Need to invest 115K ASAP

mahmsab

Hi All 
I'm married with 2 kids , expecting the third on Jan 2021
I'm also the only source of income and on a very good salary 61k
I have saved 115k over last 6 years and currently renting a cheap 2 bed flat.

I need to put this 115k in the best position to generate money knowing that
- buying any property via mortgage or any ISA is not an option as I'm against usuary.
- risk appetite is low.
- zero experience in stock share ,FTE and finance in general!
- I have no other personal commitment other than taking care of my wife and 2 kids 9 and 7 years old

Options I have 
- buying to let a lease flat/studio
- gold 
- ??
- wait another 6 years and buy my own house on 230k ?!

Stubod

Not sure why you are against usury but presumably happy to pay rent? I always considered renting "dead" money and surely the cost of funding a mortgage with the current interest rates is a better way to use your money? ie I would be "investing" in a property...

...apols if I have missed the point...

MovingForwards

At a guess you could look at a Sharia mortgage as a way of buying a home instead of waiting to be a cash buyer, if it's to do with religious beliefs that you are against interest.

NottinghamKnight

Usuary suggest a religious objection. I thought there were 'mortgages' available from islamic banks that got around the issues of interest, similar to the shared profit idea on savings accounts. I believe they operate on the principle of a shared purchase which you pay back over time at an increased sum to allow for interest but is nor explicitly so. 
Otherwise then you presumably can't earn interest on normal bank accounts. You could buy gold but it's had a good run recently and may leave you with losses over the next few years, though could do well.

DireEmblem

How about putting some money aside for the Kids?

steampowered

What do you really mean when you say that your "risk appetite is low".

There are different types of risk. There is investment risk - the risk of your investment going up or down over time. There is inflation risk - the risk of inflation reducing the value of your savings each year. And there is shortfall risk - the risk of your money being not enough for its intended purpose.

Stocks and shares come with more investment risk than cash savings, but they have less inflation risk and less shortfall risk

What are you planning to do with this money? If you are intending to keep it for the long term (i.e. more than 10 years) then you will find that stocks & shares present less risk to capital than keeping money into cash, due to inflation risk.

dunstonh

buying any property via mortgage or any ISA is not an option as I'm against usuary.

That should not be a problem as interest rates on mortgages are low and not unreasonably high. 

Normally, it is religious beliefs that prevent borrowing on a conventional way but there are mortgages now that cater for that by calling it by different names.    However, using usuary as a reason is not logical in respect of mortgages.  Usury is the action of lending money at unreasonably high rates of interest.

bowlhead99

dunstonh said:

buying any property via mortgage or any ISA is not an option as I'm against usuary.

That should not be a problem as interest rates on mortgages are low and not unreasonably high. 

Normally, it is religious beliefs that prevent borrowing on a conventional way but there are mortgages now that cater for that by calling it by different names.    However, using usuary as a reason is not logical in respect of mortgages.  Usury is the action of lending money at unreasonably high rates of interest.

Well, the reason the mortgage providers in Islamic finance use special structuring techniques / call it different names, is to avoid the accusation that any interest at all is 'unreasonably high' ; i.e. because the one lending shouldn't be able to exploit other people and be given interest simply for being fortunate enough to have the money in the first place.

Clearly there is a profit motive in saying to someone who would like your £100k that he can have it to help him buy a house as long as he pays you back £102k in a year's time or some other bigger number over some longer period. So, a lender renting out his cash for other people to use is frowned upon, due to it allowing him to simply make money from money by exploiting other people's circumstances.

Of course to the lender it would be a risk based investment due to the chance of default, and with inflation eroding the value of the debt over time they may not really make a lot of money out of you in real terms, but it's not an approved practice in some cultures. The 'dressing it up in different names' with similar economics and getting a scholar to sign off on it would seem to some people as loopholes and somehow a bad thing, but to others as exposing the absurdity of the rules and to be applauded. If the bank buys your house for you and immediately sells it to you at a higher than market price and lets you pay it back over time with no 'interest' needed, that's usually allowed... and likewise if the bank lets you lease their property and lets you buy it off them slowly while paying a rental premium for the fact you're occupying it before you finished paying for it, that's allowed too.

