175k To Invest

RolandsB90

Hi, me and my brother (both 25) have recently inherited some money. Our house is paid off and we are left with around 175k cash with no outstanding debts. I have had a little look round the forum and understand it's advised to get the money in the best interest bank accounts first which we will do as soon as possible.

Our initial thought was to invest a lot of it into property to rent out as we have a friend who owns a few places and recommended it to us. However i've noticed there's not too much talk of it on here. With property we've either got the options to buy a couple of places outright or several buy to let mortgages.

We're both self employed and don't earn a lot so how useful would getting some money into pensions be? Perhaps putting it into stocks and shares would be a good idea but i'm unsure whether it would be better to use a finanical adviser or something instead of doing it myself? Also comparitively what sort of return could you expect on this compared to letting out property?

Any ideas would be welcomed and i'm just here to seek some advice from people who know better. Overall it's a long term plan and we don't need a lot to live off right now so not accessing money wouldn't be too much of an issue.

Thanks a lot

dunstonh

Our initial thought was to invest a lot of it into property to rent out as we have a friend who owns a few places and recommended it to us.

There have been several tax changes over the last year to penalise landlords more. Just today, the bank of England has continued that it wants to cool buy to lets.

So, what is it that is attracting you to property? Do you have experience of being a landlord?

We're both self employed and don't earn a lot so how useful would getting some money into pensions be?

Best conventional option for most people looking to plan for retirement.

Perhaps putting it into stocks and shares would be a good idea but i'm unsure whether it would be better to use a finanical adviser or something instead of doing it myself?

ISAs share the same investments as pensions. just different levels of tax and maturity process.

If you DIY and do it well you can save money. If you DIY and do it badly, it can cost you money.

Also comparitively what sort of return could you expect on this compared to letting out property?

Depends on so many things. We dont know what you knowledge of being a landlord is. If you will do your own DIY on the property, use a property management company, what more taxes they have planned on landlords, what rental yields are like in your area etc.

Then you dont know what level of investment risk you will be taking if you went down the conventional investment route.

You need a much longer and thought out discussion about what you want from the money and when and then decide what risks you want to take and what level of research and work you are prepared to do.

colsten

RolandsB90 wrote: »

Hi, me and my brother (both 25) have recently inherited some money. Our house is paid off and we are left with around 175k cash with no outstanding debts.

Are you planning to live together for life? If not, how about using some of the money towards another property for one of you to live in?

RolandsB90

So in response to dunstoh:

We have no landlord experience but were attracted to it because of how good our friend made it seem. I have seen a lot about new laws and taxes with landlords though so it is obviously something the government are keen to stamp down on. We would be doing it ourselves but getting people we know for most of the maintenance and work on places.
If there are other options that are nearly as good with less risk then obviously that would be a better option.

As far as investments that aren't property, what are the likely yields?
In terms of pensions, for the time being we won't be paying much tax next year if any since we don't earn much. Don't know if this effects the decision?

In response to Colsten:

For the foreseeable the plan is to live together.. Neither of us have kids or any commitments so for now we'll assume that's the plan. When we do split and live separately we will probably just get 2 places with the money we get from the 1 we own now.

Thanks!

Cisco001

Who name is on the property you are living at the moment?

I haven't been following all the changes on BTL/ landlord. But I believe there are extra stamp duty to pay if you buy a house as second property.

If you and brother joint owned the property you are living, it may worth one person buying the other out.
So one of you get whole house, then the other person get another property to rent out or invest the money, in case one of you want to get marry/ start a family.

RolandsB90

We had already thought about that so just getting the house in one of our names. If we joint owned it then either of us would still have to pay the extra stamp duty on a new place, am I correct?

I'm kind of asking, do people think property is worth investing in right now? (obviously there are lot of factors). If not, what are the other options and what sort of return do they have?

I know it's a 'how long is a piece of string' sort of question but any information is good. We are willing to take some risks with some of the money but nothing ridiculous.

jimjames

RolandsB90 wrote: »

I'm kind of asking, do people think property is worth investing in right now? (obviously there are lot of factors). If not, what are the other options and what sort of return do they have?

Why property rather than other assets like shares? You've said you have no experience of being a landlord, maybe learn about shares as you'd need to learn about landlord. Returns are as varied for other investments as they are for property - what return are you expecting from buying a house?

There seems to be a tendency amongst those who come into money to assume that property is the way to spend it. I'm not sure why other than people assume they know what a house is but don't necessarily understand investing in the stock market. That doesn't mean that buying a house is a better option than investing, just they don't understand the alternatives and tax benefits that can bring.

RolandsB90

Thanks jimjames. That's exactly why I posted here! Believe me, I don't have my heart set on investing in property. As someone with a background in mathematics, investments of other kinds could be more suitable anyway.

As far as returns go on anything we do, we would like something around 5%. You might tell me this isn't achievable, or that it is very easy, these are the things we just don't know yet, but are very prepared to research.

So in terms of investing in the stock market, where would I begin?

Archi_Bald

RolandsB90 wrote: »

So in terms of investing in the stock market, where would I begin?

Get to know funds. Find out by reading up about investments, e.g. on http://monevator.com/category/investing/passive-investing-investing/

atush

You should fill high interest current accts. You should fill your S&S isa allowance. You should open a pension, and put in as much as you earned this year (less BR tax).

You should continue paying into pensions and S&S isas, with the money you used to spend on rent as you no longer have to.

BTL is something to consider if you have skills in that area, after you have other investments and pensions. Ask your fiend how the new tax changes will affect him?

Superscrooge

I would avoid 'Buy to Let' especially as you state you have no experience. I know several people who have had their fingers burned. Unexpected maintenance bills, difficult tenants and the cost of getting them evicted, unpaid rent, neighbour problems, periods where property is unoccupied and therefore no income, disputes with letting agents etc.

On top of all this the government is getting concerned about a 'Buy To Let' bubble and is increasing tax on landlords. Also see the below link regarding comments made today by the Bank of England Governor

http://www.bbc.co.uk/news/business-35108952

Anyone coming into money seems to be thinking in terms of buying property and it all reminds me of the frenzy to buy tech shares in 1999 when everyone (including me!) got caught up in this 'guaranteed' way to make money, and of course it all ended in tears!

As others have said, I would max out your Stocks & Shares ISA and Pension contributions because these are very tax efficient.

Monevator as others have mentioned is an excellent website for learning about stock market investment.

Another website to learn about the advantage of passive investing is

http://www.sensibleinvesting.tv/passive-investing-the-evidence