Using £400k to generate c.£5k per month
Discussion
Obviously I am asking for a 'friend'.
So, just after views. Increasingly disillusioned with corporate life, so planning to bale. c. 50 yrs old, still have some responsibilities, so could do with about £5k per month to top up other entirely passive income. (Early Pension, rent on 1 property mainly). Depending on level of risk, have some funds to invest up to £400k unincumbered.
I'm thinking about developing some interests more seriously into a business and top of the list are:
- Car dealing (doing it properly, i.e. insurance, registered with DVLA / HMRC, Finance offering, Warranty, Auction account etc.) I am semi rural so could at least start from home - no problem with up to 10 cars being here. Feels like relatively low investment, but potentially high effort and not passive. And I'm not overlooking the strangers turning up at home issue - would be very selective on the cars traded.
- HMO / Professional room lets. High investment, but would 'leverage'. More passive (not fully of course). Potential capital growth and monthly cashflow.
- Property purchase and renovation. May look at this on a selective basis - I've done a few, tax and costs are an issue now, feels like this is least passive and most risk.
- Business purchase / creation. For example, looking at a self storage business...doing the diligence of course.
- I am running a few income lines from my current industry, so before someone says develop what you've always done, that's also on the cards, but won't be full time, I don't think.
Any other ideas / views welcomed and also feel free to reality check on a 15% return from £400k....Thx.
So, just after views. Increasingly disillusioned with corporate life, so planning to bale. c. 50 yrs old, still have some responsibilities, so could do with about £5k per month to top up other entirely passive income. (Early Pension, rent on 1 property mainly). Depending on level of risk, have some funds to invest up to £400k unincumbered.
I'm thinking about developing some interests more seriously into a business and top of the list are:
- Car dealing (doing it properly, i.e. insurance, registered with DVLA / HMRC, Finance offering, Warranty, Auction account etc.) I am semi rural so could at least start from home - no problem with up to 10 cars being here. Feels like relatively low investment, but potentially high effort and not passive. And I'm not overlooking the strangers turning up at home issue - would be very selective on the cars traded.
- HMO / Professional room lets. High investment, but would 'leverage'. More passive (not fully of course). Potential capital growth and monthly cashflow.
- Property purchase and renovation. May look at this on a selective basis - I've done a few, tax and costs are an issue now, feels like this is least passive and most risk.
- Business purchase / creation. For example, looking at a self storage business...doing the diligence of course.
- I am running a few income lines from my current industry, so before someone says develop what you've always done, that's also on the cards, but won't be full time, I don't think.
Any other ideas / views welcomed and also feel free to reality check on a 15% return from £400k....Thx.
Yeah 15% is going to involve some risk. HMOs at age 50 with the constant tinkering/ fixing/ f
ktards you get? No thanks. Student lets similar maybe but 15% seems challenging tbh, not forgetting the upcoming renter's rights bks and what you buy now sensibly would comply, or you'll end up selling, like so many LL's currently are.
ktards you get? No thanks. Student lets similar maybe but 15% seems challenging tbh, not forgetting the upcoming renter's rights bks and what you buy now sensibly would comply, or you'll end up selling, like so many LL's currently are. £5k/month = £60k per year. From £400k, that equates to 15% annual return.
That is ambitious if you want true passivity (as most “passive” investments return 3–8%).
15% is possible, but not without some form of leverage or running a business....unless you want to consider speculative high risk investment.
That is ambitious if you want true passivity (as most “passive” investments return 3–8%).
15% is possible, but not without some form of leverage or running a business....unless you want to consider speculative high risk investment.
Tread very carefully Inspector!
A good friend of mine found himself in a similar position to you with a similar amount of spare cash (actually a bit more) at a similar age. A combination of daft decisions and some bad luck led him to loosing the lot and at 63, he's desperately trying to re-start his career when most are winding down theirs. Not a pleasant thing to see.
But....
I would suggest you apply some introspection to determine what exactly you don't like about corporate life now so that you can avoid those aspects in the future. You may well find this is one of the key things that shapes your decisions.
My friend sold his highly successful recruitment business and started a new business making 'surfer dude' type bangles and bandanas and also thought he could become an animator and financed a stupid amount of money on a kids TV series which went nowhere. In fairness, had either of them panned out, he could have made a great deal of money but these were things he had no experience in, so no contacts or understanding of the nuances that applied. He didn't know what he didn't know!
So I'd be looking at what you do know and build from there.
