Another inheritance query

lytton

Hi guys. Old time floater around these parts but relatively new to posting as finally I'm (nearly) in the position to ask a big question due to developing circumstances.

The short of it is I'm expecting to come into some money later this year. I don't know the figures exactly but as a wild punt I'll say around the £70k mark. It's certainly a decent amount of money for most and I'm incredibly lucky. My main query is what exactly to do with it. Conventional wisdom might suggest paying off my mortgage (currently standing at about £65k over 20 years or so) however I'm actually drifting away from that idea for the following main reasons; I'm currently not working and I want to make that money work for me. I'm not an idle layabout, I gave up full time work last year to become a stay at home dad (my wife is the bread winner) so I've given up my job to raise the two little'uns for the time being as childcare costs would easily have outstripped my paltry NHS wage. At present I'm finding it difficult to find any form of conventional employment as I can't undertake flexible working patterns demanded by many retail positions, nor am I willing to undertake evening/night shift work because it would ruin our family/life balance. Raising two very young kids really is full time work, but one that loses rather than earns money.

My interest has always been in property, I wont' lie, and I'm probably looking mainly for approval and encouragement with this post, ultimately. Many other threads have recommended putting surplus money into S&S products, which I'm partially against at the moment because as I said I'm looking to put the money into something productive, by which I mean I want to generate a monthly income of sorts for myself, to supplement my wife's income and improve our general financial situation. My research suggests that S&S investments requires at least 5-10 years of commitment and probably won't generate reliable monthly income. I know that buying property to rent is a job in itself and I'm under no illusions that it won't involve doing work, however from witnessing family involvement in the rental business it does seem to offer a 'degree' of flexibility when it comes to managing workload.

I suppose what I'm asking is whether buying property to rent is indeed a relatively efficient way of putting this money to good use? I'm living in the north-west and I know that £70k can certainly be used to buy property in the right locations, ideally without relying on a buy-to-let mortgage. Is there some other glaringly obvious way I can use this money to generate a relatively stable bit of income? As I said, paying off my mortgage would probably be a wise move but for my own sanity I really want a project of sorts that I can dedicate a bit of time to, so that I can feel like I'm doing something productive and regain a bit of financial independence and confidence. I've researched the rental game a lot over the last few years, and I am of the opinion that despite changes to stamp duty and market conditions etc, that it's still a viable option especially if a mortgage can be avoided. I'm not looking for someone to simply say yes or not, but perhaps to confirm that I'm not being a complete dimmock and that what I'm proposing is reasonably rational. Anyone? Please go easy on me. Thanks in advance.

Thrugelmir

Personally if I had with no employment income. I'd use the money to clear the mortgage. Being mortgage free makes for a stress free life. Secondly I use part of the money to start my own business. However small it maybe currently. As the chilren grow you'll progressively have more time on your hands.

A single let property is all eggs in one basket. There's no guarantees.

Zorillo

I can't understand for why you wouldn't simply clear the mortgage in this situation. You'd remove the need to work again until the kids are much bigger, and possibly altogether. It's what I'd do.

Alexland

I agree with the above BTL is a PITA and I wouldn't want to go back to being a landlord again. Although the capital value of S&S investments can fluctuate wildly the dividend income can be fairly consistent if you have a diversified portfolio.

We have one child and I totally appreciate that looking after two could be a full time job for the early years.

Still it depends what your long term financial outlook looks like. Have you ensured the child benefit is in your name to earn NI credits for the state pension?

Alex

lytton

Yup child benefit and child tax credit are sorted. I switch and compare frequently to insure household bills are down, and I’ve made every possible change already to adjust to a lower income. My reasoning for not wanting to pay off all the mortgage is that at present we have a good two year fix and even wiping that out won’t A) change the fact that we have other outgoings such as bills etc, and change the fact that I have no viable income at present. I should have clarified that I would hope to spend perhaps a good portion of the inheritance I mentioned on property but use that which is left over on cutting some of the mortgage, or spreading it elsewhere efficiently. Indeed putting a lot of that money into a property is an eggs in one basket scenario, I acknowledge that there is risk involved with that. The rationale still is that it’s something I’ve always wanted to do. A business startup was something I had toyed with however I have not yet found an entrepreneurial realm to occupy; ie I have no original or novel business idea, save for the tried and tested landlording industry. A family member currently lets out two properties, and puts some of the monthly profits into overpaying their mortgage, similarly I’m not proposing to simply ignore my outstanding mortgage balance entirely. Still a dumb move yes?

kidmugsy

If you insist on BTL I'd incline to take a mortgage to ensure you are left with enough capital for repairs and refurbishment when some simian tenant has wrecked the joint.

Zorillo

A) you've told us your wife is the breadwinner and you've chosen childcare instead. That's temporary.

But I'm not saying it's a dumb move. Clearly, it's something you strongly want to do. Each to their own

I don't live in an area where £70k would give me the options you say it gives you. We also have two small children, but for me clearing the mortgage would allow far more future flexibility in terms of work and work/life balance than buying a BTL property would.

lytton

That’s the allure; there are parts of the north west where £70k could buy you a house outright with quite a bit left over in some cases. BUT I can see a pattern emerging in the replies here and it isn’t simply falling on deaf ears. I always turn to these forums when I need pointing in the right direction. It very much depends on what the final sum is, as £70k is only a very rough estimate. I’ll wait until I know the exact amount as that will really determine the best course of action. Thanks for all the responses.

Alexland

Even though our feedback is fairly consistent remember we are on a savings and investment forum because that's what we believe in. If you asked in a BTL forum you might get completely different results.

DairyQueen

I agree with Alex. I also dabbled in BTL some years ago. Unless you enjoy being woken in the middle of the night (tenant with broken boiler), or enjoy finding your pristine property with scorch-marks on the worktops, or a loo an interesting shade of brown (not cleaned in a year), or condensation mould all over the bedroom walls (the tenant decided to site their tumble-dryer in the bedroom for some bizarre reason), I would give this a miss.

Back then the tax situation was much more favourable but I was very relieved to see the back of the final property. You will be subject to CGT on any gains and property is an illiquid asset. If the market crashes you may be stuck with the investment for much longer than you wanted or planned.

My vote also goes to paying down your mortgage but perhaps also investing in yourself via some kind of training/education. Is there a hobby that you could build into an income-generator? Are you good at DIY? Building skills are always in demand and, when kids are at school, can accommodate your role as primary caregiver. Self-employed electrician? Plumber? Decorator?

The guy who decorated my hallway last year had been a marketing manager but had become the primary caregiver of his children. He planned his work around school hours and term-time and had achieved a balance that suited him and his family.

Just a thought.

kidmugsy

Rather than finally paying off the mortgage, you could see whether anyone still offers "flexible" mortgages of the sort we had. We could pay chunks off and then borrow them back again later if we needed the capital.

If those no longer exist consider an offset mortgage, whereby you keep enough cash in a linked bank account that you get charged interest only on the difference between your debt and the balance in the account.

Both these suggestions are about ways of preserving flexibility which means they may suit you.