What Do I Do With My Inheritance?

Magmaman

Hello,

I am 50 years old, self-employed and have a fairly low income. I live in rented accommodation in London and have no savings, pension, assets or anything else. In fact, I am in debt, although not heavily (£1000-£2000).

I am soon to inherit roughly £150k. Which is clearly a good thing for me, but I have absolutely no knowledge or experience of savings or investments. I want/need this money to work for me as best as it possibly can, but I have no idea where to start.

I was initially considering buying a property, but Local London prices start at £250k and as a self-employed person on a low income I think it's unlikely I'd get a mortgage for the remaining £150+k I'd need.

I was also considering getting a buy to let mortgage and simply renting the property out but again, the same problems may be present. And with no other assets or savings I may be creating a rod for my back by putting everything into one investment and having no buffer in case of unexpected outcomes (bad/no tenants etc) - these are guesses, I have no knowledge of this atall.

Another idea was to possibly invest in a property abroad which I might buy outright and possibly rent out, or use. Greece came to mind (I do have contacts/friends there).

Other than that I wondered if I should be going to a financial advisor to see where my money would work best, but from what I could tell on this forum I might be better off educating myself first.

Any advice on any aspect of this would be welcome!

grey_gym_sock

start by paying off the debt.

if you have at least 2 years' track record of self-employment, you might be able to get of mortgage of up to 4 times your annual profits (before tax). (not enough?)

BTL would be very much putting all your eggs in 1 basket, even without a mortgage. (and it's difficult to get a BTL mortgage unless you also own your own home.)

i'd look at investing in quoted shares (i.e. owning part of a companies that are listed on the stock exchange) and corporate bonds (i.e. lending money to companies), or at collective investments which can let you spread your money across a lot of such investments (so it doesn't matter if a few specific companies do badly). this kind of investment can go up and down in value, so you need to keep a decent cash buffer, so you won't be forced to sell your investments at just the wrong moment.

an IFA could advise on this (£150k is enough to make that realistic), or do more research yourself. but i think it's helpful to have some understanding about investment even if you do then want to take advice.

Aegis

Magmaman wrote: »

Hello,

I am 50 years old, self-employed and have a fairly low income. I live in rented accommodation in London and have no savings, pension, assets or anything else. In fact, I am in debt, although not heavily (£1000-£2000).

It's likely going to be best to clear this debt first and set aside an amount of cash for everyday spending and emergency funds.

I was initially considering buying a property, but Local London prices start at £250k and as a self-employed person on a low income I think it's unlikely I'd get a mortgage for the remaining £150+k I'd need.

Potentially feasible, and a good use for the money if you can get the mortgage. It essentially turns capital into monthly "income" in the form of saved rent, then gradually turns some of that saving into equity in the property as you pay down the mortgage.

I was also considering getting a buy to let mortgage and simply renting the property out but again, the same problems may be present. And with no other assets or savings I may be creating a rod for my back by putting everything into one investment and having no buffer in case of unexpected outcomes (bad/no tenants etc) - these are guesses, I have no knowledge of this atall.

There are quite a lot of expenses associated with letting a property in addition to the other issues you've described here. If you use an agent, you can expect to see 10% or more of your monthly income disappearing into the agent's hands, which may not leave much for you after paying the interest on the buy to let mortgage. You'd own an asset which might increase significantly in capital value, but you're right that this would be putting everything (and more - you'd be borrowing to purchase this after all) into one investment.

Another idea was to possibly invest in a property abroad which I might buy outright and possibly rent out, or use. Greece came to mind (I do have contacts/friends there).

I'd be very careful about this. In addition to all the issues mentioned above, you'd have a currency risk hanging over your head, plus any local taxes or charges that you might not be fully aware of.

Other than that I wondered if I should be going to a financial advisor to see where my money would work best, but from what I could tell on this forum I might be better off educating myself first.