A good friend of mine found himself in a similar position to you with a similar amount of spare cash (actually a bit more) at a similar age. A combination of daft decisions and some bad luck led him to loosing the lot and at 63, he's desperately trying to re-start his career when most are winding down theirs. Not a pleasant thing to see.
But....
Inspectorclueso said:
Increasingly disillusioned with corporate life, so planning to bale
As mentioned already, it's highly unlikely that you'll find anything passive that generates the revenue you seek so you're going to need to start up, or buy and run a business. So you need to keep in mind the risk that in baling out of corporate life, you may end up back in corporate life but one that is much harder to extract yourself from. I would suggest you apply some introspection to determine what exactly you don't like about corporate life now so that you can avoid those aspects in the future. You may well find this is one of the key things that shapes your decisions.
Inspectorclueso said:
I am running a few income lines from my current industry, so before someone says develop what you've always done, that's also on the cards, but won't be full time, I don't think.
Well, I'd suggest that the most successful business are those that someone started in an industry they already knew. Starting something or entering into something in something you know nothing about is exceptionally risky and even if you manage that risk, can take much longer to build up any head of steam.My friend sold his highly successful recruitment business and started a new business making 'surfer dude' type bangles and bandanas and also thought he could become an animator and financed a stupid amount of money on a kids TV series which went nowhere. In fairness, had either of them panned out, he could have made a great deal of money but these were things he had no experience in, so no contacts or understanding of the nuances that applied. He didn't know what he didn't know!
So I'd be looking at what you do know and build from there.
StevieBee said:
Well, I'd suggest that the most successful business are those that someone started in an industry they already knew. Starting something or entering into something in something you know nothing about is exceptionally risky and even if you manage that risk, can take much longer to build up any head of steam.
My friend sold his highly successful recruitment business and started a new business making 'surfer dude' type bangles and bandanas and also thought he could become an animator and financed a stupid amount of money on a kids TV series which went nowhere. In fairness, had either of them panned out, he could have made a great deal of money but these were things he had no experience in, so no contacts or understanding of the nuances that applied. He didn't know what he didn't know!
So I'd be looking at what you do know and build from there.
Thanks for the above - good points and the thought of losing the buffer built up at the later end of working life isn't a risk I'd take. hence why I'd looked at businesses that are either low investment, or involve a saleable asset. My friend sold his highly successful recruitment business and started a new business making 'surfer dude' type bangles and bandanas and also thought he could become an animator and financed a stupid amount of money on a kids TV series which went nowhere. In fairness, had either of them panned out, he could have made a great deal of money but these were things he had no experience in, so no contacts or understanding of the nuances that applied. He didn't know what he didn't know!
So I'd be looking at what you do know and build from there.
All really good points and appreciate the advice.
Inspectorclueso said:
Early Pension, rent on 1 property mainly.
Any other ideas / views welcomed and also feel free to reality check on a 15% return from £400k....Thx.
I'll bet the net return from that property is a mere fraction of 15%. If so, the obvious place to start is by selling that rental property and adopting a better overall strategy.Any other ideas / views welcomed and also feel free to reality check on a 15% return from £400k....Thx.
And how much of this £400k is in ISA? If it isn't, why not? And if it is, you'll get murdered by future tax if you get it out and do something different with it.
Start an online printed calendar subscription/delivery business.
People buy a "get you started" calendar for either six or twelve months and then every month a new page arrives. A nice surprise in the post.
Aimed at those aged 60+, the kind of people who still enjoy something arriving on the doormat and have money to burn (well some of them). Can easily be gifted of course and people can choose from many different themes, or they can go completely random or semi-random.
When logged in people can add important/recurring dates so that birthdays and anniversaries are already printed.
Cost of an envelope, printing the calendar pages and delivery would probably cost £2.50, charge £4/month and you only need around 5 to 10,000 subscribers to make your money. Nothing to go wrong, no returns, no warranty claims.
Countless free images online, but equally hop over to Flickr, and you'll find thousands of photographers who'd bite your arm off for a small piece of the action. (Dave, for example, who photographs steam trains. He's already got the photos done, it's free money).
Obviously there can be referral schemes, "12 for 10" when paying yearly. Partner up with another business to include some other kind of literature in the envelope (double glazing offer/cruises etc...).
No idea if this is actually a viable business, but my wife would happily pay £40 to gift such a thing to her mother.
People buy a "get you started" calendar for either six or twelve months and then every month a new page arrives. A nice surprise in the post.
Aimed at those aged 60+, the kind of people who still enjoy something arriving on the doormat and have money to burn (well some of them). Can easily be gifted of course and people can choose from many different themes, or they can go completely random or semi-random.
