Considering selling BTL flat. How to invest 500k?

ConfusedCF

Hi,

If I decide to go down this road I will consult a financial advisor, but thought I'd pick the MSE brains first....

I own a BTL flat (mortgage free). It's a 1 bedroom Grade 1 listed property, which comes with its own headaches. Purchased for 365k in 2011, now worth around 560k. Used to manage it myself, but it has been fully managed the last few years. The rent is £1425 pcm at present, but the tenants are moving out and the agents have advised it will now get around £1700pcm. After estate agent/service charge fees, I clear around 12k a year.

The flat is in good condition but will need a full refurb in the next couple of years as it's looking quite dated. I haven't done a refurb before, but can't imagine it costing less than 40k.

My question is, if I sell it, I think I'd have a combined CGT/estate agent bill of around 65k. So would have around 500k cash to invest.

Other than a BTL, what would be the next safest option of investing that money? I have a small amount of shares that I manage myself, but am not knowledgeable on that front at all. The risk of losing money worries me and I wouldn't want to invest more than 100k that way.

The reason I'm considering selling it that I never wanted to be a landlord, it was sort of forced on me by my Dad (who has since passed away)...even though it's managed, I never fully relax, worrying that something might go wrong with the flat, and would just like to be free of it. I also hear of people having nightmares with their builders too, so the idea of refurbishing it doesn't appeal either. I'm just not cut out for it I guess 😬

I currently have a cash ISA, but am aware you can only put 20k in each year. I earn less than 20k a year (am studying atm).

Any advice would be appreciated.

Sg28

I refurbed a grade 2 listed cottage a few years ago and it was a complete nightmare, materials and specialist labour cost so much more than standard. Grade 1 listing I would imagine would be even worse! 

As a you earn less 20k a year you could for example fix the whole 500k at 6.2% for one year with ns&i which will earn you more in interest than you was making from your btl, with no hassle.

However a sum as large as that you probably want to split it up between stocks/funds, max out ISAs and look at your pension. An IFA would probably be advisable. 

MEM62

With limited information provided as to your circumstances, a considered response is not possible.  I understand the desire to exit the BTL market and, in fact, have just done that myself.  With the sum involved you would be well advised to seek proper advice from an IFA. 

     

jaceyboy

I would stick it in the NS&I 6.2 bond and rake in £31,000 per year

ConfusedCF

Thank you all for the advice & thoughts.

@jaceyboy - I was looking at the NS&I bond. I'll have to pay tax on that, but still I guess I'd end up better off than the 12-14k I clear from rent per annum after fees, taxes etc.

I wouldn't make such a big decision without speaking to an IFA first though

Swipe

Be aware that the 6.2% rate on offer may well be much lower when the the bond matures in 12 months' time

dunstonh

jaceyboy said:

I would stick it in the NS&I 6.2 bond and rake in £31,000 per year

Which may be a good option for some of the defensive side of the holdings but what about tax wrappers?   You don't mention those and for someone with this amount amount of money, it would be daft to not utilise the tax wrappers annually.

Rollinghome

I know nothing about BTL, something that I've never been attracted to, and can fully understand why anyone might want to be out of it.  I've always invested primarily in equities, so I'm the last person to take advice from on property. I barely know the value of my own home.

That said, it seems nothing has been mentioned on what appears to be the very small increase in your property's value, about 50% over 12 years. My ill-informed notion was that a more typical increase would have been around 80% or so over that period.   So has buying the wrong property been the cause of your poor returns?

With property, the value of your assets can rise and fall, as it can with equities and bonds.  With cash, it is one way only. Inflation will surely reduce the value of your cash, and current rates still offer a negative real return. That £31k pa might not buy much in a few years time.

So certainly consider a discussion with a well selected IFA, but bear in mind that their expertise will lie more in collective equity and bond investments. The focus on this board is on equity and bond funds and cash. There seem to be a lot of BLT focused forums, so looking for one of those might provide some suggestions and add to a more rounded view. Good luck.

dannya1978

If you don't need the money as an income immediately and you afford to let it grow and withstand the ripples of the stock market I would put it a mix of index tracker funds across the S+P 500 and FTSE 100/250 ETF's and take the dividends long term without needing to touch the capital...but take advice over the tax implications of such a large investment as you sound like you have covered already...good luck.....a nice problem to have!

Albermarle

ConfusedCF said:

Hi,

If I decide to go down this road I will consult a financial advisor, but thought I'd pick the MSE brains first....

I own a BTL flat (mortgage free). It's a 1 bedroom Grade 1 listed property, which comes with its own headaches. Purchased for 365k in 2011, now worth around 560k. Used to manage it myself, but it has been fully managed the last few years. The rent is £1425 pcm at present, but the tenants are moving out and the agents have advised it will now get around £1700pcm. After estate agent/service charge fees, I clear around 12k a year.

The flat is in good condition but will need a full refurb in the next couple of years as it's looking quite dated. I haven't done a refurb before, but can't imagine it costing less than 40k.

My question is, if I sell it, I think I'd have a combined CGT/estate agent bill of around 65k. So would have around 500k cash to invest.

Other than a BTL, what would be the next safest option of investing that money? I have a small amount of shares that I manage myself, but am not knowledgeable on that front at all. The risk of losing money worries me and I wouldn't want to invest more than 100k that way.

The reason I'm considering selling it that I never wanted to be a landlord, it was sort of forced on me by my Dad (who has since passed away)...even though it's managed, I never fully relax, worrying that something might go wrong with the flat, and would just like to be free of it. I also hear of people having nightmares with their builders too, so the idea of refurbishing it doesn't appeal either. I'm just not cut out for it I guess 😬

I currently have a cash ISA, but am aware you can only put 20k in each year. I earn less than 20k a year (am studying atm).

Any advice would be appreciated.

Before thinking about what to do with the money, you need some kind of plan.
For example
If you think you will need £X over the next year, put this is in an easy access savings account
If you think you will need £X in a year or two - put it in a fixed term savings account
If you think you will not need £X for 5 to 15 years invest some of it
If you want to use some to build up a retirement pot/ retire early, then put some in a pension each year ( which is basically a long term investments with tax breaks) 

So just asking where to put it is too simplistic, without knowing what you intend to do with it.

As suggested you could just stick it the NS&I bond for one year, but that one year will soon come around and the same questions will pop up again.

CaveBird

I’m by no means a financial expert, but we were in a similar situation after my mother in law died in 2019 in that we became accidental landlords alongside my brother in law. We opted to continue renting the house out (mother in law had been moved into sheltered accommodation a year before she passed away so the house already had tenants in it). The tenants were reliable and were from the local US Air Force base. In 2022 the tenants served notice and my brother in law said he wanted to cash in his share of the property as he wanted to clear his own mortgage so the house was put up for sale.

It sold after a few months on the market for £610k (February this year) and my husband and brother in law had a CGT bill of about £6,000 each to pay based on the probate value of the house.

Our share sat for a while, we toyed with investing it in a smaller BTL ourselves but couldn’t find anything in our area that would have meant we could cover all costs with the cash, so we opted to look at investments instead.

Long story short but we’ve put our maximum ISA allowance (£40k total) away and locked £100k in the NS&I 6.2% bond. We’re toying with what to do with another £100k - probably going to max out premium bonds for the moment as we don’t want it locked away long term, and we’ve put the remainder in the Santander Easy Access paying 5.2% for now. Husband has just quit his job due to stress so we wanted to make sure we had a good lump sum of cash available to cover expenses if he ends up out of work for a while. Long term plan is to pay off our own mortgage when the fixed rate ends in October 2025 (1.48% so no point in clearing it now!).