Investment advice ideas please

djparkie

Hi,

This has probably been asking multiple times before so sorry to bore - I've had a search through the forums but wanted a "2019" take on this dilemma.

My mother is in a care home that is mostly fully funded by a good pension and renting of her home. However, each month she is around £300 short.

I am trying to help her use her current cash surplus, of around £150k, to make up the shortfall. I've tried to do this with savings accounts/ISAs but the rates are so low that it's not covering it.

I was wondering if anyone has ideas/advice on how to cover the £300 shortfall making use of the cash surplus. The main choice at the moment is purchase a small property (in the right area, such as Cardiff) outright and rent it out. We've been landlords before and aware of new tax changes and feel more comfortable with this rather than dealing in bonds which I know very little about.

Let me know if there are other ideas - the main objective being to generate the income, rather than an investment for the future.

Thanks

Gav

dmelife

The costs involved in a property purchase far outweigh the benefits. It will take a long time to catch up.

You need 2.4% per annum which is easily achievable in a low/medium risk investment portfolio.

AnotherJoe

I would just put the money in a savings ladder which would get you around 2 and a bit percent and burn the money down. If she's already in a care home then no disrespect but £3.5k a year will last her out.

Even being very canny about it, a BTL won't generate much more than savinsg accounts and at the cost of a lot of extra hassle plus risk. One bad tenant could wipe out years of rental income, something that won't happen with savings.

Keep it simple

Aretnap

dmelife wrote: »

The costs involved in a property purchase far outweigh the benefits. It will take a long time to catch up.

You need 2.4% per annum which is easily achievable in a low/medium risk investment portfolio.

You can get 2.4% in 3 year fixed rate savings account, albeit she might have to pay a small amount of tax on it, and it would be advisable to split it between two banks to ensure full FSCS protection.

Even if she were earning no interest at all, £150K would last over 40 years if you withdrew £300/month. Without wanting to sound morbid, how long do you expect her to be in the care home for?

Bearing that in mind, does she actually need the risk and hassle of being a landlord, or of risky investments, when the cash itself sounds adequate to cover her foreseeable needs?

Vortigern

djparkie wrote: »

My mother is in a care home that is mostly fully funded by a good pension and renting of her home. However, each month she is around £300 short.

I'm in a similar position, but with a much greater shortfall.

Do you have Power of Attorney (Finance) for your mother?

Even if you have PoA you must not use it to make an investment that your mother would not make for herself. Would your mum buy another house at her age? And would an IFA suggest a risky investment to someone of her age?

There is a body called SOLLA the society of later life advisers. They might suggest an investment called an immediate needs annuity. The idea is that you pay a large up-front single premium, in return for which the insurer will pay the care fees indefinitely. I do not have any experience of this.

Otherwise you're stuck with savings accounts (inc NS&I)

BLB53

Let me know if there are other ideas - the main objective being to generate the income, rather than an investment for the future.

It should be fairly easy to generate an income return of 3% by investing the money in a conservative mix of globally diverse equities/bonds.

Have a read of 'DIY Income' by Edwards which provides a step-by-step guide.

djparkie

Many thanks to all for taking time to respond. I hear advice against investing in another rental property; she has her marble's so I don't have Power of Attorney and she seems keen on another small rental - the difference is it's me and my brother who actually do all of the work on her behalf.

I'm not overly old and we've been lucky with property before but it's sounding like I need to understand equities and bonds more - perhaps specialised one's that even pay a monthly or quarterly return.

Wildsound

Anyone considering going into the rental property market at this stage could be setting themselves up for a nasty shock. Underpinning a 10 year bull market in equities, relatively low regulation in the sector and the closest we've been to a Labour government unfolding in several years could see a lot of peoples faith in the property market being severely misplaced.

As someone who has already said, no disrespect, but obviously not knowing the full circumstances of why your mother is in a home, the average life expectancy of someone who goes into care is not more than a few years. Given the shortfall you have stated and the amount of cash she is sitting on, I don't see any reason to go head first into either risky investments or illiquid investments like property.

greenglide

she has her marble's so I don't have Power of Attorney

Which is the very time to get the power of attorney!


By the time something unexpected happens it becomes much harder and may be too late!

tacpot12

greenglide wrote: »

Which is the very time to get the power of attorney!

By the time something unexpected happens it becomes much harder and may be too late!

Good advice from Greenglide!

The annuity suggestion from Vortigern is a potential idea. Many people ignore annuities these days as they are concious that generally when you purchase an annunity you will never get anything back, even if you die soon after purchasing it (although annuities with a gaurantee period are available). But this would be the most certain way for your mother to convert her capital to income.

Rental property income can be very uncertain. I have two properties I rent out, and have never had any rent arrears, but I've very aware of the fact that rent arrears can occur and the cost to evict someone can be substantial, especially if repairs are needed after a tenant has trashed a properrty.

Investing in a medium risk investment portfolio is likely to produce a reliable income. My retirement portfolio is returning around 3% pa and the income should rise in line with inflation (CPI). Whether or not the value of the portfolio grows depends on the stock market, but the income depends on the investment managers of the funds I'm invested in selecting companies who reliably pay a dividend.

LHW99

You could consider consulting an independent financial adviser. They would possibly be able to look into the best annuity rates, taking into account of your mum's health, and may have other suggestions.