Sell a flat and invest the proceeds

DoctorStrange

What have you told your wealth manager about your risk profile?

 £12k pa on £250k is roughly 5% and he plans to pay his fees, beat inflation and "grow the pot" on top which suggests he's aiming for maybe 9-10% return each year?

Has he explained how he's going to achieve this, and are you comfortable with potentially losing say 15% to 30% in a market crash?

aaaaancly

DoctorStrange said:

What have you told your wealth manager about your risk profile?

 £12k pa on £250k is roughly 5% and he plans to pay his fees, beat inflation and "grow the pot" on top which suggests he's aiming for maybe 9-10% return each year?

Has he explained how he's going to achieve this, and are you comfortable with potentially losing say 15% to 30% in a market crash?

I believe I went with medium risk and no ethical barriers.

I have been through coronavirus with him and made good money, so I'm not sure what it would take for a market crash that would lose me 15% to 30% forever. It may dip and come back again.

aaaaancly

Money_Grabber13579 said:

So you’ve got a c.200k capital gain, which will be reduced by any losses and annual allowance you have (rather than the tax liability being reduced by the amount of losses etc), so that might reduce the gain to 159k less whatever annual allowance is left (have you really only got 4K left in the first day of the new tax year?)

Then, you might also qualify for a bit more relief in the form of principal private residence relief and possibly also lettings relief (it’s been quite a while since I looked at those calculations and the rules have changed significantly in the past few years so I won’t comment specifically on how they work but you might find that at least 4/24 of the gain is exempt)

That's why I'm seeing my accountant. I don't even know how the allowances work. I'm out of my depth.

aaaaancly

bostonerimus said:

Run a mile from anyone who promises you any sort of return. It seems to me that the wealth manager is onto a good thing and you are taking all the risk and paying to do it.

All I know is that he has done ok for me so far. Only just over a year though. 

I inherited shares and he is now managing them. 

How do I make money with money without taking a risk and paying someone to help?

DoctorStrange

aaaaancly said:

DoctorStrange said:

What have you told your wealth manager about your risk profile?

 £12k pa on £250k is roughly 5% and he plans to pay his fees, beat inflation and "grow the pot" on top which suggests he's aiming for maybe 9-10% return each year?

Has he explained how he's going to achieve this, and are you comfortable with potentially losing say 15% to 30% in a market crash?

I believe I went with medium risk and no ethical barriers.

I have been through coronavirus with him and made good money, so I'm not sure what it would take for a market crash that would lose me 15% to 30% forever. It may dip and come back again.

The Covid crash/recovery was quite unusual, helped by massive Govt stimulus.

I'm not saying you'd lose "forever" but you'd be withdrawing £1k a month when markets are low, which would make the recovery harder. 

I'd be interested to see his medium-risk plan for a 5% safe withdrawal rate,  after fees and inflation taken into account. 

Is he able to back test that plan for you,  to see how it have fared from say 1995 to 2005, or from 2005 to 2015 for example?

aaaaancly

DoctorStrange said:

aaaaancly said:

DoctorStrange said:

What have you told your wealth manager about your risk profile?

 £12k pa on £250k is roughly 5% and he plans to pay his fees, beat inflation and "grow the pot" on top which suggests he's aiming for maybe 9-10% return each year?

Has he explained how he's going to achieve this, and are you comfortable with potentially losing say 15% to 30% in a market crash?

I believe I went with medium risk and no ethical barriers.

I have been through coronavirus with him and made good money, so I'm not sure what it would take for a market crash that would lose me 15% to 30% forever. It may dip and come back again.

The Covid crash/recovery was quite unusual, helped by massive Govt stimulus.

I'm not saying you'd lose "forever" but you'd be withdrawing £1k a month when markets are low, which would make the recovery harder. 

I'd be interested to see his medium-risk plan for a 5% safe withdrawal rate,  after fees and inflation taken into account. 

Is he able to back test that plan for you,  to see how it have fared from say 1995 to 2005, or from 2005 to 2015 for example?

Thanks, this is all new to me hence the decisions I've made and the questions I have.

He hasn't offered a back test no. 

Are there any other options of making an income from money open to me without too much risk/work or am I chasing a dream that doesn't exist?

It's very difficult to get good advise in the real world because as soon as you speak to someone they start thinking how they can benefit from going you.

I suppose it's also about me asking the right questions. I asked my accountant about CGT and he said oh yes, there will be lots to pay. 

Not once in 20 years has he said 'watcg the capital gains on that flat'...but then that isn't really his job. It's probably my job and I haven't taken it seriously because it's been giving me a nice income.

Voyager2002

aaaaancly said:

Are there any other options of making an income from money open to me without too much risk/work or am I chasing a dream that doesn't exist?

Stock market investments are generally the way to go, and obviousy you can manage risk by diversification (if you invest everything in one tech stat-up you might become a millionaire but might lose everything; if you spread your savings across thousands of companies you are likely to get a reasonable return but not get rich). It is reasonable to expect an average return of five per cent after inflation over an extended period of time: if you take that out as income then there will be minimal capital growth and vice versa.

People who call themselves "wealth managers" tend to charge rather more than do Independent Financial Advisors while doing the same thing.

Voyager2002

aaaaancly said:

Lease is down to 93 years and the freeholder is a poor communicator so I don't relish trying to increase it.

Does the valuation of your flat take into account that the lease is under 100 years?

You have rights in respect of the lease that a new owner would not have, so extending the lease is probably the single most effective thing you can do to increase the value of the flat.

underground99

Voyager2002 said:

aaaaancly said:

Lease is down to 93 years and the freeholder is a poor communicator so I don't relish trying to increase it.

Does the valuation of your flat take into account that the lease is under 100 years?

You have rights in respect of the lease that a new owner would not have, so extending the lease is probably the single most effective thing you can do to increase the value of the flat.

Generally 90+ years is fine and easily mortgageable - some places only start out with 99 anyway - though buyers will think 'the more the better'. 

It's true that short leases gradually become less mortgageable and it's more expensive to extend when the lease dips below 80 years. As you needto have owned a lease for 2 years to have the right to extend it, and it can take a long time to negotiate, buyers might tend to be put off below 85 years as they wonder what it's going to cost them when they need to do it in perhaps a short timescale.

A lot of prospective buyers won't be put off by 93 year lease as they will be thinking that either they'll move on in a few years while it's still easily saleable, or stay there for a long time and deal with it in a decade rather than paying more up front now.

aaaaancly

Voyager2002 said:

aaaaancly said:

Lease is down to 93 years and the freeholder is a poor communicator so I don't relish trying to increase it.

Does the valuation of your flat take into account that the lease is under 100 years?

You have rights in respect of the lease that a new owner would not have, so extending the lease is probably the single most effective thing you can do to increase the value of the flat.

Yes, the estate agent is aware of the lease. His comment was that it would make no difference to the price, and if anyone questioned it we should have a price organised with the freeholder...but they (buyer) should increase it themselves at a later date if they want to.