Ok folks hyperthetical question, your 63 yrs old no pension going to come your way, got 400k in the bank, the question is what's the best way to earn an income from said dosh.Dennis
What would you do to earn more money from 400k
brillopad
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That will ensure you no longer have to worry about what to do with your £400k.:wink2:
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People seem to think property is the answer, I hope it is as I have a sizable portfolio. However, it may not fit in with the typical motorhomers way of life. Property needs attention and constant repairs and that can be difficult and expensive if you are not around to resolve.
I'm lucky that I can continue working (unfortunately - tied into final salary scheme) and my partner looks after the properties, which is almost a full time job. Once I retire we will need to look at placing the properties under a management team or employ someone to do it, this should be factored into the any yield. Typical cost of management companies is 12%
You also need to consider more than just property yield. Yield is fine if you are in for the long run. However, higher yield areas normally mean lesser affluent areas with lower house prices. This invariably means less return on property when you come to sell. A flat in the North will not increase in value as quickly as in the South (typically). We also have the new increased Buy to Let stamp duty and don't forget you pay income tax on the rent received and you pay capital gains on any profit you make when you come to sell. So not quite as simple as some may think.
I'm lucky that I can continue working (unfortunately - tied into final salary scheme) and my partner looks after the properties, which is almost a full time job. Once I retire we will need to look at placing the properties under a management team or employ someone to do it, this should be factored into the any yield. Typical cost of management companies is 12%
You also need to consider more than just property yield. Yield is fine if you are in for the long run. However, higher yield areas normally mean lesser affluent areas with lower house prices. This invariably means less return on property when you come to sell. A flat in the North will not increase in value as quickly as in the South (typically). We also have the new increased Buy to Let stamp duty and don't forget you pay income tax on the rent received and you pay capital gains on any profit you make when you come to sell. So not quite as simple as some may think.
2007 Ducato Ace Siena 2.2 100 , Keighley, Still in Gods County.
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Build and sell can't be that bad an idea there are lot of big firms doing it, getting land and planning that's the hard work, get in some Polish skills (they don't mind working ALL day and not being paid a kings ransom for it) there is a housing shortage so selling a decent property would be easy enough too, I'd not do buy to let, way too risky, and could cost a fortune if it went badly.
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Why not just spend it? That's £20K a year for 20 years!
There's no pockets in shrouds>
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Thats actually a good point. When do you cash in your chips and just spend it. For us its a little different to most. We have nobody to leave money to but we are only just turned 50. I would obviously like to think Mrs D would be looked after if I pop me clogs but there must come a time when you think, sod it. Ive got £XX tied up in property and investment, may as well cash it all in, by a brand new motorhome and spend it all.Why not just spend it? That's £20K a year for 20 years!
There's no pockets in shrouds>
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Is the correct answer:grin2:sod it. Ive got £XX tied up in property and investment, may as well cash it all in, by a brand new motorhome and spend it all.
We don't have anyone to leave any money to so it's a matter of getting the timing right so I spend my last tenner on my deathbed (or more likely Mrs Hill)
the timing's the tricky bit!
If the survivor of a couple eventually cannot cope on their own and needs residential care or full nursing care, that's a grand a week for a decent quality place. Anyone who's been inside the base standard of council-paid homes will know they want better for their surviving partner.
If the survivor of a couple eventually cannot cope on their own and needs residential care or full nursing care, that's a grand a week for a decent quality place. Anyone who's been inside the base standard of council-paid homes will know they want better for their surviving partner.
After the last financial collapse, the Bankruptcy Courts were full of property developers ruing their lack of financial acumen and realising the path to greed often diverts into poverty. So when investing in property - which remains a good thing - ensure you have cash assets to tide you over the bad times which will surely return. Do not become asset rich and cash poor because in a forced sale, your assets won't make you rich.
I would get a full health check to identify any likely health issues that will extend or shorten my life. Better to spend the money on making sure you can live long enough to enjoy it.
When I retired, I worked out we needed to acquire £636k at current values over 20 years to tide us both over until we are 80. That's £450k to cover our living and motorhoming expenses, £96k for repairs & replacement to the house/motorhome, and 20% for contingencies. I assume we can make our money grow in line with the inflation rate for retired people.. Thereafter, it will be £32k pa until we both go into a Nursing Home in which case it will be £52k pa [halved if one dies] - it's £500pw each in the north, £1,000pw each in the South East.
