House or Invest

[Laoisa]

Hello again, I'm trying to help my mother to decide what to do with 350,000 she inherited. I mentioned in Buy to let tread she was thinking of buying to let to council.
Could anyone suggest a better way to invest this money. The market through a broker? tho' I think after their service charges & tax is paid the return is not too good. Would the Post office various schemes be more beneficial & less hassle then all of the above?. I'm concerned she will get too stressed with the landlord business & feel insecure with the markets. She wants the funds in case she needs care later & if not to leave it to us.
Any suggestion on the best way forward. Many thanks Laoisa

 

[sunnydonkey]

It depends what her aims are for her investment. People in Ireland don't seen to realise what huge disadvantages investment in property has. It is hassle, it is illiquid and returns can be badly affected by events such as finding yourself stuck with a bad tenant. Often people assume that the return is the rent divided by the purchase cost... but in reality costs can reduce it by half (especially since she will be a cash buyer).
Depending on her attitude to risk, she should consider investing in a basket of 10 blue chip, high dividend, shares. This would give her an income, and she would have access to her money within a week, as against many months, even years for property.

 

[cremeegg]

Hi Laoisa,

You seem to be looking at 3 options. 1 An Investment property. 2 The market through a broker. 3 A post office saving scheme.

Let me give you some pros and cons for each.

1 An Investment property

This is long term, don't even consider it unless you are happy to have the money tied up in the property for at least 5 years.

Property investment is a type of business and you need to know what you are at. You have asked about hassle, I think hassle is a bad way to describe it, I would say it is work and sometimes hard work.

You can lessen the work by using an agent or renting to the council, but at the end of the day you are still the landlord. If there are problems, and there will be, the buck stops with you.

The advantage is, in my opinion, that property offers the best return.

2 The market through a broker

If you don't know what you are doing you are putting your trust in a broker. For me this is unacceptable. I am sure there are many fine brokers out there, but I am also aware of people being put into totally unsuitable investments by large and ostensibly respectable brokers. These all involve the customer taking on much more risk than they should.

Done well this may give a good reward, but done badly you could loose your money.

3 A post office saving scheme.

The returns are low.

There is no hassle, no work or knowledge required.

There is as near as it is possible to get no risk.

The reason your mother needs to make an investment is because she received an inheritance, I don't think that is a good reason to become a landlord, or even a stock market investor. In my opinion, go to the PO.

If you accept that idea, you may get more advice on here as to exactly which PO scheme, or Prize Bonds may best suit, but they are all more similar to each other than options 1 and 2 above.

 

[Steven Barrett]

I don't understand the Irish obsession with property. Why would your mother put all of her money into one, very illiquid asset class? If (when?) there is a property crash again, she won't be able recoup her money. Being a landlord has costs too, maintaining the property, stamp duty, solicitor fees, taxes etc. Then there is the chance of unfavourable tenants (see drug dealer moving in thread ).

She should have a diversified portfolio, suitable to what her needs are. It's a big world out there and it is easy to get access to some of the world's biggest and most profitable companies. Remember, when you own shares in a company, you are a part owner of that company. So when you see a kid getting Frozen or Star Wars toys, you are making money. When someone buys a Domino pizza, you are making money. And there is no work required, you outsource the whole lot. You can also mix the levels of asset classes to suit the required level of risk, it's not an all or nothing game.

Your mum should have a good think about what she wants the money for first of all and then look at what kind of investment she needs to make to achieve that. You never know, keeping it in cash may be the most suitable.

Steven
www.bluewaterfp.ie

 

[thedaddyman]

Had a similar issue with my own Mam a while back (sum involved was around €120k). We spent some of it future proofing the house, putting some additional steps in, a bigger shower, better insulation so she is more comfortable in retirement. We also took some of the money and put it into an easy access pot in the bank. That's because there may be emergencies that need funding, for example, if she goes to hospital and requires a scan or test and is told there is a 6 month waiting list but you can go private and get it done next week for €2k. We can just write a cheque for such issues now. If it's never used, we've not lost out on much but there is some peace of mind there.

 

[Leper]

I don't know how old your mother is. Readers of this forum will have come face to face with the problems and profit/loss of investing in a house for letting purposes. If your mother is in her late 50's or 60's she would need her head examined if she thinks that she will have a steady income on renting out a purchased house. Much will depend on where the house is e.g. no problem in finding renters in Dublin, Greater Dublin and surrounding counties. But, let's say the house she buys is in small-town Ireland, then she will have problems.[I could write a book on bad tenants too no matter where the house is located].

She is €350,000 to the good. My tuppence worth:- Let her enjoy it over the years left to her; she probably has earned the right.