When logged in people can add important/recurring dates so that birthdays and anniversaries are already printed.
Cost of an envelope, printing the calendar pages and delivery would probably cost £2.50, charge £4/month and you only need around 5 to 10,000 subscribers to make your money. Nothing to go wrong, no returns, no warranty claims.
Countless free images online, but equally hop over to Flickr, and you'll find thousands of photographers who'd bite your arm off for a small piece of the action. (Dave, for example, who photographs steam trains. He's already got the photos done, it's free money).
Obviously there can be referral schemes, "12 for 10" when paying yearly. Partner up with another business to include some other kind of literature in the envelope (double glazing offer/cruises etc...).
No idea if this is actually a viable business, but my wife would happily pay £40 to gift such a thing to her mother.
Sounds like you have some experience in property, and despite the negatives it does remain somewhat forgiving. I’d say 15% ROI with some leveraging isn’t that hard to achieve. It’s still very difficult to get so wrong you lose your capital!
I’ve a few HMO's, while a good ROI can be achieved. You do end up working as a maintenance man and letting agent.
A good middle ground, if you can find one, would be a block of individual flats. Good enough yield and hopefully less management than HMO’s. Unfortunately, you don’t see many for sale. But there is some potential in converting high street building into small flats and reducing size of the commercial space. They can be picked up cheap, can be VAT reclaimable on renovation costs and there is rental demand for small self-contained units in most towns.
I’ve a few HMO's, while a good ROI can be achieved. You do end up working as a maintenance man and letting agent.
A good middle ground, if you can find one, would be a block of individual flats. Good enough yield and hopefully less management than HMO’s. Unfortunately, you don’t see many for sale. But there is some potential in converting high street building into small flats and reducing size of the commercial space. They can be picked up cheap, can be VAT reclaimable on renovation costs and there is rental demand for small self-contained units in most towns.
CaiosH said:
Sounds like you have some experience in property, and despite the negatives it does remain somewhat forgiving. I d say 15% ROI with some leveraging isn t that hard to achieve. It s still very difficult to get so wrong you lose your capital!
I ve a few HMO's, while a good ROI can be achieved. You do end up working as a maintenance man and letting agent.
A good middle ground, if you can find one, would be a block of individual flats. Good enough yield and hopefully less management than HMO s. Unfortunately, you don t see many for sale. But there is some potential in converting high street building into small flats and reducing size of the commercial space. They can be picked up cheap, can be VAT reclaimable on renovation costs and there is rental demand for small self-contained units in most towns.
Thanks for this, not sure if I am being biased, but nice to see someone not telling me to swerve more rental actiion of some form ! I actually had rentals (only 3 mind, for about 15 years) and had no issues. Sold 2 for various reasons, hold 1, but it's attached to our main house, essentially annexe that we let, hence why I still hold that one.I ve a few HMO's, while a good ROI can be achieved. You do end up working as a maintenance man and letting agent.
A good middle ground, if you can find one, would be a block of individual flats. Good enough yield and hopefully less management than HMO s. Unfortunately, you don t see many for sale. But there is some potential in converting high street building into small flats and reducing size of the commercial space. They can be picked up cheap, can be VAT reclaimable on renovation costs and there is rental demand for small self-contained units in most towns.
One thing I am considering is high quality rooms to let for more 'young professional' market. What I'm noticing around here, is that the combination of the room revenue is 30% to 40% more than letting the whole house and of course, the issue of all of the revenue stopping during a void is reduce, albeit I accept there may be more management at times.
Looking to the future I think there are risks and opportunities with this, like all businesses. What does the job market look like for the demographic over 10 years (I think poor), but what chance do they have of buying themselves (poor or at least long lead time).
Need to look at it properly, scout some areas, I'm thinking better suburbs and towns around Brum, possibly on the main train lines.
loskie said:
you suggest car dealing up to 10 cars from home:rural.
Would you need planning permission for that if changing what is a dwelling to a business?
I've looked at it, though not spoken to LA yet. It seems to be a grey area...Thing is I have no neighbours to bother and I don't need to clog up a surrounding road / area to store (1 acre spare ground). And obviously the main purpose of the dwelling is exactly that - dwelling.Would you need planning permission for that if changing what is a dwelling to a business?
I would look at it more, I wouldn't want a vindictive punter to cause me a problem by reporting me etc... But there again, the LA seem so stretched I don't think they could be bothered !
I have a friend who does the same, and his advice is to dip my toe in the water and see how it goes, so I may well just try it. Just working out where to place my bets on all of the options.....
