Graduate with investment funds, but clueless!

Jonobo92 · 14 June 2017 at 11:18AM

Hey there,

New poster here, and also a fresh university graduate looking for advice!

Basically, I'm leaving university this July and have £90.000 to invest more-or-less as I see fit; however I'm not exactly sure where I would see the most returns.

My current plan is to spend £30k on a BTL house worth c. £65k, and then have the tenant's rent pay it off over, say, 10 years and then sell the property, hopefully at a profit, making £35k-£40k in the process. This is only really £4k a year though when it's broken down and I'm wondering if there are better ways to invest? I've read online too that there are new laws being implemented that make BTL a little less promising.

With the remaining £60k I was going to look at buying a cheap property at auction and then developing it and selling it for a profit. Roughly £45k property, £15k development if that seems realistic?

Would I be better buying a property at auction for, say, £75k, and then developing it with the remaining £15k and sell it on for hopefully greater returns?

I'm really new to this whole thing, so I don't fully understand all the available tax relief options (or lack thereof), or other investment opportunities like REITs, however I'm trying to learn. I'm equally open to other investment options too.

Thanks in advance.

tl;dr How should I invest £90k in property?

Lokolo · 14 June 2017 at 11:24AM

Why do you want to invest in property?

rentmekid · 14 June 2017 at 11:28AM

why not invest in property?

HouseBuyer77 · 14 June 2017 at 11:28AM

Probably better off with the savings & investments boards.

Still why so obsessed with property? You have a significant sum to invest, and a good piece of advice is diversify. You seem to be planning on putting the lot in the UK property market. Do you really want all your eggs in one basket like that?

Do you have any property development skills or contacts in the trades that will allow you to get work done cheaply? Making a profit in development is not straight-forward.

The other thing to point out is property is an active investment, indeed developing/being a landlord can easily be a full-time career, how much time are you willing to spend on tending to your investments?

saajan_12 · 14 June 2017 at 11:34AM

There are lots of other investment vehicles, and any sensible portfolio would diversify in a range of sectors including equities, bonds, etc. Specifically regarding your suggestions,

1) BTL: where would you live? most BTL mortgages require you own your home and have an income, as well as some age requirements. If you're inexperienced, there is a steep learning curve regarding legal requirements as well as dealing with queries, repairs etc, which can be difficult alongside a job.

2) 'Flipping' a house: What do you think your value add would be here? i.e. why would someone who wanted to keep the house not buy at the cheaper price and renovate themself rather than pay the higher price including your profit? Answer: often because they don't have the time / ability to renovate cheaply. So, what makes you think you will have the time / ability to renovate cheaply? The profit here is from knowing reliable tradespeople or being able to do some of the work / contracting yourself. Do you have that?

DumbMuscle · 14 June 2017 at 11:35AM

Do you currently own a residential property which you live in? If not, you're not going to get a BTL mortgage. Assuming you're looking at buying locally, you seem to have enough cash to buy your own house outright, so why not do that (and you can still do it up to get more money when you sell it)?

Being both a landlord and redeveloping a property (to a standard where you can turn a profit) sounds more like a second job than an investment.

Do you have a job lined up that will give you a steady income? What are you planning to do with the money long-term?

G_M · 14 June 2017 at 11:38AM

Re the BTL, a steep learning curve indeed. Read:

* Tenancies in Eng/Wales: Guides for landlords and tenants This thread is intended to provide information to both landlords and tenants relating to Assured Shorthold Tenancies (ASTs) in England and Wales.

Topics covered:

* Repairing Obligations: the law, common misconceptions, reporting/enforcing, retaliatory eviction & the new protection (2015)

* Deposits: payment, protection and return

* Ending/renewing an AST: what happens when a fixed term ends? How can a LL or tenant end a tenancy? What is a periodic tenancy?

* Rent increases: when & how can rent be increased?

* Repossession: what if a LL's mortgage lender repossesses the property?

* New landlords: advice, information & links

* Letting agents: how should a landlord select or sack?

ReadingTim · 14 June 2017 at 11:52AM

Are you related to this poster, here?

You won't be getting a BTL mortgage.

tl;dr you can't

Jonobo92 · 14 June 2017 at 12:06PM

Hi again,

Thanks for all these quick and extensive responses.

I should really have made my position a bit clearer, my brother currently owns and lets two properties himself in our hometown, and so that is what drew me towards that idea.

I'll also be living with my brother in his house all expenses paid, and the BTL could be bought under his name, or through his property company?

Fortunately, I have an unlimited amount of time on my hands to be an active landlord, and to renovate, however in terms of trade-skills, I can paint and remove furniture - so I realise the costs may mount up paying tradesmen.

Would I perhaps be better buying a £65k house outright, getting c.£450pcm rent and then save/invest the other £25k elsewhere? Or are BTLs still worthwhile when they're paid off?

Where else could/should I invest my money, I don't really know of any stocks or bonds that do well etc. Should I pay an investment manager to do it all for me?

Thanks again for all the posts/advice/links etc.

aneary · 14 June 2017 at 12:17PM

I would watch a few episodes of homes under the hammer.

You find that 'Cheap' properties (the value you are looking at) have a very small margin in price between wrecks and renovated. If your skills are limited to moving furniture and painting you are going to make very little money as yes you will have to pay trades people who have the skills you don't.

What did you do at Uni? Why not get a job, buy a home mortgage free and do that up to the standard you want slowly.

Jonobo92 · 14 June 2017 at 12:34PM

Ah ok, thanks; so assuming property renovation is completely out of the window, where should I put my money?

Owning my own home doesn't interest me as my brother's place is more than enough for us to live in comfortably, I'd really just like to put all of the money to work in a way that returns me the most profit.

I studied English Language and Linguistics, and though I've been offered a job abroad teaching English, I'd rather explore my investment options at home first.

This may be wrong but as I see it, if I put a £30k deposit on a £65k house, paid it off over 10years and then sold the house for £65k again, that would be profit of £35k, or £3500 per year before tax. Are there any other investment avenues that could return £3500pa from a £30k deposit, or have I completely missed the mark with those sums?

Thanks again.

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Graduate with investment funds, but clueless!

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