So here's the question, you have £20,000 in the bank, hard earned beer vouchers or windfall, doesn't matter. What do you do with it, put it in a high interest bank account, stocks market or property?
So here’s the question, you have £20,000 in the bank, hard earned beer vouchers or windfall, doesn’t matter. What do you do with it, put it in a high interest bank account, stocks market or property?
Well lets have a quick look at what that could achieve, obviously this is only a very rough guide, it doesn’t take into account your personal financial/tax situation etc and you should always take professional advice before doing anything; but just for the sake of discussion.
The best interest rates for this kind of lump sum are around 3% and then only if you open a current account ordinary savings accounts are a lot less impressive right now. Over 5 years that gives you a return of around £3,185, not bad, especially with low inflation rates.
The stock market is fine, provided you know what you’re doing, or are willing to pay for professional advice and of course have reasonable attitude to the probably greater degree of risk
Over the same five years the FTSE 100 has gone up 30.8%, which would give you a return of £6,160, even better. However this is naturally dependent on picking the right share or fund to invest in.
So let have a look at property, with £20,000 your going to need a mortgage, lets say you can basically buy a property with a value of up to £80,000 as you generally need a 25% deposit on buy to let mortgages, though there are some that will accept 20%.
What that will get you will obviously vary with location, condition etc, however as an example it could get you a two bed on Scott St, I highlighted one recently on the blog.
This would generate a gross rental return of about 6% per annum. That’s about £24,750 over five years, plus, based on average house price increases over the preceding five years an increase in the property value of around £5,500, now that’s not startling but added to the rental yield it starts to look good I think.
Now I fully accept that you have to offset the cost of the mortgage and other expenses against these figures, but there are some good mortgage deals and fixed rates available right now. Ultimately all I’m really saying is it’s worth having a look around and examining all your options before deciding where to put your money, either way and as usual always get professional advice.
If you have any questions concerning the above or property in general then please don’t hesitate to drop me a line at firstname.lastname@example.org.