Invest or buy property?

soupdragon10

I will be inheriting about £100,000 in the near future and need to decide whether
1. to invest this somehow to provide an income, or
2. to buy a property locally to rent out (there are suitable properties in my area, I have checked).


I am self-employed at present and will be retiring in about 3 years so am looking to supplement my small occupational pension and retirement pension.


Which do you think would be the best option for me?

alexanderalexander

Presumably by the former option you'd mean buying equities and you'd take an income from any dividends and also engage in a gradual sell-off of the shares themselves?

In short it's very hard to say which one would be better for you. If you are just buying a property outright for yield and not capital growth (and it sounds like you would be) you'd be clearing maybe 6% or so yield as profit even from a high yield property (landlords' expenses add up) and it could be a lot of work. One of the main reasons why a lot of people prefer property investment to shares is because property allows you to benefit from highly leveraged capital growth, but if you are buying outright for income that is not something you'd be benefiting from so that'd suggest equities could be better for you.

On the flip side, equities are volatile which wouldn't be ideal if you have to sell some of them at a depressed price in order to fund your retirement.

Really the decision depends on your attitude to these considerations.

Archi_Bald

soupdragon10 wrote: »

Which do you think would be the best option for me?

What are your financial circumstances, requirements, and expectations?

jimjames

soupdragon10 wrote: »

I will be inheriting about £100,000 in the near future and need to decide whether
1. to invest this somehow to provide an income, or
2. to buy a property locally to rent out (there are suitable properties in my area, I have checked).


I am self-employed at present and will be retiring in about 3 years so am looking to supplement my small occupational pension and retirement pension.


Which do you think would be the best option for me?

The 2 options are very different. One needs little input from you and the other may generate a phone call at 2am that the boiler has broken.

1) could be beneficial tax wise if you use a pension. Personally I'd be looking at investments not property as it is more flexible and less hassle.

lozzy1965

alexanderalexander wrote: »

... you'd be clearing maybe 6% or so yield as profit even from a high yield property...

You'd be doing very well to clear 6% after ALL expenses. I'm in the "investments" camp.

justme111

It feels to me that someone not experienced or skilled in investing would prefer property because it is something tangible while money in funds or trust ot shares is virtual and one does not feel it is secure - its good only if you log in on your computer , able to access the site of whatever you invested in and sees the numbers on a screen.

robatwork

Do you own property already? If so then buying more property would be putting more eggs into the same basket, so I would lean to investing/saving.

Aquamania

soupdragon10 wrote: »

I will be inheriting about £100,000 in the near future and need to decide whether
1. to invest this somehow to provide an income, or
2. to buy a property locally to rent out (there are suitable properties in my area, I have checked).


I am self-employed at present and will be retiring in about 3 years so am looking to supplement my small occupational pension and retirement pension.


Which do you think would be the best option for me?

Do you want to be a landlord?
Can you buy a suitable property for £100k, or would you need to borrow some money too? If so, are you comfortable with that given you will retire shortly?

If you want to invest in property, but don't want the hassle that comes with being a landlord, have you considered putting your money in a fund that invests in property?

I suggest you go and see an IFA

mike88

Investing in shares at this stage of the investment cycle is daft. Drip feed by all means but huge lumps sums are an absolute no no in my view. On this board there is a huge following for shares but many have not seen the ups and downs I have seen in my investing lifetime which is now of over 40 years duration. Many on here I suspect have been investing in shares only since the current 5 year bull run so their recommendations are heavily influenced by the excellent returns they have received. Don't fall for it. Now is not the time to invest heavily in the stockmarket especially at your age near retirement so safety first should be upper most in your mind. Losses now will mean you have little time to recover if the market falls..

There is also an anti investment bias against housing on here. There are good reasons for that if you sink the whole lump sum in property. But what is required is investment balance - some of this and some of that. Don't be put off by the comments about tenants ringing up at 2am with a broken boiler. Hire an agent and then it becomes his problem and fees are tax deductable.

What is required here is some shares, some bonds, some cash and an investment property through buy to let.. Never leave your self short of readies as over time you may need money for things that you have not thought of and for holidays and a replacement car.

Lansdowne

mike88 wrote: »

What is required here is some shares, some bonds, some cash and an investment property through buy to let. Never leave your self short of readies ...

Well the sum being talked about here is £100,000. Depending on the part of the country that could buy a lettable property. But splitting the 100k among all those assets, doesn't seem to leave enough cash for a buy to let.

Buy to let is investing. Borrow to buy to let is gambling. Just as you believe shares have been on a bull run the last few years and can't stay that way, the same is true of the ultra low mortgage interest rates at present.

mike88

Lansdowne wrote: »

Well the sum being talked about here is £100,000. Depending on the part of the country that could buy a lettable property. But splitting the 100k among all those assets, doesn't seem to leave enough cash for a buy to let.

Buy to let is investing. Borrow to buy to let is gambling. Just as you believe shares have been on a bull run the last few years and can't stay that way, the same is true of the ultra low mortgage interest rates at present.

Before posting I checked on Right Move. The OP lives in Cornwall and there are 937 properties for sale with prices ranging from under £50k up to a £100k. That would give the OP some flexibility to decide on an asset allocation between cash, shares, bonds and property.

I have no idea what the condition of these properties is but given that the OP has mentioned property he/she clearly believes that something rentable can be acquired at a reasonable cost. Possibly the OP has other resources also to add to the £100k. We simply don't know. But to sink the lot into the stockmarket is not a good idea; that is my main point.