What to do with £30k..buy to let or savings??

daisycat01

We are hopefully selling our house to our tenants and once we have paid off the morgage and cleared our CC we will have approx £30-£40K left over.

My husband is quite keen to put it back into a buy to let property (a small flat or 2up/2down). I have felt very stressed by having a rental property so would rather put the money into a high interest account.

Which do you think would grow more? We are planning to buy a larger house in about 2/3 years and will probably want the money to put towards our morgage then, so will need access to it in 2/3 years but want to do the most we can with it.

After the recent Northern Rock saga and possible interest rates decreasing, what the best thing to do??
Thanks

caliston

I don't know where you live, but there can't be too many places left where you can still buy a property for £30K

You might want to work out the expenses you'd put into buying a property: estate agents' fees, letting agency, refurbishment costs at the end, etc. Once you have an idea how much that'll be, put those against your potential rental income. Don't forget to include periods when it might be empty. You might also want to consider a 'hassle budget': how much stress can you cope with and what's the minimum profit you'd accept to endure that stress.

By investing in property you might reduce your exposure to property market fluctuations (if the market goes up or down 10% so might your flat). But the market isn't necessarily linear like that (flats may go up/down 20% but big houses only 5%), and if the market is slowing don't forget it may take some time to sell.

Essentially it's a gamble on the state of the housing market - only you can make that judgement for yourself. However there are some fairly good fixed rate accounts now, so the alternative is to keep it in cash - again a fixed rate is a gamble based on what you think interest rates are going to do. Or a variable rate, but of course that can up or down.

You don't say how you're living at the moment, so that might also influence your thinking - do you already own a house? Diversifying your assets is generally a useful way to reduce risk (some cash, some property) but of course that might be reducing the risk your assets go strongly up in value as well the risk they go strongly down.

zag2me

Just putting it in a high interest account will probably only just keep up with inflation, especially if you are a tax payer. So its effectively doing nothing.

BTL can still be a good option if its for the long term and you can find a suitable property.

There are other options like shares, gold ect that you can look into, depends on your attitude to risk.

dannyboycey

BTL is dead.

You can get almost 7% on high interest, no-risk savings accounts now. In the current climate, there is more chance of you finding lord lucan in Asda than getting a BTL that will return that much. Don't kid yourself that it's a long term investment either - a downturn has started, and it could last for 10-15 years!

daisycat01

Thats what we are worried about, we were thinking about using the £30k as a deposit to a buy to let, but with the fees and expenses plus the hassle, and with things being a bit unstable we are not sure.
If we decide to go down the savings route, what is the best options for us? We have never been in the position to save any money so are complete novices! I have tried reading the posts on fountain saving, but to be honest I am quite confused! We would want to lock it away for 2 years minimum.

dunstonh

What about conventional investments?

You are looking at mortgaged buy to let so you obviously accept high risk and with savings at the bottom end you leave yourself with a load of options in between.

However, a timescale of 2-3 years doesnt give you much time for any investment, including buy to let so you are best sticking with deposit based accounts unless you are really a high risk investor.

dannyboycey

daisycat01 wrote: »

Thats what we are worried about, we were thinking about using the £30k as a deposit to a buy to let, but with the fees and expenses plus the hassle, and with things being a bit unstable we are not sure.
If we decide to go down the savings route, what is the best options for us? We have never been in the position to save any money so are complete novices! I have tried reading the posts on fountain saving, but to be honest I am quite confused! We would want to lock it away for 2 years minimum.

There are lots of options open to you but it depends on how much risk you want to expose yourself to and how long term you are looking.

With savings accounts, you can get some really decent returns, risk free by locking your cash away for a couple of years.

baby_boomer

daisycat01 wrote: »

We are planning to buy a larger house in about 2/3 years and will probably want the money to put towards our morgage then, so will need access to it in 2/3 years

Buy-to-let is not a 2-3 year investment. And you are presumably talking about a highly geared investment as well, since you would need a buy-to-let mortgage.

Effectively that would be a bet that house prices will rise. If they do you could win. If they fall you lose big time.

You are talking savings accounts and should check out https://www.moneyfacts.co.uk/savings

isofa

Agree with much of what has already been discussed. I'd only consider buy to let for a long investment period, in fact if I was to do this now (and I wouldn't because I think house prices are way too high), I'd be investing for tens of years.

If you have more time, then stocks and shares would be a good idea, but obviously you need to ascertain your risk and 3 years isn't enough time at all, so I'd abandon that idea.

Max out both your cash ISAs (3K each). Obviously if you fancy a dabble in some funds, you can still invest a further 4K each in the remaining ISA Stocks and Shares allowance, however as with the above, 2-3 years isn't really enough time to see a good return, so I'd probably just stick with the cash ISAs.

Depending on your tax bracket, you could put the remainder in NS+I Saving Certificates 15K per person per issue, they are index linked, 3 or 5 year terms, but after 12 months you can access the money.

Or spread it into a good high-rate either instant access account, or maybe split it some in a high rate fixed bond for up to 2 years depending on when you might need it back for the next house purchase.

Many options, I think high-rate savings would be best for the time period you are talking about, and the base rate is unlikely to go up in Oct, many think it'll drop a little, so fixed rate bonds looking a good option.

Agri47

Stick to a high interest savings account for the moment.

If UK property prices do fall (as they are now doing in the United States) then the purchasing power of your cash may increase over time (so far as property is concerned).

PauliPauli

agreed ... but it in a high interest 1 year bond before rates go down) so that your not tempted to take it out and buy, buy-to-let 6 months from now, as your purchasing power will be even greater in 12 months

As a landlord myself the sheer scale of the "misselling" in the buy to let market is huge and will come home to roost soon, my two properties left have less then 50% LTV..... it was hard to fight the urge to buy anything in last 18 months !!