With £115k of cash for a downpayment and £60k income it wouldn't seem difficult to obtain a £230k house using one of these techniques, though at the end of the day a £230k house may be more expensive to buy and run than a small 2 bed flat, so if you don't mind two parents and three kids in two bedrooms I suppose you could just hold on until everyone is a bit older and more cramped as the newborn gets bigger. 

As only one breadwinner the large pile of cash in the bank while waiting to buy a house at some point in the future is a good thing in case of disaster. With low risk appetite: the gold could lose half its value over the next five years just as it lost 40% of its value in pounds over about five years from a 2011 peak, so doesn't seem the right sort of place to put the money being saved towards a property, and most equity investments could do the same.

mahmsab

Thank you all for the replies 
If I can get additional 30k what about the buy to let option for a studio or even a leas flat ?

Thank you again 

bowlhead99

mahmsab said:

Thank you all for the replies 
If I can get additional 30k what about the buy to let option for a studio or even a leas flat ?

Thank you again 

You said risk appetite was low. So, that doesn't seem compatible with finding a single flat or studio and putting all your money into that one asset and watching its value go up and down with the property market for that particular street in that particular town in that particular region, while meanwhile putting a lot of money aside for periods when you get a bad tenant who stops paying the rent and takes several months to evict (and when you eventually get them out they have trashed it and crapped everywhere and you need to completely repair and refurbish it before it becomes habitable / rentable again).

If you set up in business as a landlord you will be competing for tenants with other landlords who  have whole portfolios of properties and can afford to have a portion of them empty from time to time while cashflow comes in from the other ones, getting better rates on maintenance and letting agency fees etc due to doing a lot of business with service providers and handymen, and getting capital cheaply through borrowings which you are unwilling to do. 

So, before you even start to think about getting another £30k to consider it, your single-studio BTL is already destined to be a worse performing business than the other property BTLs in the area which are managed as a more efficient portfolio by people who have more experience of doing it, and you will make less money out of it than the average 'proper' landlord portfolio while taking higher risk ('all eggs in one basket').

mahmsab

bowlhead99 said:

mahmsab said:

Thank you all for the replies 
If I can get additional 30k what about the buy to let option for a studio or even a leas flat ?

Thank you again 

You said risk appetite was low. So, that doesn't seem compatible with finding a single flat or studio and putting all your money into that one asset and watching its value go up and down with the property market for that particular street in that particular town in that particular region, while meanwhile putting a lot of money aside for periods when you get a bad tenant who stops paying the rent and takes several months to evict (and when you eventually get them out they have trashed it and crapped everywhere and you need to completely repair and refurbish it before it becomes habitable / rentable again).

If you set up in business as a landlord you will be competing for tenants with other landlords who  have whole portfolios of properties and can afford to have a portion of them empty from time to time while cashflow comes in from the other ones, getting better rates on maintenance and letting agency fees etc due to doing a lot of business with service providers and handymen, and getting capital cheaply through borrowings which you are unwilling to do. 

So, before you even start to think about getting another £30k to consider it, your single-studio BTL is already destined to be a worse performing business than the other property BTLs in the area which are managed as a more efficient portfolio by people who have more experience of doing it, and you will make less money out of it than the average 'proper' landlord portfolio while taking higher risk ('all eggs in one basket').

Thank you sou much 
So , seems like buying my own property is the best investment (may be I can deep dive and consider the shared ownership help to buy option ) or other Sharia compliant way.
But if so I may have 2 paths :
1- a cheap 3 bed house in average or low area on 230 for example which need some work also 
2- Hight class 4 bed on 300k in high class area and it's ready to live in

Which one is the best route