What to do with inheritance

notfunnyortalented

Hello Moneysavingexpert forums, I hope I've posted this in the right place.

I am a 25 year old man living in greater London. In Feb, my father passed away, leaving an estate of which I will inherit around £150,000. This is more money than I've ever had, by a long way, and I am embarrassed to say that I don't really know what to do with it.

I was interested in using it to buy property to live in here in London. I currently live with my mum, work 25~ hours a week and pay a few hundred a month in rent to her. I could not afford to move out on my salary and I am not in a position to get more hours at work, so I realise I cannot afford to buy property in London. I have heard buying property and then renting it out is a viable option, but I don't know much about it.

I am not interested in anything risky outside of property, it's pretty unlikely I'll ever have this much money again so I don't want to risk it. I'm not in a rush to do anything, but the longer it sits in my bank account, the more likely I am to chip away at it.

Sorry if I haven't provided enough detail, hope you can help!

bigadaj

Buying property and letting it out is a business, do you feel comfortable running a business which you presumably have no experience in?

Many people in the south east have bought up property in cheaper areas of teh country, some have got a decent income and capital growth even after agents fees, others have never received rent, had the house damaged and had no end of headaches including legal bills.

In your situation, if you were me, I would work my way through the 5% loophole arise and thread. You can get £50k or more in accounts paying over 3%, and also get a few thousand per month into regular savers paying 4-6%.

These amounts would be plenty as an emergency fund so if you aren't thinking you might buy a property in the next few years then look at stockmarket investments. Read through the monevator website for background, and also see how much you can usefully get into your pension as that gets immediate tax relief.

notfunnyortalented

Thank you for the answer- you're certainly right about letting property being a business, so maybe that's an idea for further down the road, once I'm a bit older and the money is more 'disposable' to me.

I will read your recommendations now, thanks again!

xylophone

The money shouldn't just be left in your bank account where it is (presumably) earning little interest and anyway is over the FSCS limit.

While you are thinking how best to proceed, you might consider moving it all into NS&I income bonds - the interest is only 1% but your savings would be fully protected by the government and you will have a small supplement to your income paid monthly into your bank account.

http://www.nsandi.com/income-bonds

Once this is done, you can think about using high interest bank accounts.

You say that you pay your mother rent of a couple of hundred pounds a month.

You might consider opening a Santander 123 account - you could transfer £20,000 into this and then have your salary paid into it - you would then take on responsibility for paying all the utility etc bills and the Council tax so as to earn as much cash back as possible - the sum required to do this might be as much as you pay your mother at the moment and would take the place of it.

This would almost certainly cover the monthly fee and you would be earning a reasonable rate of interest on your £20,000.

You might then consider opening a couple of Tesco current accounts, a Tesco Internet Saver and a Tesco Easy Access Saver.

You would transfer £3000 into each current account.

Next open a TSB Plus current account, set to paperless, set up a Standing Order for £500 from one of the Tesco current accounts to TSB and from TSB to the current account for the same day each month.

Proceed to open a Lloyds Club account. Transfer in £5000, set up a monthly Direct Debit for an amount of your choice from each Tesco Saver to pull money from Lloyds into the Saver accounts.

Set up a monthly Standing Order for £1500 from your second Tesco current account to Lloyds and one from Lloyds to Tesco for the same day each month.

Set up a Nationwide Flexdirect account. Deposit £2500 in it. Set up a monthly SO for £1000 from Santander to NW and from NW to Santander for the same day each month.

Set up three BOS accounts - deposit £5000 in each. Set up internal SOs to transfer £1000 monthly between these accounts.

Use your Tesco Saver Accounts to pull two monthly DDs from each BOS account.

Collect up your interest on these account each month into the better paying of the Tesco Saver accounts.

The Santander, Lloyds, TSB, and Nationwide Accounts also offer regular saver accounts which you could consider.

At all events, after a few months, you should end up with a fair interest rate on around £50,000.

You might at some stage wish to consider buying a property - consider a HTB ISA or next year a LISA - http://www.moneysavingexpert.com/savings/lifetime-ISAs

Do some research and then consider opening a stocks and shares ISA.

And remember, you can always take (paid for) advice from an Independent Financial Adviser. See

http://www.thepfs.org/yourmoney/find-an-adviser/

atush

Get a better job, work full time. Then you can buy. At 25, you should be building some sort of career. If you cant, use the money to better yourself- retrain.

Pay off any debt, open all the current accts mentioned above, start a pension.

Stevo2800

xylophone, what is the purpose of swopping all that money around?

I will shortly have an inheritance of around £100k, but I am in a different position. I'm in my late 50's, my house is paid for, I work part time and care for family members. I want a regular income from my investment so I am also attracted to property. Here in the midlands, I could buy a flat outright for cash, but would that be the best option?

Eco_Miser

Stevo2800 wrote: »

xylophone, what is the purpose of swopping all that money around?

To earn hundreds of pounds in interest. See the 5% loophole article.

xylophone

Here in the midlands, I could buy a flat outright for cash, but would that be the best option?

Do you want to be a landlord?

https://www.gov.uk/renting-out-a-property/landlord-responsibilities

atush

Stevo2800 wrote: »

xylophone, what is the purpose of swopping all that money around?

I will shortly have an inheritance of around £100k, but I am in a different position. I'm in my late 50's, my house is paid for, I work part time and care for family members. I want a regular income from my investment so I am also attracted to property. Here in the midlands, I could buy a flat outright for cash, but would that be the best option?

I dont think it is a good option esp re the new BTL ruules that will make them far less profitable. The income is taxed, as is the capital growth.

Do you need the income now? Or will it be best to compound your investments for later when you stop work? do you have a pension?

I'd be inclined to out some of it into pension, as you are only 5 years off being able to take the income.

If you need income now, (or even if not) a S&S isa would be a good idea. With income in mind, look at some good income paying investment trusts, and some income funds.