.thepensionservice.gov.uk

Will you have enough to live on when your retire and still pay rent?

Much as you like your current place, would it not be better to buy a place to live in now with the money, thus saving the rent money to pay any additional mortgage needed and to add to your assets?

If you own your own home, you can later on take an equity release mortgage which doesn't have to be repaid until you die.You could spend that money on travelling (investing some of it to provide more income) and still have a home, as well as a bigger income and security when you are old.

It doesn't look to me like you're anything like well enough off to consider blowing the money now. Don't forget that although you may be willing to work forever, many companies lose interest when you get to be a wrinkly, and you might find you're not physically (or mentally) up for it, anyway.

A bit of deferred gratification might go quite a long way in your case.


PS I see no attraction in the BTL idea: you'll pay tax on the income, make little more than you get in the bank from the rent while having plenty of potential hassle, and pay CGT on any gains.None of this applies to your own home.

Errata

What's the one thing yoiu've always wished you could do but never had the money for? And here's a tip: Nobody laid on their deathbed shouting "I wish I'd spent more time at work!"

Yogibear

Errata wrote: »

What's the one thing yoiu've always wished you could do but never had the money for? And here's a tip: Nobody laid on their deathbed shouting "I wish I'd spent more time at work!"

well said,there`s no pockets in a shroud,is my way at looking at things;)

Edinburghlass_2

Yup, I'd be offski, you're a long time dead.