Advice please on investing quite a large sum.

squidlydiddly2

I started getting the Martin Lewis emails almost from the very start and have had good advice from my few posts but I’m really not sure where to post this question so have posted in a couple of places on the forum!

I am 76, have been retired for 15 years, have carefully depleted my drawdown account to nil and now only have my state pension of £1k a month. My wife is 72 still has drawdown, a small NHS pension and state pension amounting to almost £1k a month. We have several one year cash investments maturing in late April amounting to £116k but this will still leave us with other cash still invested. We own our home which is worth around £400k which we put into a family trust for our son in 2014. We have also done all the usual powers of attorney, funeral plans etc to make things easier should things begin to go wrong.

When our son wanted to buy his first property 12 years ago the bank of mum and dad gave him and his partner £110k to help make his mortgage payments affordable. He has now sold the property, is moving abroad and wants to give us back the money! In all this means in April we have around £226k to invest somewhere. Stocks and shares are of no real interest to me at my age and interest rates are abysmal so my thoughts are moving towards buying a second property to let, as I expect prices to fall unless the chancellor keeps the stamp duty holiday, and this brings me to my questions.

Is this a sensible option, what would you advise? If property to let is a sensible option should we put our son down as owning part of the property, what are the tax consequences, can you claim the cost of the property against any income from it. There must be many more things we would need to take into account? Any proper advice would be most welcome. Thank you.

dunstonh

Is this a sensible option

Buy to lets are not the easy option they once were.   prior to the credit crunch, a blind monkey picking a property at random could turn a profit.   Today, you have to be more picky and there are more requirements as a landlord.

 If property to let is a sensible option should we put our son down as owning part of the property,

What would that achieve, other than an eventual capital gains tax bill and it will being within the estate for IHT?

what are the tax consequences, can you claim the cost of the property against any income from it

Capital gains tax on the sale.   Still within the estate for IHT.  Income tax on the rental income minus expenses.

Going into a buy to let in your 70s with no previous experience is not something I think most people would consider.

barnstar2077

I personally would not want to take on the responsibility of a second property at your age, surely you should be living as stress free as possible and enjoying your retirement.  I will say that there are not many children that would give back that kind of money (or be in a position to be able to for that matter.)  If he is the sole beneficiary of your estate, and you have no use for the money at this time, it might be better if he kept the money for now to avoid any tax implications later. 

Marcon

squidlydiddly2 said:

I started getting the Martin Lewis emails almost from the very start and have had good advice from my few posts but I’m really not sure where to post this question so have posted in a couple of places on the forum!

I am 76, have been retired for 15 years, have carefully depleted my drawdown account to nil and now only have my state pension of £1k a month. My wife is 72 still has drawdown, a small NHS pension and state pension amounting to almost £1k a month. We have several one year cash investments maturing in late April amounting to £116k but this will still leave us with other cash still invested. We own our home which is worth around £400k which we put into a family trust for our son in 2014. We have also done all the usual powers of attorney, funeral plans etc to make things easier should things begin to go wrong.

When our son wanted to buy his first property 12 years ago the bank of mum and dad gave him and his partner £110k to help make his mortgage payments affordable. He has now sold the property, is moving abroad and wants to give us back the money! In all this means in April we have around £226k to invest somewhere. Stocks and shares are of no real interest to me at my age and interest rates are abysmal so my thoughts are moving towards buying a second property to let, as I expect prices to fall unless the chancellor keeps the stamp duty holiday, and this brings me to my questions.

Is this a sensible option, what would you advise? If property to let is a sensible option should we put our son down as owning part of the property, what are the tax consequences, can you claim the cost of the property against any income from it. There must be many more things we would need to take into account? Any proper advice would be most welcome. Thank you.

Once I'd finished admiring your organisation, and the strength of your family relationships, I read the rest of your question!

BTL can be a success, but too many people have blundered into it (especially in their later years) thinking it must be a good idea, only to bitterly regret their choice of investment as they deal with empty properties, problem tenants, unexpected tax bills - do you really want a whole new learning curve at a time when tranquility might be a preferable option?

