Investing 250k - 350k for income

tightauldgit

I'm just doing some sums with regards to what to do with potential proceeds of a house sale vs renting the house out for income. My medium term plan is to move overseas to somewhere low-cost and basically use the income generated from this to fund my day to day living. Looking at the housing market at the minute  I know that I can rent out the property and expect to get something like a 5% return on it (top line, I'm aware that there will be costs associated with that so actual money in my pocket will be quite a bit less) but in all honesty I would like to avoid the hassle of being a landlord. Obviously with property you also have the potential for the value to increase as well as the rental income so that's another thing to consider. 

That being the case, If I was to sell the house and look to invest the proceeds I'm wondering what I could reasonably expect and how best to go about it? I'd need to be able to get a good return while having a reasonable amount of security that my capital is going to be safe. I don't mind locking the capital up for a while but I do need to have access to the returns so while I would be putting some into a pension that's not how I would want to invest the whole lot. 

I used to be quite savvy with the investment market and options but i've been away from it for quite a while. So just wondering if anyone can give some advice of what might be a good idea to look at, or whether, in all honesty, keeping the house and renting it out is going to be the best option? 

dunstonh

 I'd need to be able to get a good return while having a reasonable amount of security that my capital is going to be safe.

The safer you want your capital, the lower the return will be.

 don't mind locking the capital up for a while but I do need to have access to the returns so while I would be putting some into a pension that's not how I would want to invest the whole lot. 

Apart from the pension wrapper and offshore bond wrappers, you would not be locking it up.  Offshore bond could be a potential option here depending on the tax regime of where you are going to.

So just wondering if anyone can give some advice of what might be a good idea to look at, or whether, in all honesty, keeping the house and renting it out is going to be the best option? 

Government has overseas residential property owners in its sights.  What is the treatment of rental income in the country you plan to live in?

Nothing on this section is classed as advice.   Just comment, discussion and opinion.

Adyinvestment

My limited experience thoughts...

Your situation would seem to be suited to a dividend portfolio, there are lots of dividend aristocrats/kings trading at decent prices at the moment which will easily give you a 4-5% yield with a varied portfolio.

Yes the portfolio will have volatility but with a little bit of housekeeping you should be able to keep and increase the yield going forward.

Plenty of YouTube videos of people doing this, perhaps take a look. 

Linton

IMHO......
One reason to keep the house is what would your plans be if you had to return to the UK?  eg social unrest, natural disasters, ill health, plain old age, fifficulty in obtaining a long term visa etc etc? There is the danger that you could be unable to afford somewhere acceptable to live.  On the other hand what would happen if the rental income ceased for a few months?

On the investment side I think having a stable 5% return and safe capital will be very difficult with current interest rates.   Is this 5% of what ever happens to be the level of your capital at the time or would you want say 5% of the initial value rising with inflation? And what is safe capital?   Would you want that to keep up with inflation? Yes to either or both of these questions could make your 5% much more doubtful.

One way of getting moderately secure income broadly rising with inflation over the long term at perhaps 4% rather than 5% with moderate security of capital could be to invest in a very broad range of large, defensive, dividend paying companies.  Somewhat out of fashion since the great crash but it may meet your requirements.

tbh I would start my planning at the other end.  What day to day income is required? Over what timeframe?  What happens in real old age?  How much in emergency funds is required?  Once you have a picture of your outgoings over the rest of your life you can then start working out where the money could come from.  Some could be secure income from secure capotal, some could be a simple drawdown of capital.  Maybe you have a large cash fund to last for the medium term and get better long term returns from the rest of your money without worrying about short term volatility.

tightauldgit

dunstonh said:

 I'd need to be able to get a good return while having a reasonable amount of security that my capital is going to be safe.

The safer you want your capital, the lower the return will be.

 don't mind locking the capital up for a while but I do need to have access to the returns so while I would be putting some into a pension that's not how I would want to invest the whole lot. 

Apart from the pension wrapper and offshore bond wrappers, you would not be locking it up.  Offshore bond could be a potential option here depending on the tax regime of where you are going to.

