Big decision - am I doing the right thing with 500k?
Discussion
Sorry - wouldn't normally be so open about personal finances but if i screw this up I ruin my early and future retirement!
About to buy 4 beautiful fully renovated high end flats and a v successful shop (shop goes in private pension). Its something I know inside out and even feels more diversified compared to my other similar property. Will be high end tenants (they know what a CCJ is and that it would screw them up...) and will be super vetted. Its all EPC C and even has a sprinkler system and electrics to die for! Proper job - new roofs and no chimneys to worry about!
It will make over £55k pa + capital gain. Over 8% yield. But then remove agency and running costs and £10k for mortgage its more like 6.6%%. I currently have my stash mostly in ISA's that pay 4.5%.... Also keep seeing people saying that ETF/Index Funds/Vanguard 500 might be less grief. But I know nothing of them and have never handed over a bunch of cash to someone and crossed my fingers - I'm really useless here.
Do I do what I know or has the ground shifted enough to suggest I do something different? This is life savings + inheritance for a self employed guy and it needs to feed us till I croak! Most debts paid off so it really should create a good retirement on paper and maybe I can sell a couple of the flats once state pension kicks in for 2 of us in 7 years and blow the capital on a Bentley
Versus blowing it all on a low stress annuity its nice to think I can set up the kids well too... Control freak? YES!
Any tips on a v big decision v welcome.
About to buy 4 beautiful fully renovated high end flats and a v successful shop (shop goes in private pension). Its something I know inside out and even feels more diversified compared to my other similar property. Will be high end tenants (they know what a CCJ is and that it would screw them up...) and will be super vetted. Its all EPC C and even has a sprinkler system and electrics to die for! Proper job - new roofs and no chimneys to worry about!
It will make over £55k pa + capital gain. Over 8% yield. But then remove agency and running costs and £10k for mortgage its more like 6.6%%. I currently have my stash mostly in ISA's that pay 4.5%.... Also keep seeing people saying that ETF/Index Funds/Vanguard 500 might be less grief. But I know nothing of them and have never handed over a bunch of cash to someone and crossed my fingers - I'm really useless here.
Do I do what I know or has the ground shifted enough to suggest I do something different? This is life savings + inheritance for a self employed guy and it needs to feed us till I croak! Most debts paid off so it really should create a good retirement on paper and maybe I can sell a couple of the flats once state pension kicks in for 2 of us in 7 years and blow the capital on a Bentley
Versus blowing it all on a low stress annuity its nice to think I can set up the kids well too... Control freak? YES!Any tips on a v big decision v welcome.
You will get a multitude of responses on here unfortunately.
Nothing is risk free. I m 47 and have c£2m in managed investments and have spent £300k and set aside another £300k to convert a shop and maisonette round the corner from me into a larger retail space (I m converting the basement into habitable space) and 3 smaller residential flats. I already have a couple of other rentals. All in I probably will have >£1m tied up in rentals.
No one knows how markets will go, and I ve just spent the last 4 weekends fannying around sorting one of the rentals after it was left in a mess by a vacating tenant. However my gut says it s right to have a split in my assets.
I intend to use the retail unit to set up a retirement business too.
Nothing is risk free. I m 47 and have c£2m in managed investments and have spent £300k and set aside another £300k to convert a shop and maisonette round the corner from me into a larger retail space (I m converting the basement into habitable space) and 3 smaller residential flats. I already have a couple of other rentals. All in I probably will have >£1m tied up in rentals.
No one knows how markets will go, and I ve just spent the last 4 weekends fannying around sorting one of the rentals after it was left in a mess by a vacating tenant. However my gut says it s right to have a split in my assets.
I intend to use the retail unit to set up a retirement business too.
Might be worth spending a little time trying to understand if there's half a million in play.
I'm the opposite I don't "get" property. Never quite figured out what you do when all your net worth is stuck in something quite illiquid and where you can't just sell a bit if you decide you want something or if life throws a curveball at you.
Each to their own of course
I'm the opposite I don't "get" property. Never quite figured out what you do when all your net worth is stuck in something quite illiquid and where you can't just sell a bit if you decide you want something or if life throws a curveball at you.
Each to their own of course
Never understood why 8% yield on Property management strikes some as attractive
Had to look after my Parents rental doing a three year probate and it was hell. Perhaps cause the agency was useless and I had to do everything.
This odd juxtaposition of wealth and fixing toilets and burden that I could never get my head around
I guess it comes with practice. Give me the stock market any day.
Had to look after my Parents rental doing a three year probate and it was hell. Perhaps cause the agency was useless and I had to do everything.
This odd juxtaposition of wealth and fixing toilets and burden that I could never get my head around
I guess it comes with practice. Give me the stock market any day.
Ken Figenus said:
and maybe I can sell a couple of the flats once state pension kicks in for 2 of us in 7 years and blow the capital on a Bentley
The tenants will have more rights than you but I'm sure they'll voluntarily move out so the landlord can have a Bentley.lizardbrain said:
I guess it comes with practice. Give me the stock market any day.