However, these figures do not allow for paying taxes on income, say another £250k until 80.
If both of us live until we are 90, spending the last 5 years in a Nursing Home, we will need £1.25m at current values.
I would get a full health check to identify any likely health issues that will extend or shorten my life. Better to spend the money on making sure you can live long enough to enjoy it.
When I retired, I worked out we needed to acquire £636k at current values over 20 years to tide us both over until we are 80. That's £450k to cover our living and motorhoming expenses, £96k for repairs & replacement to the house/motorhome, and 20% for contingencies. I assume we can make our money grow in line with the inflation rate for retired people.. Thereafter, it will be £32k pa until we both go into a Nursing Home in which case it will be £52k pa [halved if one dies] - it's £500pw each in the north, £1,000pw each in the South East.
However, these figures do not allow for paying taxes on income, say another £250k until 80.
If both of us live until we are 90, spending the last 5 years in a Nursing Home, we will need £1.25m at current values.
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there are some upcoming changes that will help savers
1. from April 6th, every basic rate tax payer gets a tax free £1000 annual allowance on interest earned. that's £1000 free of tax - for basic rate tax payers, that equates to interest on £71k of savings in top easy access accounts. see here for more insight - http://www.moneysavingexpert.com/latesttip/. however higher rate tax payers only get £500 allowance, and those in the 45% bracket get nothing.
2. there will be ISA wrappers for P2P investments where interest is currently taxed. as these are often paying interest around 6%, these can be wrapped into a ISA tax free account which means you are better off. I don't know if it applies to all P2P investments or just a select few so you need to do your own research. I have an account with RateSetter and they will be offering one - https://www.ratesetter.com/blog/article/first-innovative-finance-isa-product-announced.
1. from April 6th, every basic rate tax payer gets a tax free £1000 annual allowance on interest earned. that's £1000 free of tax - for basic rate tax payers, that equates to interest on £71k of savings in top easy access accounts. see here for more insight - http://www.moneysavingexpert.com/latesttip/. however higher rate tax payers only get £500 allowance, and those in the 45% bracket get nothing.
2. there will be ISA wrappers for P2P investments where interest is currently taxed. as these are often paying interest around 6%, these can be wrapped into a ISA tax free account which means you are better off. I don't know if it applies to all P2P investments or just a select few so you need to do your own research. I have an account with RateSetter and they will be offering one - https://www.ratesetter.com/blog/article/first-innovative-finance-isa-product-announced.
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I think that post has a lot of sensible comments about the property market in it.
Several of them are borne out by my experience; I bought a terraced house in a leafy part of SW London (Barnes) 17 years ago which had to be stripped out for new services and a roof addition (now 4 beds, large living room and 2 baths) and lived in it for several years but have been renting it out on/off for 7-8 years. I pay an agent 12% - the office only does rental management so are specialists and was founded by a lady whose husband is a builder, and most of the staff have been there 15 years so know their onions - not easy to find such good agents, especially 1/2 mile from the property.
My net yield, after fees repairs and tax is only 3% of current value, but in 17 years the capital value has gone up over 400%. This illustrates Stewart's point about the total (Rent + Capital Gain) over the years.
Of course if the rental yield needs to be a certain minimum one might have to go for a higher yield and accept a lower capital gain.
Although there is are reasons for having a portfolio of properties - spread of risk of voids, the portfolio can start small and expand etc, there are the risks that if they are cheap the quality of the tenants and their ability to pay the rent are increased as are the chances of voids.
I have never had tenants whose references did not disclose incomes of less than £100K and the current tenants' combined incomes come to £200K and either would be good for the total rent - important to me because they only started co-habiting at the start of the tenancy. Also tenants on that sort of income tend to have a lifestyle such that they are unlikely to 'trash' a place.
I have had very short voids between tenants - last one, two years ago, was 10 days, which were needed for a quick freshen-up of some decoration.
On the repair/replacement side there is only one washing machine to go wrong not 8, and the capital cost of replacement as a % of the rent and value of the property is small in comparison to 8 machines in lower cost properties.
I make the above points to illustrate that there can be a successful way of having money in one (or more) properties of high value in 'good' areas - also think quality of schools, increasingly important to some families - my first tenants sold a house 300m from mine, rented mine for 2 1/2 years while looked for and extended another house and have moved less than 800m in total because of kids' schools.
