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Safest way to invest £450k

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Fifteen15
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PostPosted: 13:12 - 05 Dec 2015    Post subject: Safest way to invest £450k Reply with quote
Asking on behalf of someone, his 1 year fixed savings accounts have just matured. He wants to split the money into 6 chunks of £75,000 and put them into 6 separate 1 year fixed savings accounts earning around 1.4% each.

Is there a better, safe way of investing the money where he'll be able to access the money in one year?
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Ste
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PostPosted: 13:45 - 05 Dec 2015    Post subject: Reply with quote
1.4% !?!? Laughing Laughing

You can get current accounts which pay more than that. Wink

With £450k he should speak with some of the private banks to see how they can help him investing it.
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Tracey Suntan-King
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PostPosted: 14:47 - 05 Dec 2015    Post subject: Reply with quote
Ste wrote:
1.4% !?!? Laughing Laughing

You can get current accounts which pay more than that. Wink

With £450k he should speak with some of the private banks to see how they can help him investing it.



Those current accounts have very stingy maximum investment limits and strings attached.

If your mate wants low/no risk then the OP proposal works best. He could put £50k into premium bonds for a year to get around 1.3% tax-free and with a slim chance of a big win.

Without knowing more about your mate, for example, age, long-term plan, income etc it's hard to advise.

The one thing I would say though is avoid is speaking to a bank, private or otherwise because they have a vested interest in pushing their own/their mates' products
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FriendlyEllis
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PostPosted: 15:02 - 05 Dec 2015    Post subject: Reply with quote
Buy houses and rent them out.

The houses are very very unlikely to lose money so his asset is reasonably safe.

He would get rental income of 24k ish per annum depending on where he lived.

Even after 40% tax that would give him an annual return of 3.2%.
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Itchy
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PostPosted: 15:13 - 05 Dec 2015    Post subject: Reply with quote
FriendlyEllis wrote:
Buy houses and rent them out.

The houses are very very unlikely to lose money so his asset is reasonably safe.

He would get rental income of 24k ish per annum depending on where he lived.

Even after 40% tax that would give him an annual return of 3.2%.


See clause 24 of the finance act. 10% W&T allowance is going in April. The government is also steadily moving towards mandatory licensing.

The big part of Clause 24 is that it will cause MANY leveraged people to rush for the exit as the interest amount is tapered off and you can lose a whole load.

Take for example a gigantic pub near me that was converted into 28 flats. It was valued at 1.2 million in 2007. It's now for sale at 240K and still nobody wants it.
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stinkwheel
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PostPosted: 15:55 - 05 Dec 2015    Post subject: Reply with quote
He should go and see a registered independant financial advisor who will be able to asess his best return for the risk he is prepared to take.

They can advise on legal tax efficiency and (importantly) are insured against cock-ups.

My Dads IFA landed him with an unexpected tax bill of £85k because he accidentally moved the wrong investment between two accounts and incurred 40% capital gains on the ful amount. He was able to sucessfully claim this back off the advisors insurance.

It's a mine field out there and you should leave amounts like that to the professionals.
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Andy_Pagin
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PostPosted: 16:02 - 05 Dec 2015    Post subject: Reply with quote
FriendlyEllis wrote:
Buy houses and rent them out.

The houses are very very unlikely to lose money so his asset is reasonably safe.

Except the property market has a nasty habit of suddenly crashing, UK housing is already well over-valued and I suspect we're in for another crash in the not too distant future. As a very long term investment where you plan to sell when the going is fantastically good property makes sense, for a fixed one year term it's seriously risky.
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Ste
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PostPosted: 16:36 - 05 Dec 2015    Post subject: Reply with quote
Tracey Suntan-King wrote:
The one thing I would say though is avoid is speaking to a bank, private or otherwise because they have a vested interest in pushing their own/their mates' products

Well yes, of course they're going to be making money from the services they provide.

That doesn't change the returns you get from the investments which I'd have thought is more important than the fact the bank is also making money from you.
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trevor saxe-coburg-gotha
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PostPosted: 16:47 - 05 Dec 2015    Post subject: Reply with quote
Andy_Pagin wrote:
FriendlyEllis wrote:
Buy houses and rent them out.

The houses are very very unlikely to lose money so his asset is reasonably safe.

Except the property market has a nasty habit of suddenly crashing, UK housing is already well over-valued and I suspect we're in for another crash in the not too distant future. As a very long term investment where you plan to sell when the going is fantastically good property makes sense, for a fixed one year term it's seriously risky.


I think local knowledge can be key. Some regions, and some districts within some regions, can be very sheltered from the broader national property price cycles.
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Rob Fzs
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PostPosted: 18:11 - 05 Dec 2015    Post subject: Reply with quote
buy 45 acres of ag land and rent it out, a tenant can't fuck it up too badly and they don't make land anymore so it will only go up in value

mr Dyson is buying up large swaths of Lincolnshire and i would think he knows quite abit about making money

woops missed the need the money back in a year bit, fuck knows
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FriendlyEllis
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PostPosted: 10:36 - 07 Dec 2015    Post subject: Reply with quote
Itchy wrote:
FriendlyEllis wrote:
Buy houses and rent them out.