Ditto. A little more uncertain perhaps but no work to do other than think occasionally and click a mouse.Edited by Simpo Two on Wednesday 10th December 20:41
Ken Figenus said:
Sorry - wouldn't normally be so open about personal finances but if i screw this up I ruin my early and future retirement!
About to buy 4 beautiful fully renovated high end flats and a v successful shop (shop goes in private pension). Its something I know inside out and even feels more diversified compared to my other similar property. Will be high end tenants (they know what a CCJ is and that it would screw them up...) and will be super vetted. Its all EPC C and even has a sprinkler system and electrics to die for! Proper job - new roofs and no chimneys to worry about!
It will make over £55k pa + capital gain. Over 8% yield. But then remove agency and running costs and £10k for mortgage its more like 6.6%%. I currently have my stash mostly in ISA's that pay 4.5%.... Also keep seeing people saying that ETF/Index Funds/Vanguard 500 might be less grief. But I know nothing of them and have never handed over a bunch of cash to someone and crossed my fingers - I'm really useless here.
Do I do what I know or has the ground shifted enough to suggest I do something different? This is life savings + inheritance for a self employed guy and it needs to feed us till I croak! Most debts paid off so it really should create a good retirement on paper and maybe I can sell a couple of the flats once state pension kicks in for 2 of us in 7 years and blow the capital on a Bentley Versus blowing it all on a low stress annuity its nice to think I can set up the kids well too... Control freak? YES!
Any tips on a v big decision v welcome.
Is going all in on property that you early don’t understand, or you wouldn’t be asking, a good idea?About to buy 4 beautiful fully renovated high end flats and a v successful shop (shop goes in private pension). Its something I know inside out and even feels more diversified compared to my other similar property. Will be high end tenants (they know what a CCJ is and that it would screw them up...) and will be super vetted. Its all EPC C and even has a sprinkler system and electrics to die for! Proper job - new roofs and no chimneys to worry about!
It will make over £55k pa + capital gain. Over 8% yield. But then remove agency and running costs and £10k for mortgage its more like 6.6%%. I currently have my stash mostly in ISA's that pay 4.5%.... Also keep seeing people saying that ETF/Index Funds/Vanguard 500 might be less grief. But I know nothing of them and have never handed over a bunch of cash to someone and crossed my fingers - I'm really useless here.
Do I do what I know or has the ground shifted enough to suggest I do something different? This is life savings + inheritance for a self employed guy and it needs to feed us till I croak! Most debts paid off so it really should create a good retirement on paper and maybe I can sell a couple of the flats once state pension kicks in for 2 of us in 7 years and blow the capital on a Bentley
Versus blowing it all on a low stress annuity its nice to think I can set up the kids well too... Control freak? YES!Any tips on a v big decision v welcome.
No it’s not.
With all due respect you should do your own homework. Everyone who answers is in a different financial position to you and has their own risk appetite. From the replies you get here you’re not going to learn about how to invest, which tax wrapper to use, the best platform because it’s all a very personal decision. There’s loads of reading out there. A very basic starting point would be to take a look here.
https://www.moneysavingexpert.com/savings/investme...
Good luck!
https://www.moneysavingexpert.com/savings/investme...
Good luck!
Fair. I think my mind is likely made up. Probably. But, you know, am open to input as times change. And I have till Monday...
I have zero issue fixing toilets twice a year fwiw - others may pay Pimlico Plumbers £300 for a washer! Although my agency would prob sort for £45. Do I trust them more or less than St James's Place with my dosh? 🤔
I have zero issue fixing toilets twice a year fwiw - others may pay Pimlico Plumbers £300 for a washer! Although my agency would prob sort for £45. Do I trust them more or less than St James's Place with my dosh? 🤔
So your Gross yield is 11% but than after costs, the net yield is 6%.
Basically, your operating costs (including leverage costs) actually 45.5% of your gross income. It is quite high, as leakage. I believe you might actually be more proactive on management and reduce the leakage.
How much equity you are putting in without leverage?
What is the historical 10 years average capital growth in the area ? Are there any more new builds coming up that might depress your capital growth (by increasing supply).
I would say, if you are investing in a liquid and desired location in UK, your min expected Annual Total Return (Income + Capital) should be risk free rate (Uk 10 year Bond yield) + 2% (risk premium), so that is 6.5%. This is also assuming, your investment period will be min 10 years, to relieve from transaction costs + tax.
Basically, your operating costs (including leverage costs) actually 45.5% of your gross income. It is quite high, as leakage. I believe you might actually be more proactive on management and reduce the leakage.
How much equity you are putting in without leverage?
What is the historical 10 years average capital growth in the area ? Are there any more new builds coming up that might depress your capital growth (by increasing supply).
I would say, if you are investing in a liquid and desired location in UK, your min expected Annual Total Return (Income + Capital) should be risk free rate (Uk 10 year Bond yield) + 2% (risk premium), so that is 6.5%. This is also assuming, your investment period will be min 10 years, to relieve from transaction costs + tax.
ooid said:
I would say, if you are investing in a liquid and desired location in UK, your min expected Annual Total Return (Income + Capital) should be risk free rate (Uk 10 year Bond yield) + 2% (risk premium), so that is 6.5%. This is also assuming, your investment period will be min 10 years, to relieve from transaction costs + tax.
