Rather than hijacking drobbins thread......

[greektony]

This is a similar topic to Drobbins one, but i believe there is a significance difference in the amount of money involved. Basically, sadly my Aunt died in January of this year (sad, but as she had multiple sclerosis and was bed ridden for the last 3 years of her life, it was a kind of relief) getting off topic here..................

Anyway she left me a conderable amount of money in her will which was supposed to be used as a deposit on a house. I'm 24 and really don't want a mortgage or anything and i'm living at home for cheap anyway at the moment However what I would like to do is invest the money in some sort of high interest savings account, and use the interest to pay for renting a place in London.

Does anyone have any recommendations as to where i should put this money? It will be in the region of around 50k

[ikonia]

go see an independent financial adviser, if that cash is that much you shouldn't consider the advice of people on a random forum

[greektony]

well i wouldnt go on what people said her per se, rather investigate what pointers they gave, as i'll do with your suggestion

[directhex]

renting in london costs a fortune - you're easily looking at £1k a month for a reasonable 1-bed flat. covering that with a 50k bank account would require savings with about 24% APR, after tax.

[Fidley]

I know you said you didn't want a mortgage, but buy-to-let would be my advice Now before you just ignore that do a bit of googling into the subject.

[greektony]

cheers for the advise Fidley. If i were to rent, it would be sharing with other people........when I rented in London last year with 2 other people it cost me £480 a month

Does anyone here let out any properties?

[XA04]

I'd definitely invest it one way or another, but I probably wouldn't let it sit in the bank.

Fidley's idea is very good. You could buy cheap houses, do them up, then rent them out, you could end up making a small fortune. After a while you could even start a business up if you started to buy more and more houses.


It's a good oportunity so watch what you do with it! lucky git


Edit: Same could be done with cars. You could make a renting business, or you could just buy cheap cars, do them up and sell them on for more.

[ikonia]

ahhh there speaks the voice of youth.....and the watcher of many "DIY shows"

just buy houses and do them up ? and sell them for a proffit

Well you should have a pretty good understanding of the property market as doing up some houses won't actually change their value, some areas are more expensive for run down properties due to the building/revneation potential.

You should also be a pretty good handyman/builder/electrician or you'll end up paying people to do it. All the time your doing it up you're paying the mortgage so your outgoings are increased. All the time your house is for sale, your paying the mortage so if it take 3 - 6 months to sell it you've got to pay the mortage for 6 months + all the money you've spent "doing it up"

Same applies to cars - you can't just "do cars up" you need the ability of a mechanic, storage, tools, painters, you also need to know where to get cars really cheap, same thing again, unless your in the trade or really skilled - you're onto a tough business idea.

50k is a fair sum of cash, take it to financial advisers who can invest it in various low/medium/high risk oppertunities where you understand the risks and returns. You don't have to work with your money, or do anything for it, thats the point of investment, and for one 50k is a fair enough sum to see a return. Just be aware that you'll need to invest it for 5 - 7 years to see a return unless you are lucky enough to hit a windfall.

Perhaps other pie in the sky ideas include buying 5k's worth a lottery tickets, or 50k's worth of magic beans, perhaps you could invest in futher education eg: do a law degree

[Fidley]

Errm, on the other hand property has consistanly gone up in value over the years, with only occasion dips. Now i wasn't saying, buy a run down house, buy one thats ready to rent (or very very nearly ready) put down 25k deposit, get mortgage, put rent @ 130% of mortgage (most buy to let mortgages require this ratio) get all the various insurances (including good life cover) If your lucky you'll have some left over every month AFTER all bills/fees/repairs are paid for, if not well your actually earning the rent minus interest every month. After mortgage term you own a house outright! Borrow as much as you can against the house you now own- which WILL, interest paid aside, be worth more than you've actually bought it for, and buy 5 more. Rinse repeat if required. Don't don't get me wrong these 'DIY' shows do mislead(?), but to me that makes good business sense and will ensure your kids have assets to set them up in life, not a get rich quick scheme, hell you'll retire before your assets fully mature probably, but it's the next gen that'll benefit the most! Like i said there's lots of info to be found from google.

I, however, am not an independant financial advisor, so go to one! It's just one avenue to explore and discuss with them.