A valid point was made above about buying close to hospitals, to which I would add close and/or Universities - not for student rentals but for mature research post-grads or junior lecturers who may be thinking of a two-year term there and moving on to another university.
Just my jottings on the rental market.
Geoff
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The examples on property investment are good. But it still depends on whether you want easy access to capital or have anyone you want to leave the money to.
We own 2 properties but live in both of them. Any other property investments would tie up too much capital. The UK property market may well be lucrative and relaively liquid but that is not the case elsewhere. Having effectively cut all links with the UK, investing in Uk property is really not an option. Reasons for leaving the UK ? Income tax, capital gains tax, inheritance tax. Not Necessarily in that order.
Our intention is to die in debt. We will never achieve that aim unfortunately.
Our capital is invested in open architecture pension funds, managed by wealth management companies. They take 0,85% annually.
You can put anything you like into these funds. Even physical property...the fund holds the deeds. They are typically held offshore where you must pay income tax at local rates on any withdrawals. As long as you have enough diversification then you can get some yield even in the current market ( saying that, a large chunk is currently held indirectly in property). The fees are not expensive IMO. Some of the rates quoted in this thread are astonishingly high.
We own 2 properties but live in both of them. Any other property investments would tie up too much capital. The UK property market may well be lucrative and relaively liquid but that is not the case elsewhere. Having effectively cut all links with the UK, investing in Uk property is really not an option. Reasons for leaving the UK ? Income tax, capital gains tax, inheritance tax. Not Necessarily in that order.
Our intention is to die in debt. We will never achieve that aim unfortunately.
Our capital is invested in open architecture pension funds, managed by wealth management companies. They take 0,85% annually.
You can put anything you like into these funds. Even physical property...the fund holds the deeds. They are typically held offshore where you must pay income tax at local rates on any withdrawals. As long as you have enough diversification then you can get some yield even in the current market ( saying that, a large chunk is currently held indirectly in property). The fees are not expensive IMO. Some of the rates quoted in this thread are astonishingly high.
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Sarah, Sarah,
I can help out with that aim next time we meet.:wink2::laugh:
Geoff (always willing to help)
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It depends on how much if any you want to hand on when you are gone, decide who is getting what take that away from your sum, decide how many useful years you are going to be active and divide the remainder by those years, then leave an amount you feel you might need for a rainy day and sending you off...
Put the rest in what ever is safe and giving you a bit of interest..
Then blow the bloody lot!.. It's not the dress rehearsal .:wink2: ,you can be sure who ever you leave anything too will blow it!.
ray.
Put the rest in what ever is safe and giving you a bit of interest..
Then blow the bloody lot!.. It's not the dress rehearsal .:wink2: ,you can be sure who ever you leave anything too will blow it!.
ray.
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Another vote for buying a couple of houses and renting them out.
Monthly income and you still have the capital asset which should increase in value, no risk attached, no brainer really. (well thats what I would do)
Down my way a 2 bed house is the best rental to own, cost wise about 160-170K per house for a decent letting one) monthly rental about £750-£800 PCM so with just two houses you would have an income in the region of £1500-£1600 per month thats £18000 a year !! (less any letting agent fees etc. Where else will you get that sort of GUARANTEED return???
Premium bonds will give you around 8.5% but they might not of course.
Andy
Monthly income and you still have the capital asset which should increase in value, no risk attached, no brainer really. (well thats what I would do)
Down my way a 2 bed house is the best rental to own, cost wise about 160-170K per house for a decent letting one) monthly rental about £750-£800 PCM so with just two houses you would have an income in the region of £1500-£1600 per month thats £18000 a year !! (less any letting agent fees etc. Where else will you get that sort of GUARANTEED return???
Premium bonds will give you around 8.5% but they might not of course.
Andy
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Yeah they definitely "might not". If the average yield on PB was anywhere near 8.5% everyone would be stuffing money in them like there is no tomorrow.
I agree about the houses though but its clear to me that the yield varies geographically. There are definitely areas where you can do better than others. £170K would buy you three terrace houses in Darlington or two half decent flats and the rental would be probably £450 per house or £500 to £600 for a flat.
I think there are some hot areas in the Midlands as well. For me though I think Ill buy somewhere I know like Darlington as I was born there (dont live there now but nearby). My brother in law is a builder (of sorts) and my best mate runs a long established building firm and has a large property portfolio. What can possibly go wrong?
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