Education is never wasted, and there are still some slightly dubious advisers out there against whom knowledge is the single best defence. You can always come back here with their recommendations to see what people here think.

merlingrey

Greece is cheap but then so is Iraq, I'd be wary of long term commitment to a country that might go the way of 1930's Germany.

quotememiserable

Its great to hear someone who plans to hold on to their money and get a return. So many people in your shoes would think only of what to spend it on.
What I did in your position was build a 3 pronged portfolio. I have money is various equity based investment funds, 2 properties in Burnley (where they can be bought from £30k upwards), and money in peer to peer lending (currently I'm getting 10% return on this money, before tax, although the capital can't grow). There's no particular need for buy-to-lets to be on your own doorstep if you use a lettings agent to manage them. They charge around 10% for this.

robatwork

Aegis wrote: »

Education is never wasted, and there are still some slightly dubious advisers out there against whom knowledge is the single best defence. You can always come back here with their recommendations to see what people here think.

I was about to ask you what you had against financial advisors...then I saw your sig!

Well done for having the cajones for saying what we all know

Aegis

robatwork wrote: »

I was about to ask you what you had against financial advisors...then I saw your sig!

Well done for having the cajones for saying what we all know

Sadly the industry isn't perfect... Most advisers do a fine job with their clients, but I've recently had the unfortunate "privilege" of trying to unwind a couple of particularly poor outcomes.


Just to add to my earlier comments, if you do go to a financial adviser, it would likely be in your best interest to seek out an independent one. It doesn't absolutely guarantee they'll be spot on with their advice, but it means they're starting from the right position and have the ability to source from all types of investment and all providers of those investments. The alternative is termed "restricted", which ranges from those who are almost fully independent to those who can only advise on one company's products.

DUTR

quotememiserable wrote: »

Its great to hear someone who plans to hold on to their money and get a return. So many people in your shoes would think only of what to spend it on.
What I did in your position was build a 3 pronged portfolio. I have money is various equity based investment funds, 2 properties in Burnley (where they can be bought from £30k upwards), and money in peer to peer lending (currently I'm getting 10% return on this money, before tax, although the capital can't grow). There's no particular need for buy-to-lets to be on your own doorstep if you use a lettings agent to manage them. They charge around 10% for this.

And this is the reason why, there is no point being the richest person in the cemetary.
Spend it yes, but spend it wisely.
Or tie it up for the next in line.

theoretica

I suggest you have a think about your plans for retirement. Find out what state pension you expect, where do you want to live and how much will you need to live on. This will influence your plans and the risks you take.

Are the house prices you are looking at for a 1 bed or bigger? If you can take in a lodger to your own home some of this is tax free and you are not faced with looking after a property other than your own. This would be a good way to pay your mortgage off faster.

Totton

Consider moving if you can, why not go to one of the northern counties, buy yourself a really nice home outright and put the remainder of the cash in savings or investments. As a self-employed person could you do the same job in another part of the country if you found a nice place to buy a home.

bowlhead99

Totton wrote: »

Consider moving if you can, why not go to one of the northern counties, buy yourself a really nice home outright and put the remainder of the cash in savings or investments. As a self-employed person could you do the same job in another part of the country if you found a nice place to buy a home.

That's definitely a question worth asking. If London hasn't been able to make you rich enough to keep up with the other Londoners, and your prospects at retirement are grim (low income goes to no income other than state pension), you could use this windfall to set yourself up in a new place.

It might be painful to wrench yourself away from friends to start afresh, and you still won't be able to live like a king, but it is a significant step to getting out of poverty and at your age you could easily have 45 years ahead of you in which to make new friends.

Obviously there's no point going to Burnley to have a house for only 30k and then burning through the other 120k over the coming years to retirement while unemployed.

But if you have some skills that could be deployed anywhere outside the South East, a move to a lower-cost town could be the smartest decision you ever made, and something you couldn't have practically considered over the last few years with zero cash in the bank. Now with some free cash, life-changing options open up, which are nothing to do with the secondary ideas of what types of savings and investments might be made once your life is on track.