Second home

IklGrr

Hi, I already have a property, we do not have a mortgage on this anymore. I came into some money which at the moment is in an investment of 250k with St James Place. I have £500 a month from this each month. Rather than have my money sit here and not be use as such, I am thinking of buying a second home where I feel I would make more of an investment. I do not intend to rent this out. The only reason I'm hesitating is that I'm unsure if I'm doing the right thing for my future,  so any advice would be most appreciated. 

AdrianC

Your money is "being use". It's earning you £6k/year. Just under 2.5% return.

An empty property is not an investment. It is a liability. It will cost you money every month - maintenance, insurance, council tax.

The only "investment" value is if you think that property values (after CGT, purchase and sale costs, as well as those running costs) will outstrip the 2.5% you're getting from your current investment.

https://forums.moneysavingexpert.com/categories/savings-investments is where you want to be.

Of course, if you simply want to own a holiday home somewhere you like, then just do it. But don't try to justify it as an investment. But think about what the same ongoing outlay and lost investment return could pay for in terms of nice holiday accommodation in a variety of places...

oldbikebloke

Do you think the property market for the precise type of property you buy in the precise location you buy it in will outperform the stock market? If you can answer that accurately you must be George Soros 

saajan_12

IklGrr said:

Hi, I already have a property, we do not have a mortgage on this anymore. I came into some money which at the moment is in an investment of 250k with St James Place. I have £500 a month from this each month. Rather than have my money sit here and not be use as such, I am thinking of buying a second home where I feel I would make more of an investment. I do not intend to rent this out. The only reason I'm hesitating is that I'm unsure if I'm doing the right thing for my future,  so any advice would be most appreciated. 

So currently you get 6k ie +2.4% return on the investment (is that pre / post tax? any management fees?). 

If you buy a property, you would incur costs for solicitors, SDLT, council tax, maintenance, insurance.. so already starting at MINUS x%. If you're not letting the property, your only return can come from capital appreciation - do you think that will exceed the x% costs + 2.4% from the current investment? 

The other question is what sort of investment do you have with St James Place. Can you speak to them to adjust the risk profile / return? A property, particularly without rental income is fairly high risk given the costs are front loaded and its quite illiquid if you want to adjust your investment. So if you're happy with that level of risk, perhaps you can invest in a higher risk / higher return portfolio with St James Place or another portfolio manager.