So just wondering if anyone can give some advice of what might be a good idea to look at, or whether, in all honesty, keeping the house and renting it out is going to be the best option? 

Government has overseas residential property owners in its sights.  What is the treatment of rental income in the country you plan to live in?

Nothing on this section is classed as advice.   Just comment, discussion and opinion.

Yeah when I said 'advice' I meant 'suggestions of what to look into' .... I'm just at the point of trying to work out what' what in terms of sensible options. I couldn't tell you what the tax regime will be in terms of where I end up as I don't know where that would be yet, or even if i would put down permanent roots anywhere in the medium term or just travel. 

tightauldgit

Linton said:

IMHO......
One reason to keep the house is what would your plans be if you had to return to the UK?  eg social unrest, natural disasters, ill health, plain old age, fifficulty in obtaining a long term visa etc etc? There is the danger that you could be unable to afford somewhere acceptable to live.  On the other hand what would happen if the rental income ceased for a few months?

On the investment side I think having a stable 5% return and safe capital will be very difficult with current interest rates.   Is this 5% of what ever happens to be the level of your capital at the time or would you want say 5% of the initial value rising with inflation? And what is safe capital?   Would you want that to keep up with inflation? Yes to either or both of these questions could make your 5% much more doubtful.

One way of getting moderately secure income broadly rising with inflation over the long term at perhaps 4% rather than 5% with moderate security of capital could be to invest in a very broad range of large, defensive, dividend paying companies.  Somewhat out of fashion since the great crash but it may meet your requirements.

tbh I would start my planning at the other end.  What day to day income is required? Over what timeframe?  What happens in real old age?  How much in emergency funds is required?  Once you have a picture of your outgoings over the rest of your life you can then start working out where the money could come from.  Some could be secure income from secure capotal, some could be a simple drawdown of capital.  Maybe you have a large cash fund to last for the medium term and get better long term returns from the rest of your money without worrying about short term volatility.

It does occur to me that it's quite likely anywhere I move to may well be underwater in 20 years time and circumstances can change quickly so there does need to be that emergency option to come back but I'm not tied to the house I'm currently in. On the face of it being invested in UK property while also getting a rental income from it if I'm not there seems like a sound investment but I just wondered if I was missing an alternative.

I'm in the process of sorting out all of my personal finances, as I basically neglected everything for the past 5 years or so as other more pressing matters took precedence. I'll be looking again at things like my share portfolio and probably transitioning to higher yield stocks over time. I'm also squirreling away as much into my pension fund as makes sense when I can. 

I'm in the process of winding up my small business over the next 12-18 months (which never really made much profit) but have no desire to go back to being a wage slave in an office in the UK. Having done a few high level sums I reckon if I can turn 350k in assets into £1500 a month (give or take) and build up enough of a backup fund to account for emergencies then that's a reasonable budget to live frugally (but not in squalor) somewhere like Thailand or Indonesia. 

I'm really cautious about the temptation of capital drawdown though because while a few hundred thousand might seem like a big chunk of change it's certainly not enough to last me the next 40 years. Or even the next 20 until pension age.

Of course that all has the potential to go nipples skywards in any number of ways, so having a house to come back to in the UK is probably not the worst idea in the world.  

Thrugelmir

tightauldgit said:

Linton said:

IMHO......
One reason to keep the house is what would your plans be if you had to return to the UK?  eg social unrest, natural disasters, ill health, plain old age, fifficulty in obtaining a long term visa etc etc? There is the danger that you could be unable to afford somewhere acceptable to live.  On the other hand what would happen if the rental income ceased for a few months?

On the investment side I think having a stable 5% return and safe capital will be very difficult with current interest rates.   Is this 5% of what ever happens to be the level of your capital at the time or would you want say 5% of the initial value rising with inflation? And what is safe capital?   Would you want that to keep up with inflation? Yes to either or both of these questions could make your 5% much more doubtful.