The houses are very very unlikely to lose money so his asset is reasonably safe.

He would get rental income of 24k ish per annum depending on where he lived.

Even after 40% tax that would give him an annual return of 3.2%.


See clause 24 of the finance act. 10% W&T allowance is going in April. The government is also steadily moving towards mandatory licensing.

The big part of Clause 24 is that it will cause MANY leveraged people to rush for the exit as the interest amount is tapered off and you can lose a whole load.

Take for example a gigantic pub near me that was converted into 28 flats. It was valued at 1.2 million in 2007. It's now for sale at 240K and still nobody wants it.


What????? There are 28 flats for sale 240k. That's 8.6k each???
Or has it not been converted yet?
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DrSnoosnoo
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PostPosted: 11:51 - 07 Dec 2015    Post subject: Reply with quote
FriendlyEllis wrote:
What????? There are 28 flats for sale 240k. That's 8.6k each???
Or has it not been converted yet?


BCF should buy it. Motorcyclist hotel.
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Itchy
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PostPosted: 16:18 - 07 Dec 2015    Post subject: Reply with quote
FriendlyEllis wrote:

What????? There are 28 flats for sale 240k. That's 8.6k each???
Or has it not been converted yet?



As I said it used to be a huge pub. The word flat however is subjective and it's probably more like 24 bedsits. It is also in a VERY stabby area.


But tbh many of these kinds of conversions and flat blocks have forests of forsale signs in them as nobody wants them except for those in city centres. Where WG work in them.
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Pie-Roe
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PostPosted: 22:29 - 07 Dec 2015    Post subject: Reply with quote
Itchy you keep saying these doomsday things about buy to let, could you explain in simple English?
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Itchy
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PostPosted: 23:16 - 07 Dec 2015    Post subject: Reply with quote
Pyro. wrote:
Itchy you keep saying these doomsday things about buy to let, could you explain in simple English?



Sure grab a mug of coffee this may get a bit Teffers.

In the recent finance act clause 24 was introduced. Clause 24 is like an Atom bomb going off in BTLers faces. Particularly those who are leveraged many of which are leveraged. Many also use interest only loans as well with no repayment vehicle.

If you can buy in cash then you are affected but not as badly, but you are still affected in other ways. I shall explain.

The law

Clause 24 is being introduced in staggered stages.

In April 2016 the new tax year Wear and tear allowance which allows a landlord of ALL types to claim 10% of the rent as wear and tear is being removed.

The next thing from April 2016 is the tapering of mortgage interest claimable. Currently you can claim mortgage interest.

Scenario pre April 2016

Rental income: £30,000 per annum

Mortgage interest: £20,000

Other legitimate expenses: £10,000 (e.g. insurance, letting, management, maintenance etc.)

Taxable income = zero.

Scenario pre April 2020

Rental income: £30,000 per annum

Legitimate expenses excluding interest: £10,000(e.g. insurance, letting, management, maintenance etc.)

Net taxable income = £20,000 WHAT?

Net cash flow is still zero but tax is payable on £20,000 less a tax credit of £4,000 due to the 20% relief on the £20,000 of mortgage interest. No difference right? Nope, that £20,000 is now considered to be income. So you might be earning £25,000, previously you earn £25,000 you're now considered to be earning £45,000. Of which £15,000 over £30K is taxable at 40%.

IIRC Clause 24 also moves rental income to a higher slice meaning 40% tax payers get hit harder. Add a zero onto those and the situation is bad. People are taxable on £200,000 @ 40%.


I'll just put up the rent!

Not possible as this simply increases their tax liabilities.

It is also not possible due to the law of rent. Law of rent states that rent is set at the maximum the market can bear. Therefore the rent is already going to be the maximum they can charge. Take for example London people are paying 72% of their take home on rent.

https://www.theguardian.com/money/2015/jul/16/tenants-in-england-spend-half-their-pay-on-rent

75%? 80% How much until people think right that's it I can't make a living here and move out or find something else to do?


I'll just sell up!

A model many BTLers use is the interest only model there are about 2.5-4 million interest only BTL loans.

Selling a house which is not your main home realises the capital gains tax liability. This means a big big tax bill. Herein lies the problem. Many BTLer individuals did not use cash or money from their pocket. They borrowed money against their properties which were rising in price. Therefore they used the gains from house price increases to buy more property. Therefore they have ALREADY SPENT THE GAINS.

I'll just transfer my property to a company

Tax law considers this to be a disposal and gives rise to a charge like Capital gains tax.