If I was getting 4.5% on bonds I’d be expecting 6-7% on equities and 9% net on property given the extra effort and risk.Countdown said:
If I was getting 4.5% on bonds I d be expecting 6-7% on equities and 9% net on property given the extra effort and risk.
I would really have the same exp. return but just including his assumptions, properties new, good tenants meaning a few years hassle-free operations.If he can also put annual rent reviews (CPI linked), it's a no brainer investment. Good luck OP.
lizardbrain said:
Never understood why 8% yield on Property management strikes some as attractive
Had to look after my Parents rental doing a three year probate and it was hell. Perhaps cause the agency was useless and I had to do everything.
This odd juxtaposition of wealth and fixing toilets and burden that I could never get my head around
I guess it comes with practice. Give me the stock market any day.
This is where I am - I've looked into BTL and other things a few times over the years, and I always conclude the same. Had to look after my Parents rental doing a three year probate and it was hell. Perhaps cause the agency was useless and I had to do everything.
This odd juxtaposition of wealth and fixing toilets and burden that I could never get my head around
I guess it comes with practice. Give me the stock market any day.
Add on to that the ever more challenging treatment of landlords that the Gov seem to be enacting and it seems to be quite risky to me. Who's to say that they won't decide to further screw landlords in the next few budgets - Logic suggests it might be quite likely, and if they do, I'd suspect future governments (whatever their colour) would talk a great game, but would take years (if ever) to undo it.
Concerns I always worry about are things like this, and the liquidity aspect - i.e. you suddenly want to change your plan, and now you have to sell / re-finance a property - Can it be done? - yes, is it a pita? - yes.....c.f. S&S where you can have your money at the push of a button with almost zero attached costs,.
If property had a better yield, or was much safer than it is, then it might be worth it, but it's not for me.
I'm a simple chap and like no one asset class or even fund to be more than a certain percentage of my overall investable wealth.
I include private pension pots quantum in this although "obviously " here the overall Equity make up is around 75% v 25% Bonds.
For context I'm 64 and have been not working for 4 years.
Having all of my non primary house wealth in Property to let wouldn't be for me.
I know that I need income of around 2% of my primary pension pot pa to live how we live and so my nett returns overall over that time have been around 400% of this which for me is perfectly satisfactory.
I include private pension pots quantum in this although "obviously " here the overall Equity make up is around 75% v 25% Bonds.
For context I'm 64 and have been not working for 4 years.
Having all of my non primary house wealth in Property to let wouldn't be for me.
I know that I need income of around 2% of my primary pension pot pa to live how we live and so my nett returns overall over that time have been around 400% of this which for me is perfectly satisfactory.
Ken Figenus said:
I have zero issue fixing toilets twice a year fwiw - others may pay Pimlico Plumbers £300 for a washer! Although my agency would prob sort for £45. Do I trust them more or less than St James's Place with my dosh? ?
They wouldn't personally hold your dosh, that would be elsewhere. But what they will do is charge you high fees. Many better options exist!Assuming you own your house you will have your whole net worth in property which obviously has risks as does any non diversified portfolio. Also you are exposed to a single site with 4 flats in the same place. Your perceptions of high end flats and high end tenants don’t really mesh with either their purchase price or the gross income of 55k from 4 flats and a shop. Have you factored in possible void periods in rent or tenants falling into arrears? To me BTL and the attendant hassle really relies on capital growth in most cases unless you have the time to run them without management fees. You are relying on the value of a single site and area where good or bad things can happen . Also what will these smart flats be like after 5-10 years of tenants?
When I see these comments about it being better to invest in the stock market etc. there always seems to be one factor that is missed. Yes it’s possible that capital growth may not be that great. But the rents will also go up every year.
The new regulations are not that onerous if you are doing the job right.
People also comment how illiquid you are if life throws a curveball, but firstly you presumably keep back a cash reserve, and secondly you can always mortgage one of the properties if you have too.
I assume your figures cover a sum for voids/ carpets/ refreshes etc.
Sounds like there will be no major works needed.
You have the potential EPC change covered.
And it’s a good point about higher end tenants, although personally I would still have rent insurance in place.
If you are renting 4. You should be in a good position to negotiate letting agents fees down a bit!
It all looks good to me.
The new regulations are not that onerous if you are doing the job right.
People also comment how illiquid you are if life throws a curveball, but firstly you presumably keep back a cash reserve, and secondly you can always mortgage one of the properties if you have too.
I assume your figures cover a sum for voids/ carpets/ refreshes etc.
Sounds like there will be no major works needed.
You have the potential EPC change covered.
And it’s a good point about higher end tenants, although personally I would still have rent insurance in place.
If you are renting 4. You should be in a good position to negotiate letting agents fees down a bit!
It all looks good to me.
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