Where to invest inheritance?

Retireby40

If one were to come into an inheritance of around 70k what do you suggest be the best place for it. By the looks of savings accounts and premium bonds the most one could achieve is around 1% give or take. So we are talking £700 a year. Or around £58 quid a month.

Now before the anti-landlord people attack would this represent a logical move? I dont have all the figures to hand and it is only an idea. I'm not claiming to know everything or even very much and any advice on my workings would be welcome.

Buying a house with cash and no mortgage for 70k (the area I live in I can buy a 3 bed terraced house for that in an ok neighbourhood. Not the best but by no means the worst).

Rental income: £5400 per year (£450 a month)
-Management fee 10% £540 a year 
- management tenency renewal yearly £80
- rates £480 per year 
- insurance £200 a year 
- tax on rental income (it wont push me into a higher bracket, I need to check more things but thinking probably 20% of gross figure.)£1080 

So basically my £5400 I recieve would be down to £3020 for the year. That is before repairs, vacancies (the area I would be buying has a big rental demand but nobody knows what could happen)

For sure theres things I have missed out. The management company would be dealing with it so there wouldnt be a great deal of time spent on it at my end. 

70k investment to return £3020 a year/£251 a month (before repairs and unexpected things which can easily happen I'm not deluding myself to it). Is around 4%. I do expect this to drop but to 1% no.

For me it seems worth the risk. I work full time so if the house does lay vacant it isnt really costing me money as I would have no mortgage on it and I just dont see how trying to open 10 different bank accounts to avail of 1% is worth it. 

I also have no idea about stocks and shares either which could be an avenue. Any experts fancy looking at the figures and advising me I would be grateful.

*if your not a landlord/lady and want to bash me for thinking about becoming one please dont. I am only trying to learn and see if my thinking is logical or I'm majorly wrong. 

Thanks

Steve182

Do you want the hassle of tenants? 
What's your attitude to risk?
As a landlord you really pay huge taxes nowadays!
For most people pension/ISA is usually a better option.
If you have a partner you could put £20K each in a (completely tax free) S/S ISA now, then the remainder in April 2021 so all  gains are fully sheltered from tax within 6 months!

Thrugelmir

What's your pension provision like?  Far more efficient tax wise. 

What's your exit route once the BTL loses it's novelty value. Exiting itself could come at a cost and loss of income. A double whammy that takes the shine off the return made. 

Retireby40

I contribute the minimum to my pension which I should increase however being 30 (I know it is never too early) I dont fancy locking my money away and maybe not able to get it for 25-30 years. I see the house as a sort of pension in the future. Even if it's only a couple of hundred a month on top of my standard one.

In regards to tenants as I've stated I will pay a management company and they will deal with the tenants. I wont know them or have any dealings with them day to day.

At least with the house if in 10-15 years my circumstances change I can sell it.  

How much interest does the best ISA get nowadays? My aim is to make some sort of money from it. Even if short term it costs me money long term I want some form of return.

Putting 70k in an isa paying 1% does absolutely nothing for me. I can earn that interest work an hour a week extra over the course of the year.

[Deleted User]

Retireby40 said:

70k investment to return £3020 a year/£251 a month (before repairs and unexpected things which can easily happen I'm not deluding myself to it). Is around 4%.

Your £3020 will go down to £0 after repairs and unexpected things which can easily happen. Or even negative when you hit unlucky year and bad tenants, like many landlords find themselves in right now.

Alistair31

pioruns said:

Retireby40 said:

70k investment to return £3020 a year/£251 a month (before repairs and unexpected things which can easily happen I'm not deluding myself to it). Is around 4%.

Your £3020 will go down to £0 after repairs and unexpected things which can easily happen. Or even negative when you hit unlucky year and bad tenants, like many landlords find themselves in right now.

On the other hand it could be a rip-roaring success. I rented my flat to a single male divorcee who never missed a payment and respected the property like his own (he now does owns it). The flat was bought and paid for and his rent payments funded me through university. I handled it all myself and the return was excellent.

For every rental-pessimist there is probably 5 silent but successful landlords sitting back reaping the rewards. Or, maybe I just got lucky!

NottinghamKnight

Alistair31 said:

pioruns said:

Retireby40 said:

70k investment to return £3020 a year/£251 a month (before repairs and unexpected things which can easily happen I'm not deluding myself to it). Is around 4%.

Your £3020 will go down to £0 after repairs and unexpected things which can easily happen. Or even negative when you hit unlucky year and bad tenants, like many landlords find themselves in right now.

On the other hand it could be a rip-roaring success. I rented my flat to a single male divorcee who never missed a payment and respected the property like his own (he now does owns it). The flat was bought and paid for and his rent payments funded me through university. I handled it all myself and the return was excellent.

For every rental-pessimist there is probably 5 silent but successful landlords sitting back reaping the rewards. Or, maybe I just got lucky!

Yes, but that is historic, many things have changed including the tax regime. 

Retireby40

But even taking 20% of the total amount before deductions it's still providing around 4%. Now while some years you may run into problems. Repairs, a bad tenants etc if you manage it accordingly you should minimize those risks.

If a management company finds your tenant, with references, deposits and background checks that should provide less risk compared to sticking it on gumtree.

Again I'm just trying to figure different things out because as I said there has to be a better option than sticking it in a bank gaining 0.05% or 1% interest. 

Albermarle

The alternative to investing in a pension , is a stocks and shares ISA. You do not get the tax benefit of the pension but your moment is always accessible if needed. The caveat to that is that it is recommended to hold on to investments for a minimum of 5 years , preferably more than 7 years and ideally more than 10 years . This gives time to ride out the short and medium term ups and downs in the market and reduces the possibility of a loss to a small % .
Depending on the investments and how markets perform, 4% above inflation, is not unrealistic as an average over 10 years .
For sure you would be disappointed to return less than 2% above inflation. 

DiggerUK

Retireby40,  you don't hide your concerns about what to do for retirement and seem to be open about what you don't know. At your age you shouldn't be surprised.
You don't say anything about your life in the here and now either, what is your current situation....mortgage, loans, debts, family, hopes, aspirations etc..

From were I'm sitting I'm of the opinion that BTL is not suited to you in any way..._

george4064

Do you need to take income from this new money or not? Stockmarket will provide much better total return than BTL so unless you have a desperate need for income I would invest in traditional stockmarket. I would argue that if you did want income from this new money you would be better off investing it for a mix of income & growth in the stock markets, in this case some more income oriented assets such as infrastructure may be suitable.