Gilts or buy to let

itsme999

I have £90k in easy access account paying 4.5%, want to utilize it better, been thinking of either:

1. Buy to let, purchase one bed flat for around £250k; £90k deposit borrow the rest. This will keep me busy as have free time. Net rent app 5% taxable at 40% plus tenant's headaches and compliances. Plus point is property appreciation but no guarantee or looks good with current economic climate. I haven't shopped for mortgages, don't know or sure I can get mortgage, safe to assume 6% although seen much cheaper ones.
2. As started investing in gilts recently, do the same if any decent ones available up to 2 years term? Big plus tax fee CGT.
3. Leave it where it is which I don't think it's clever.

Thanks

wmb194

https://forums.moneysavingexpert.com/discussion/6686557/gilts-or-buy-to-let

You seem to be all over the place. In a thread from July you wrote, "I am 65, have 2 fully paid properties rented and not in the mood or energy for more."

You need to decide what you want to do.

https://forums.moneysavingexpert.com/discussion/6675398/where-to-invest-100k-today

Linton

There may be other, probably better, options. It depends very much on your circumstances particularly your age, whether you are employed, and your objectives for how much and when you want to access the proceeds.

if appropriate to your situation, putting extra money into your pension could be the most lucrative and likely life changing option.

But the first thing is to ensure you keep sufficient cash available to cover emergencies, 6 months living expenses is sometimes suggested though again it depends on your circumstances.

itsme999

https://forums.moneysavingexpert.com/discussion/comment/82167004#Comment_82167004

I am in two minds about property, tempted because have free time keeps me stimulated, gone be within 3 miles from where I live so local and self managed.

itsme999

https://forums.moneysavingexpert.com/discussion/comment/82167007#Comment_82167007

At 65 I think it's too late to put extra money for pension.

I don't have full time employment, income from rentals, bank interests and share/gilts investments.

The objective is to maximise return on the cash.

I don't need access the funds and agree with you to keep 6-12 months cash available in case.

Let me know of other options

sheenas

Here in Glasgow the market is pretty decent, boasting some of the best rental yields in the UK (averaging 6.4% to 7.8% overall, and spiking to over 9% in postcodes like G2 or G52). However, buying physical property involves significantly higher friction, legal differences, and hidden costs than paper investments as you possibly know. May your are planning to flip?

Maybe get some financial advice and get some focus and balance in you investments.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82167047#Comment_82167047

OK.

There is a basic issue with "maximising return on cash". The more you seek to maximise, the higher the risk. For example renting out a house carries the risk of the tenant from hell, unplanned costs, gaps between tenancies etc. So you would expect overall to get higher returns than from cash but you may make a loss, particularly over short time periods.

If you dont want any risk stick to cash. though even there you have the risk of inflation exceeding the interest.

If you invest the money in investment funds or shares there is a wide range of options between close to cash with similar returns, and buying a lottery ticket with the possibility of unimaginable wealth. What risk can you accept? Over what time period?

To take real examples. With £90K in investments you could reasonably get steady-ish interest/dividends of around 6% - £5400/year. But no guarantees. Or if you had invested that money 10 years ago in a standard global shares fund your £90K would now be worth over £200K. But you would have experienced a temporary fall of about 25% around the time of Covid. Other historic crashes have been much larger. So to get a really high level of return you need to be thinking of a timeframe of perhaps 10 years to minimise the risk of ending up with less than when you started.

Another option is to buy an annuity. For £90K you may get £7K/year fixed for the rest of your life or £5K with inflation increases. A good return but of course you pay out the money up front and dont start making a profit until you reach your current life expectancy. But it helps solve the risk of you living longer than your money. A good choice perhaps if you were to need extra income and aren't bothered about leaving money to your beneficiaries.

itsme999

https://forums.moneysavingexpert.com/discussion/comment/82167132#Comment_82167132

I should have said "more than what I am getting now" rather than "maximizing return on cash".

I've been renting for over 25 years, learned a lot but still possible to end up with nightmare Ts. I always minimize risks by strict vetting without cutting corners and RGIs (rent guarantee insurance).

I have share investments thru institutions and banks, always opted for med risks and been lucky so far. So really haven't taken risks in the past , won't be taking now.

TBH 10 years is long term not something am looking for this one, either buy to let to keep me busy or gilts 1-2 years or similar; looking for short term as have few fixed terms maturing between 2028 to 2030, always try to keep 50-50 distribution.

BreakingGlass

And don't forget rental income will be taxed at an extra 2% from 6 April 2027.

New Property Income Tax Rates

Property income will no longer be lumped in as general non-savings income; it will have its own dedicated tax bands:

• Basic rate: 22% (up from 20%)
• Higher rate: 42% (up from 40%)
• Additional rate: 47% (up from 45%)

Linton

https://forums.moneysavingexpert.com/discussion/comment/82167169#Comment_82167169

A BTL is hardly short term! The hassle and the buying/selling costs would be prohibitive. Surely running one is a long term job or business more than an investment opportunity. Perhaps you could find part time employment or a volunteer role to fill your time and keep your savings out of the equation.

For the very short term (1-2 years) straight cash is the easiest option and you are very unlikely to get significantly better safe returns elsewhere.

In the longer term gilts have advantages. For the longer term a risk with cash is that it is limited to 5 years by which time you have no idea what the rates will be. Gilts guarantee the interest in £ terms from when you buy them until maturity which could be many years away and then you get £100 back. You can sell gilts at any time before maturity, though you may have a significant capital loss (or gain), whereas fixed rate cash savings are likely to be more restrictive.

kempiejon

We know not to let the tax tail boss the dog about. I didn't know rental income had an extra 2% tax. I try to keep my unsheltered cash/investments within allowances for dividends and interest and use gilts, premium bonds and harvesting any capital usually just up to limits.

Of course filling ISAs and SIPPs always a priority annually. Gilts are offering about 4.5% and could be minimal tax with low coupons. One can find that around 2 - 4 years maturity.