Advice On Investing a Small Windfall

njmase

Hi,

I will be receiving around £80k shortly and wanted to grab some advice on what to do in the short term.

By the end of the year I wanted to invest in a buy-to-let property in the commuter belt outside of London to get on the property ladder, pay off the mortgage easily, and hopefully also obtain a small profit each month, but until then, what would the best thing to do with my money? In fact, would investing in a buy-to-let property be a wise investment right now (I was banking on the lower house prices and interest rates due to "Brexit")?

I have a small ISA already and a regular savings account with my bank, and don't have any debt...my job pays quite well so I wouldn't need to dip into the amount for any reason except emergency.

Thanks for your help!

atush

Why buy a BTL instead of buying a place to live in and save rent?

but first- any debt? Paying off non mtg debt should be your first port of call.

sEcond, do you have an emergency savings pot (before the 80K) equiv to at least 3 months outgoings? If not address this first.

Do you have a pension? If not address this before any BTL. If yes, but you are paying in a pittance, boost your pension before any BTL.

BTL is heavily taxed, both income and Capital gains. Pensions, S&Sisas, and savings are not as heavily taxed.

njmase

Sorry for the delay on response here..

1) BTL instead of buying to live in....I have a girlfriend in another country and and making very frequent trips to stay there....this is possible especially as I work from home, aside with the fact when I'm in the UK I live with my parents and don't pay rent there.

2) Yes, I have a separate savings account with a fair amount in there

3) Yes, have a pension and regularly put a % of my wages in there (which employer matches)

My main thought at a house vs a savings account would be that "if" something were to go wrong with my relationship...I would easily have a place I can move into myself and be on the ladder as well as making a small amount per month. I had a 100k mortgage @ 3.5% previously and it set me back 575 per month. Surely renting out a property at around 750 after fees and tax would still give back 100 per month or so?

Alternatively, if this is still not a good idea, wouldn't I only be able to invest ~15k even in a S&S ISA? Would this mean the rest of my ~80k should just move to a regular bank savings account?

Thanks!

Eco_Miser

njmase wrote: »

Alternatively, if this is still not a good idea, wouldn't I only be able to invest ~15k even in a S&S ISA? Would this mean the rest of my ~80k should just move to a regular bank savings account?

You are allowed to invest all your money. (Keep some in the bank for emergencies/normal use.)

The amount of money you are allowed to invest within an ISA is limited to ~£15k this year, £20k next year, and whatever in subsequent years. However you can invest the rest unwrapped (and can receive up to £5000 dividends free of income tax, and £11,100 crystallised capital gains free of CGT if you sell some of your unwrapped investments).
With S&S you can time your sales so your gains never exceed your CGT allowance, you can't do this with BTL.

droopsnoot

njmase wrote: »

My main thought at a house vs a savings account would be that "if" something were to go wrong with my relationship...I would easily have a place I can move into myself and be on the ladder as well as making a small amount per month.

Except that if you're renting the house out to someone, you probably wouldn't just be able to pitch up on the doorstep, turf them out and have somewhere to live yourself. Not saying it's a good, bad or indifferent idea, just that it's not somewhere you can turn up at short notice to move in, if it's rented.

atush

If you dotn already won something, yu will at least save ont he extra stamp duty involved with BTL. But the income and capital gains are going to be taxed.

It would give you somewhere to live in future, but you'll need a specialist rental agreement with any tenant if you expect to get it back in short order. Maybe a one year period, and month to month after. Or a 3 month notice escape clause you can trigger for any reason.

What % total is going into your pension? How much of your salary do you save each month (given you live at home)?

teddysmum

You're lucky to be able to call £80000 a small windfall.

DigForVictory

Blimey, my small windfall replaced my white goods & bought us all a fish supper.
Yours is loads more exciting, but £80K is over the bank safety limit, so maybe two accounts rather than one?

njmase

Hehe...I guess I am being a little loose tongued with the title. In my company quite a few people made a lot more on their stock sale.

@DigForVictory: Agreed. Should I be keeping the money in a bank I would definitely spread my assets to be within the insurance limit. I remember too well the Northern Rock fiasco.


I should clarify on the "if my relationship doesn't work I want to come back" statement: I have a space at my parents house I can indefinitely stay. The only reason I haven't bought my own place in the UK is because I travel to Europe so much and it wouldn't make sense....along with not needing to pay my parents any rent....I didn't think it was worth buying a new place for myself.
If things were to go wrong in my relationship I guess I would just continue to stay at my parents full time and start the process of moving in to the place I own....vs selling (if feasible) and buy my own new place. I don't think I would be too bothered waiting a year for this process

@atush: I put in 6% of my wages into my pension, which my employer currently matches. I'm also putting £500 per month into a separate savings account (non-ISA) for emergencies etc.

I guess even with the fees of renting out a house...even if I "lose" money on the rent...let's say I rent out for £800 per month and cost to me is:

£600 mortgage plus £240 tax bill=£840 + £60 fees = £900 per month

I'm still looking at this with the view that I'm paying £100 per month "mortgage" effectively to then have a house paid off in 15 years.....barring the house market completely crashing...but then with no pressing incentive to sell, I'm sure I can wait for the right time with the way the property market peaks and troughs?

kidmugsy

If you really must go for BTL, perhaps better to wait until 2020 when the market has responded to the ongoing tax changes.

teddysmum

If you work in such a high level financial situation, surely you have better contacts to advise you than a group of anonymous people on a free for all website ?