120k - house or some sort of stock market investment?

binka

I've recently inherited quite a bit of money and a share of a house.

First option is to buy the other part of the house and have no money....I'd be about 20k short so would need a small mortgage. Plan would be to rent out, its a nice, well maintained terrace house in a rentable area and looking at others I should get between £500 and £550 rent a month.

Or we sell the house and I have approx 120k in money which I then invest. But have no idea on returns, where to invest, etc. have looked at some funds online and some have monthly charges, set up charges, etc. what's reasonable for charges?

I currently have no debt apart from a 30k mortgage on a 200k house. Nothing else. Good, secure job and I save about £200 a month. I have 10k in a unit trust isa monthly income fund with Legal and General which earns me £30 interest a month which goes back into the fund. I'm married and husband also saves from his wages, I think he saves about 1k a month and maybe about 50k in the bank. He won't touch the stock market with his money.

If I did go stock market route I'm happy to be in it long term. I'm late 30s and have a good public sector pension. Husband is 50 and has no pension. As well as his savings he's got about 40k worth of land which he inherited and is likely to inherit half a farm house before he retires.

Any advice or ideas very welcome. I probably need to see a IFA don't I?

binka

Meant to say my main pension won't be available until I'm 67. Though I've got a different one which will pay me about 1.5 k a year from 55 onwards.

I'd like to retire earlier than 67 if possible.

Wilkins

I don't think you need to see an IFA as you will get plenty of suggestions here which you can ponder. My suggestion is:

1) sell the house share and realise £120k;

2) payoff your mortgage, leaving £90k;

3) temporarily put most of that into an instant access account;

4) register with an online broker, open an S&S ISA and start buying passive index trackers, like ETFs;

5) use up your ISA allowance year on year this way but watch the rules w.r.t. to your existing ISA;

6) put spare cash into a cash ISA;

7) put a lump sum into a one or two year term deposit;

8) Start a SIPP;

9) keep some cash in the instant access account as an emergency fund.

Lots of permutations on this and more sophisticated things you can do but it's a start.

jimjames

Are you prepared to have the hassle and maintenance associated with a rental property. If it isn't local to you then you'd have the cost and risk associated with finding someone who can deal with issues for you.

You'll also be taxed on any rental income once expenses taken out. With no or little mortgage that could be a larger amount even more so if you were a higher rate taxpayer.

With the £120k you can get £11k each into a S&S ISA this year and the same in April. If your husband hasn't used his allowance then that is £44k covered and invested tax free.

I'd personally suggest funds rather than ETFs for investments as someone coming in new but that's really down to preference and the platform you use.

If your husband has no pension then that should be a priority for him - unfortunately that will entail using stock market investments for a better long term return.

kidmugsy

Like jimjames I'd be loth to let a house unless it was nearby so that I could keep an eye on it, employ tradesman I knew, and so on. I would also be reluctant because I would bring no advantage to that sport - I have no trade skills, no legal knowledge, and so on.

In your shoes I might think that a couple with their own house, a bit of land, and a lively expectation with another half house to come, are already quite heavily weighted in property.

Since your husband clearly has a zero weighting in Equities and Bonds, you might reasonably be attracted to rebalancing your joint portfolio by pursuing those. Personally, I'd also buy some gold sovereigns if only the banks around here hadn't all closed their safety deposits.

binka

The house is local to us and dh can do anything DIY to a good standard. He can do plumbing, plastering, brickwork, he has in the past rewired a house but I know as a non qualified electrician he wouldn't be able to touch the electrics.

How much "income" roughly am I likely to see from investing cash?

Any recommendations for an online broker?

Thanks.

atush

you might not be 20K short in buying the other ahlf. A house is worth only what somehone will pay and who is to say that is the amt you are thinking it is wort? You could easily discount that by 10% in a buyers market. Nto to mention no estate agents fees, so the other party saves that too.

But I agree, what would put all your eggs in the property basket.

I'd sell it, use your half to pay off your mtg, open a pension or boost oen if you have one, and save the rest in both cash and S&S isas

bigadaj

Sounds like a 5% yield on the house! which isn't great but isn't terrible. Cash returns currently are very poor so as others have said you'd be looking at investing any money rather than saving.

Given you have the property already then you are arguably ahead in that selling would incur fees which would normally be acquired if purchasing a. Buy to let.

You should be able to remortgage up to 75% so the rate of such a buy to let Mortgage could be critical, particulalry as the interest is allowable against tax. This money could be invested, or you could simply clear your mortgage.

Don't take the responsibilities of letting lightly. There are risks, hassle and voids to consider but it can form a different asset class alongside equity investement, savings, and your db pension.

planteria

there are all sorts of options which could all be 'right'
but my first thought it that, bearing in mind you are pretty well set up elsewhere, i would look to have the house. perhaps even borrow 30k more against it, to clear the mortgage on your home, and then the BTL debt would be offset against your rent.
then, i would reassess the cash holdings you jointly have, and look to improve this return. perhaps better rates on cash. but then one way/another this would involve some risk.

planteria

starting to invest in equities, somehow, is likely to be the best long-term use of your regular savings.

and just to rewind...yes: i am assuming that the property is convenient for you to access it.

mike88

I have rented out property and its not nearly the hassle some would have you believe. A house can give you a good rental return and is an appreciating asset. Stock market investments can and do fall. Remember the FTSE peaked in December 1999 so an investment made then in a Tracker for example would 14 years later have lost money.

Now is not the time for lump sum investing in the stockmarket as markets are overheated and overvalued. Savings accounts cannot keep up with inflation so by far the best bet is to invest in property especially as you have other savings.