One way of getting moderately secure income broadly rising with inflation over the long term at perhaps 4% rather than 5% with moderate security of capital could be to invest in a very broad range of large, defensive, dividend paying companies.  Somewhat out of fashion since the great crash but it may meet your requirements.

tbh I would start my planning at the other end.  What day to day income is required? Over what timeframe?  What happens in real old age?  How much in emergency funds is required?  Once you have a picture of your outgoings over the rest of your life you can then start working out where the money could come from.  Some could be secure income from secure capotal, some could be a simple drawdown of capital.  Maybe you have a large cash fund to last for the medium term and get better long term returns from the rest of your money without worrying about short term volatility.

 Having done a few high level sums I reckon if I can turn 350k in assets into £1500 a month (give or take) 

Investment returns have been lumpy historically and difficult to predict. Investing for the longer term smooths these lumps out. What this does is hide the dips. Which are often severe and not necessarily short term. 

adindas

tightauldgit said:

I'm in the process of winding up my small business over the next 12-18 months (which never really made much profit) but have no desire to go back to being a wage slave in an office in the UK. Having done a few high level sums I reckon if I can turn 350k in assets into £1500 a month (give or take) and build up enough of a backup fund to account for emergencies then that's a reasonable budget to live frugally (but not in squalor) somewhere like Thailand or Indonesia. 

I'm really cautious about the temptation of capital drawdown though because while a few hundred thousand might seem like a big chunk of change it's certainly not enough to last me the next 40 years. Or even the next 20 until pension age.

Do you mean this £1,500 a month is from investment or from your small business. If it is from investment, it is a very dangerous assumptions. Just look at what happen with the current bear market. Instead of making money many people are in fact losing money. It depend on their investment some are down 30%+ some are even 50%+. If it is a good investment such as index funds, globally diversified fund, it will recover but it might take sometimes. It will not meet your objectives to earn £1,500 a month.

dharm999

If you want to invest in property have you looked at Property Investment Trusts?  I have money in AEW (AEWU moniker).  Has a dividend yield of over 6%, invests in commercial property, but you are taking a risk with your capital.  There are plenty of others to look at if that was of interest

I’m happy to take long term view, as I don’t have enough invested in commercial property, for diversification purposes, and plan to hold it for a long time

tightauldgit

adindas said:

tightauldgit said:

I'm in the process of winding up my small business over the next 12-18 months (which never really made much profit) but have no desire to go back to being a wage slave in an office in the UK. Having done a few high level sums I reckon if I can turn 350k in assets into £1500 a month (give or take) and build up enough of a backup fund to account for emergencies then that's a reasonable budget to live frugally (but not in squalor) somewhere like Thailand or Indonesia. 

I'm really cautious about the temptation of capital drawdown though because while a few hundred thousand might seem like a big chunk of change it's certainly not enough to last me the next 40 years. Or even the next 20 until pension age.

Do you mean this £1,500 a month is from investment or from your small business. If it is from investment, it is a very dangerous assumptions. Just look at what happen with the current bear market. Instead of making money many people are in fact losing money. It depend on their investment some are down 30%+ some are even 50%+. If it is a good investment such as index funds, globally diversified fund, it will recover but it might take sometimes. It will not meet your objectives to earn £1,500 a month.

The £1500 a month is what I would expect to take in (top line) if I rented out the house I own rather than sell it. So what I am looking at is whether there are other alternative investments out there that would be a better option. I'm not looking for capital growth necessarily just a yield comparable to renting out property - it's entirely possible such an investment does not exist in which case Plan A would be to keep the property and rent it out. 

tightauldgit

dharm999 said:

If you want to invest in property have you looked at Property Investment Trusts?  I have money in AEW (AEWU moniker).  Has a dividend yield of over 6%, invests in commercial property, but you are taking a risk with your capital.  There are plenty of others to look at if that was of interest

I’m happy to take long term view, as I don’t have enough invested in commercial property, for diversification purposes, and plan to hold it for a long time

I'll take a look at it. I appreciate NOTHING is going to be completely risk free so I'm prepared to accept some level of risk on the investment. I just don't want my nest egg wiped out by chasing speculative returns. I think to be honest what I am probably looking for is confirmation that I am doing the right thing holding onto the house and renting it out (at least for now) and then maybe over time look to build up a diverse portfolio of stocks with good yields while also making best use of my pension fund.