In a nutshell

Leveraged BTLers can't sell because they can't afford the CGT or worse they have already spent it.
Leveraged BTLers can't keep because they will be given fat tax bills which get fatter as time goes on.
They can't raise the rents.


What will happen

The smart ones will be quietly making their exits trying to unload onto bigger fools.

Many BTLers are completely ignorant of the above changes. This is why there is a splurge of BTL mortgages recently. They will prepare their taxes exactly like they've done for years they may not even notice the missing boxes for tax relief claims. But when the calculation comes back there will adjustments which make their tax bills a lot bigger which get bigger over time. HMRC also implements a cruel and unpleasant penalty system in regards to tax.


At which many will suddenly look into it and see how the tax system has changed and will try and head for the exit. But basic economics tells us about supply and demand. If demand is massively increased prices go down. So while they may well dodge the CGT bill they are left with having to pay the difference or go bankrupt. The massive supply will erase much of the equity in the homes of those who are NOT leveraged.

On top of this many BTLers smug Rachman types quit their day jobs to BTL full time. Meaning they can't just hop skip and jump back into the workforce to make up the difference.

BTLers now make silly arguments about how houses vanish when a landlord sells up.

Or how rents will go up... except if a renter buys a previous BTL house there is no net change.
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RhynoCZ
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PostPosted: 23:22 - 07 Dec 2015    Post subject: Reply with quote
£450k, ever thought of doubling the money with No risk? Thinking

https://simpsonswiki.com/w/images/thumb/2/26/No_Risk.png/250px-No_Risk.png
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mentalboy
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PostPosted: 23:24 - 07 Dec 2015    Post subject: Reply with quote
stinkwheel wrote:
He should go and see a registered independant financial advisor who will be able to asess his best return for the risk he is prepared to take.


As I was so subtly reminded in a different post this is BCF, your advice is far too sensible.

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Itchy
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PostPosted: 23:34 - 07 Dec 2015    Post subject: Reply with quote
If you really want to make that £450K into £900K then go into partnership with me.

The UK has a glut of milk which is reflected in super low prices.

China will have a baby boom in 2016 due to the one child policy being ended. Chinese consumers don't trust Chinese milk. So they buy foreign.

You can buy 1 kilo of UK baby milk powder for £10 this is at retail prices turn up at SMA and ask for 9000 tins and they will give you a discount lets say £6 per tin.

You can sell 1 kilo of non China baby milk (which ironically they can't digest). For £23 at wholesale or £32 retail.

It costs £700 for a shipping container from Felixstowe to Guangzhao with £200 charge on that end. The Baltic dry index is being crushed by low demand...

You can stuff 9600 tins of milk powder into a 40ft shipping container.

So £9600 x 6
£57600 + £1000 costs add in £1000 costs for paperwork and stuff.

At Guangzhao

You can off load them and sell them for £220,800 at wholesale. It takes 20-25 days port to port x13 times = £2870400 quid.

I'll take a 15% cut for dealing with the Guangzhao port authority and finding a wholesaler.
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Rogerborg
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PostPosted: 08:22 - 08 Dec 2015    Post subject: Reply with quote
Itchy wrote:
[interesting stuff about BTL]

However, you have strong views regarding rent-seeking; it is possible that you may be over-egging the pudding slightly?

It's just that it seems unlikely that a Tory government would fail to leave a loophole for them and their chums to exploit. </corrvpt scvm>
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Itchy
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PostPosted: 17:05 - 08 Dec 2015    Post subject: Reply with quote
Rogerborg wrote:

However, you have strong views regarding rent-seeking; it is possible that you may be over-egging the pudding slightly?

It's just that it seems unlikely that a Tory government would fail to leave a loophole for them and their chums to exploit. </corrvpt scvm>



Who do you think will be the fire sale price buyers? Who has massive share holdings in the banks which will repo?


The smart cookies will already have been renting houses through housing associations and corporations.


Amateur BTL was always a bit of a grey area. In that a great many claimed it wasn't a business... yet they claimed running costs and expenditures... which means it is a business. This halfway house allowed them to take the best of both worlds. That is preferential tax treatment being able to save 45% income tax AND claim expenses AND leverage.
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Itchy
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PostPosted: 19:59 - 09 Dec 2015    Post subject: Reply with quote
https://uk.finance.yahoo.com/news/fergus-wilson-britains-most-iconic-142132220.html

He's been trying to get out for YEARS. He said 250 million.

Which means £280K each.

Except

Auction results:

Lot 13: No sale - available at £225,000

Lot 22: Sold for £183,000

Lot 40: Sold for £174,000

Lot 60: No sale, but listed as 'sold after'


So lets call it £180K x 900

£162000000. Except he owes £110 million.
162,000,000 - 110,000000 = 52 million.

Not forgetting the charges and CGT of 30 million so he MIGHT walk away with 20-15 or so million. That's IF he can sell but as above his auctions haven't been selling.
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