Portfolio Diversification and Buy to Let

GiddyInvestor

I am in the fortunate position of having £450k earned over many years from working abroad. This has to date been poorly invested due to being an expat with what at the time seemed to be limited opportunities for placing money.

Now I am home I have been moving money gradually from savings to Vanguard. Currently invested from the £450k is around £150k in accumulation life strategy bonds at approximately 50/50 bonds to equity. Over the next 2 years I will have another £300k available that is currently in various savings accounts and premium bonds. I am aged 55 and have a house with no mortgage, plus another rented out house that is worth about £160K. We have properties abroad getting rental income that have a combined worth of perhaps £500K. By age 67 between me and the wife we should be getting £24k in state and company pensions. I will probably find further work for a few years.

My wife has in the past been scarred by bank failures and massive currency devaluations in her home country. As a result she is very keen to get more UK property to let on the grounds that it is a solid investment. I am also keen to diversify investments but cannot accept that the double stamp duty and unsure future for letting of property is necessarily a good investment.


Can people please provide suggestions? Perhaps further property is practical through a limited company status or is there a reputable property fund that could serve the purpose. Also suggestions on alternative diversification for the money would be appreciated. I am not looking to beat the markets but rather to achieve perhaps a 4.5% return with limited risk.

Thrugelmir

GiddyInvestor wrote: »

I am not looking to beat the markets but rather to achieve perhaps a 4.5% return with limited risk.

A return that's not far off the long term market averages. Unfortunately in the current environment taking risk is a neccessity in the hunt for positive returns.

GiddyInvestor

Good point noted. I should perhaps say a return with reasonable risk that is more than building society rates.

torrence

4.5% with limited risk is unlikely. I would say your current equties exposure is very low. Your £150,000 fund is 50:50 equties bonds so out of £150,000 + £300,000 savings + £500,000 property, you have only 8% of your investments in stocks. That is quite conservative.
I agree that property rent income - when there is no mortgage debt - is a good diversifier. I assume if you are keeping your overseas properties that they are debt free, fully managed for you by a local agent, and yielding a good return after costs? If so then it makes sense to keep them - although again long term your foreign income may be affected by currency exchange rates.
Woud you consider selling some of your overseas property portfolio to buy a small property in the UK so you can increase your equities allocation a bit and also be diversified into UK property in addition to your main home?

NedS

GiddyInvestor wrote: »

By age 67 between me and the wife we should be getting £24k in state and company pensions. I will probably find further work for a few years.

If you have earnings, I would look at paying into a pension at your maximum allowable rate. Even without earnings, both you and your wife can contribute £2880 net / £3600 gross per year to a pension (e.g, SIPP) and receive tax relief.

18cc

Be aware of upcoming changes in letting regulation in particular section 21 abolition meaning you may be unable to remove your tenant should you wish to

GiddyInvestor

" I assume if you are keeping your overseas properties that they are debt free, fully managed for you by a local agent, and yielding a good return after costs?"


All the above is correct. Although there are currency fluctuations we are getting about 3.5% after all costs. As returns are good and steady I would not want to sell part of the overseas properties at the moment. In addition while repatriating rent money twice a year is easy getting a large sum out of the foreign country could be complicated.