It can still work with properties that provide a good rental yield, as long as you’re not naive of the difficulties and amount of work involved. It far from passive, its a business and a job. It has changed, the standards are much higher in terms of property, legislation and it is not something you can do half-hearted anymore. You need to be a committed & experienced professional to deal with it.
Inspectorclueso said:
One thing I am considering is high quality rooms to let for more 'young professional' market.
There is a lot I could say about student vs professional HMO’s, more than I can summarise here. But in short, it's very dependant on the area, but even in a good area the tenants are not going to be trainee surgeons and accountants. The tenant profile is a mix of university leavers, low wage employed and divorced men.
These HMO’s can be volatile, by that I mean tenant turnover is unpredictable, you never get a clean start / fully empty property & there is much higher potential of having to deal with difficult tenants. Basically, they are a pain in the arse to manage and maintain.
I agree there is a need and its a growing need. But that market would work much better with small individual flats. It’s a need that hardly anyone is building anything new for.
CaiosH said:
There is a lot I could say about student vs professional HMO s, more than I can summarise here.
But in short, it's very dependant on the area, but even in a good area the tenants are not going to be trainee surgeons and accountants. The tenant profile is a mix of university leavers, low wage employed and divorced men.
These HMO s can be volatile, by that I mean tenant turnover is unpredictable, you never get a clean start / fully empty property & there is much higher potential of having to deal with difficult tenants. Basically, they are a pain in the arse to manage and maintain.
I agree there is a need and its a growing need. But that market would work much better with small individual flats. It s a need that hardly anyone is building anything new for.
You've not got me thinking about build to rent....Stop it ! Seriously, I did sketch this out a while ago i.e. build so avoid some of the developers margin, which then means ROI / Yield is higher. All assuming a lot course....appetite for risk, funding the build, land etc... But, as always if it was easy, many people would be on it...But in short, it's very dependant on the area, but even in a good area the tenants are not going to be trainee surgeons and accountants. The tenant profile is a mix of university leavers, low wage employed and divorced men.
These HMO s can be volatile, by that I mean tenant turnover is unpredictable, you never get a clean start / fully empty property & there is much higher potential of having to deal with difficult tenants. Basically, they are a pain in the arse to manage and maintain.
I agree there is a need and its a growing need. But that market would work much better with small individual flats. It s a need that hardly anyone is building anything new for.
Inspectorclueso said:
You've not got me thinking about build to rent....Stop it ! Seriously, I did sketch this out a while ago i.e. build so avoid some of the developers margin, which then means ROI / Yield is higher. All assuming a lot course....appetite for risk, funding the build, land etc... But, as always if it was easy, many people would be on it...
hahaaa, that is 100% the ideal. But very difficult to find a suitable building plot for. Another thing that makes that the ideal is how the funding works. If you own the land with planning outright, then obtaining funding for 100% of the build costs is fairly easy and you can potentially get quite a lot of support from the lender.
Fag packet ‘investor man maths’
of a typical industry aim of 3rd, 3rd, 3rd. £400k for land with planning, £400k build, £400k admin/profit = £1,200,000 valuation*10% yield, £120k a year rent roll.
All great in theory*, but finding a plot and a builder is very difficult.
CaiosH said:
hahaaa, that is 100% the ideal. But very difficult to find a suitable building plot for.
Another thing that makes that the ideal is how the funding works. If you own the land with planning outright, then obtaining funding for 100% of the build costs is fairly easy and you can potentially get quite a lot of support from the lender.
Fag packet investor man maths of a typical industry aim of 3rd, 3rd, 3rd. £400k for land with planning, £400k build, £400k admin/profit = £1,200,000 valuation*
10% yield, £120k a year rent roll.
All great in theory*, but finding a plot and a builder is very difficult.
Yep...agree not easy.Another thing that makes that the ideal is how the funding works. If you own the land with planning outright, then obtaining funding for 100% of the build costs is fairly easy and you can potentially get quite a lot of support from the lender.
Fag packet investor man maths
of a typical industry aim of 3rd, 3rd, 3rd. £400k for land with planning, £400k build, £400k admin/profit = £1,200,000 valuation*10% yield, £120k a year rent roll.
All great in theory*, but finding a plot and a builder is very difficult.
Interestingly always takes me back to what I think it my overriding frustration. I've been too busy 'working' for too many years, to really put my mind to making money, not earning it. I guess that can be seen as an excuse, but is the real life challenge for many people.
Only I can make that change, so going to put some proper time aside next two weeks and get a proper plan of attack together....
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