Property investment?

Guineapigpig

How should I invest £150K? This is part inheritance and part savings. It's currently sitting in savings accounts and an ISA.
I am married and we both have pensions. We only have £40k owing on our mortgage and have two children who are likely to go to uni in a few years.
The options we have thought of are 
1. Buy a property to long-term let by increasing our own mortgage a bit.
2. To buy a holiday let property in the same way to use ourselves and let out.
3. To invest in stocks etc. We are not clued up on investments so have an IFA we would use.
The last option is the least hassle, but feels the least exciting too. The second option could be lovely as we would stay there ourselves. But I'm worried about the ongoing costs and hassle. Would this end up wasting our money?
All advice welcome. Thanks.

Apodemus

Guineapigpig said:

We are not clued up on investments...

That's where I would start! Invest the time and effort to become more clued-up before you make any decisions. This is important stuff and you (probably) only get the chance to do it right once!

MaxiRobriguez

Investing isn't meant to be exciting. It's meant to be (financially) rewarding.

£150k is enough to speak to your IFA about.

dunstonh

1. Buy a property to long-term let by increasing our own mortgage a bit.

Do you have any experience of being a landlord?   It is no longer the easy money anyone can make.  Nowadays it is all about the right property or having building/decorating skills to buy cheap and improve.

2. To buy a holiday let property in the same way to use ourselves and let out.

That didn't work too well in 2020.  Can be viable but you need contracts with cleaners after every possession and going forward, that means deep cleaning for a number of years.  Plus, pretty frequent repairs and maintenance, often at emergency rates.     

3. To invest in stocks etc. We are not clued up on investments so have an IFA we would use.

This is the most conventional method and the most liquid.

All options can make you money if you do your homework and do them correctly.  There are always pros and cons with any method.  

pjcox2005

Do you have healthy pensions, and how far are you from retirement age?
For example to throw in another option you may want to increase pension contributions living of the £150k inheritance money now. Could be more valuable than the other three options particularly if you're currently missing out on employer contributions and/or being taxed at 40% plus. Appreciate it would also fall in the not very exciting box but it's not all or nothing how you spend the money.

BananaRepublic

It might sound nice to have a holiday cottage and stay there from time to time, but it can be cheaper and easier to use a nice B&B. I'm also against holiday homes, but that's just my personal view. Throwing some of the money into pension contributions might be a good idea. Shove most into unwrapped investments, then each year move the maximum lump sum you can into your pension (perhaps view a SIPP) and/or an ISA wrapper.

steampowered

Guineapigpig said:

I am married and we both have pensions. 

Looking at your pensions is the best place to start. While you may have a pension, are your pensions going to be enough to allow you to have a decent retirement? Or are you looking at retiring aged 70 for a retirement on baked beans?

If you don't know, now is the time to find out - while you still have enough time to make changes to your retirement planning if that is needed

Get hold of all the paperwork for your pensions - check exactly what you have got in your pension pots; and where it is invested. Then put the numbers through the pension calculators. Many people's retirement savings are woefully inadequate - the statutory /minimum contribution levels are nowhere near enough. If that applies to you, topping up your pension is likely to be the best use of a lot of this money due to the tax incentives associated with pensions. Especially if either of you are higher rate tax payers.

Now is the time to spend some time educating yourself on investments and pensions. If you are still confused, it will be money well spent to see an IFA. A few hundred quid on an IFA will pale into comparison with what you should be generating from your pensions, inheritance money and other assets - so will be money well spent given that you have decades to go until retirement.

Whatever you do, avoid holiday lettings. So many people have lost their life savings on holiday properties - you only need to look on the MSE forums to see what a disaster holiday lets can be. Unless you are a professional in the hospitality sector, stay well clear.

El_Torro

It's not surprising that most people on this forum will tell you to invest in stocks and shares rather than property.

Buy to Let can work, as with anything in life this involves you being lucky in buying in an area where prices will rise and getting tenants that won't be awkward or trash the place. People are right to warn you against BTL, it's not as profitable as it was years ago. As part of a well diversified portfolio it can make sense though, by that I mean if you already have a lot of investments in pensions and ISAs.

I am really not a fan of buying a holiday let. Sure, you can use it yourself, though in the long run it's probably cheaper to just rent a holiday let whenever you need to. The advantage of that as well is that you can take holidays wherever you want, not just going to the same place every time. 

I know it's been said by a few posters already but to reiterate, investing with an IFA might be "boring" but that doesn't necessarily mean it's a bad option. You can always do fun stuff with the money you earn out of it.

zagfles

Recent discussion on property investment here https://forums.moneysavingexpert.com/discussion/6228376/pick-apart-my-strategy/p1

People seem to think investing in property is easier to understand than equities/bonds etc. It isn't, it's far more complicated, especially with loads of simple multi-asset funds out there like the VLS range etc. Whereas with property you have all the complications and risk highlighted here and in the linked thread.

ETA and this thread may be useful for IFAs etc - question about charges with the usual debate on whether to use one, what to look for etc https://forums.moneysavingexpert.com/discussion/6228557/ifa-charges/p1

Guineapigpig

Thank you everyone. Some very wise words, there! 
I am now thinking that the holiday home idea is not so great. I was referring to an actual cottage in a seaside town, not a lodge in a holiday park. But it would probably be very time consuming. We are both higher rate tax payers and I am self employed. So I imagine a lot of any income from lettings would be eaten up by income tax.
Our pensions could probably do with a boost. So I will have a chat with our IFA.
 I also think E Torro is right in saying it would be cheaper to rent someone else's airbnb and go to different places. 
This site is brilliant. Thanks for your help everyone! 

greatcrested

Go and spend some time on the property board. The post and ask there.

Read the stickie there.

Make sure you understand the 84 bits of legislation and regulation you have to comply with as a landlord.

Make sure you fully understand the taxes involved. and the costs. And the risks.

Bear in mind that with property your money is tied up - investments are liquid so if a life-problem arises and you need cash, you can access it easily.

And I echo the suggestions above tomax out pension contributions for the helpful tax benefits.