Given the amount of cash you have sloshing about, why not spend some of it on proper advice, based on a full fact find? That might yield some ideas which you might not otherwise have considered. In particular, what arrangements do you have in place for paying for care if you and/or your wife need help, or even full time residential care, at some future point?

Scrudgy

My father in law at age 80 sold his buy to let, and breathed a huge sign of relief. The property had been causing him problems for quite a long time.
His issues were, poor tenants not paying rent, dirty tenants leaving the property is a horrible mess at the end of a lease, property management company who were only interesting in their monthly fee, but not actually managing the property, regular changes to the regulations meaning more time and money needing to be spent to keep up to code. Item breakages which were probably misuse by tenant. 

While buy to let can be a good experience and good regular income, it can also take up a lot of your time which can be quite stressful. My father in law used to say you can go wrong investing in property. He doesn’t say that anymore and was really glad to sell up.

if you want easy and low maintenance, investing in a lower risk multi asset fund would probably be a lot less stress that managing a buy to let, with probably similar yields to a rental property.

jimjames

I find it really bizarre that you've discounted stocks & shares but are looking at getting a BTL property. Surely at 76 you want the least possible hassle and having tenants is not likely to be that at all. At least stocks and shares just sit there in the account without calling you at 7am that the boiler has broken. I'd strongly suggest reconsidering your options

marlot

Buy to lets are not very liquid - if you needed money for a care home or a big purchase, it could take months to get your money out.

Stubod

..at your time of life I would never consider "investing" in a BTL....way too much hassle, and the potential for really big problems, and as above the returns are not as good as they once were. You would be much better off either saving, or "low risk" investments...IMHO

Secret2ndAccount

If you operate a buy-to-let:

You have to get an annual gas safety certificate

You have to get regular electrical safety checks

You have to give your tenants an energy performance certificate

If the roof gets a big hole in it, and the rain starts coming in, you are responsible for arranging and paying for alternative accommodation for your tenants, then you have to pay to fix the roof.

If the tenants don't pay the rent for 3 months, then do a runner, you are unlikely ever to see your money, or any of your things they take with them.

If you decide this was a bad idea, and you want to sell the house, are you going to kick out your tenants, or wait until they leave? Could be years if you wait; will be many months if you decide to evict your blameless tenants.

When you come to sell, you will realise one large gain, so you could well end up paying Capital Gains Tax

When you pass on, your heirs are presented with a house that has someone living in it. Hope they wanted to run a buy-to-let too.

If you go with stocks and shares:

You open an account

You purchase one fund, e.g. Vanguard Lifestyle 40. You can choose a fund that gives a modest annual income, or a fund that reinvests any income, so it grows more.

It grows. Occasionally it shrinks - can happen to a house too, but unlike a house it never presents you with an unexpected bill.

When you need some money, you sell just as much of the fund as you need, leaving the rest invested. Probably no tax to pay.

When you pass on, your heirs receive a cheque. They can do whatever they want with it.

Secret2ndAccount

Also, treat yourself to something nice, and I think your son is great

ed_3000

BTL is riskier than shares. I have an SII certificate level 3 to vouch for this. 

Dealing with late paying tenants is not ideal, but is part of doing this business. If you are relying on a regular income from this, think again. I believe it is six months notice to serve a section 21 at the moment, before you can start court proceedings. In that time the tenant may not pay you and may even trick you into paying them several months of rent for them to leave. You will likely have to write them a good reference, too, so some other unfortunate landlord will get to manage them. There is evidence that people tend to cut their profits short and let their losses run.

Given the above points, it may only make sense to do BTL if you have a time horizon of 10 to 20 years, where you are relying on the total return, based on both income and capital appreciation, at the end rather than during the investment period. In the current environment, excluding Covid-19, there are more investors flush with money than there are good yielding investments. This has the effect of reducing returns and investors having to stomach even more risk. For you to benefit, you need another bubble in the property market and hope you had timed your purchase well so you net make money when you sell, overall.