[Steve B]

i think that the point that ikonia is trying to make is that unless you know what you're doing, property development has too many pitfalls.

however, the buy to rent thing is perhaps a good idea, as you gain a steady return every month that you have tenants. The only problem is, however, that it takes a long time for your investment to be paid off.

greektony has already pointed out that he wouldn't like a mortgage, so i think the buy to rent thing is not up his tree.

i think that mortgage lenders look for a significantly higher deposit on properties being purchased for letting, rather than yourself living in them, as the property will probably be empty for a quarter of the year, unless you find a domestic tenant.

[Fidley]

i think that the point that ikonia is trying to make is that unless you know what you're doing, property development has too many pitfalls.

It does have pitfalls yes, but you can plan against these, landlords insurance, a kick ass tenancy agreement (get a good solicitor) etc etc. And it's medium risk with good long term returns imo. He shouldn't disregard it.

I agree with iknonia buying a ****ty house to do up is not going to work, but realistic long term plans may, and do. Theres lots of agencies out there that'll do all the work for you too/give you lots of advice. Google it, talk to an indepenant, make an informed desision!

greektony has already pointed out that he wouldn't like a mortgage, so i think the buy to rent thing is not up his tree.

i think that mortgage lenders look for a significantly higher deposit on properties being purchased for letting, rather than yourself living in them, as the property will probably be empty for a quarter of the year, unless you find a domestic tenant.

Buy to let is slightly different tho, if it all goes down the pan, sell up, what you lost? Your desposit? No! You've probably (depending on how long you keep it goin) made some money, it's just that it didn't fully mature. But thats medium risk.

Why would you look for anything other than a domestic tennant in this situation? With at least a 1 year agreement, ok you can't tie them to this entirely (tbh i'm not exactly sure how the law works here). Have you heard of landlords insurance? It covers the mortgage for upto one year whilst the property is empty (required normally if you take out a mortgage to let), for comparably a pitance.

[greektony]

all good ideas guys......my parents have had buy to let mortgages in the past so i'll see what opinions they offer. I do agree however that it would be a waste to stick it in a bank/savings account what with interest rates being so low

And surely ikonia, with 50k, id buy 50,000 lottery tickets not 5000 might as well blow it all on the biggest gamble of my life! I wonder what the odds of making a profit off the lottery are if one buys that many tickets!?!?!??!

[Fidley]

And surely ikonia, with 50k, id buy 50,000 lottery tickets not 5000 might as well blow it all on the biggest gamble of my life! I wonder what the odds of making a profit off the lottery are if one buys that many tickets!?!?!??!

The man speaketh the way, fook it, why not buy a kg of coke employ some crack whores and be the koolest kid in the neighbourhood!

[5lab]

realistically, the most you can expect from a no-risk savings account is in the region of 5%. thats around £2500 per year. you can get more by investing more riskily, but the more profit you get, the more risk you run - you could end up without any of it. Additionally, you should figure in the rate of inflation - 2-3%. if you got a 10% (after tax) interest rate, thats 5k a year, but next year, your money will be worth 3% (£1500) less, in what you can actually buy with it. to stop the pot becoming worthless, you should keep the interest rate to the level of inflation in it, then cream off the top.

buy to let is a fairly risky way of investing money - if you have no tennants for any reason you end up making fairly large payments yourself, and you can face problems such as non-rent-payers (its very difficult to get rid of them - can take 6-12 months to force them out) or the property market crashing - 20 years ago that happened, and people ended up with £100,000 mortgauges on a property worth £60k, at an interest rate of 15%. not a nice situation at all.

[Fidley]

buy to let is a fairly risky way of investing money - if you have no tennants for any reason you end up making fairly large payments yourself, and you can face problems such as non-rent-payers (its very difficult to get rid of them - can take 6-12 months to force them out) or the property market crashing - 20 years ago that happened, and people ended up with £100,000 mortgauges on a property worth £60k, at an interest rate of 15%. not a nice situation at all.

But the market always recovers may take some time but well it does! Insurance for the none-rent paying scum is cheap tbh, and is a requirement of buy to let mortagaes!

[ikonia]

But the market always recovers may take some time but well it does!

thats very true,

you try paying a 200k mortgage at %15 for 8 years while the market recovers when you can only charge low rent as the housing market has crashed.....



unlikley but it has happened before. I think the deposit needed for a buy to let house is around %40 of the properties value.

The best thing to do is speak to the experts who can lay out the pro's / con's risks and beinifits clearly.

What works for someone won't work for someone else.