What To Do With £50,000?

July 15, 2010

What should you do if you have £50,000 in the bank and don’t know where to invest? Below are some examples of the returns to expect over 5 years. Investing your money in the bank will get maximum 27.6%, in UK real Estate 38%, with high yield real estate via Abbotsinch 79.3%. This demonstates that in a flat/recessionary market, yield is the most important factor if you want to maximise returns.

Bank Account

Typical Bank Accounts in UK will yield an interest rate of under 5%. Lets imagine you do get 5%. Your money will grow as follows:

End Yr 1 – £52,500
End yr3 – £57,881
End yr 5 – £63,814 or 27.6% over 5 years

UK Real Estate

The Real Estate Market has fallen back sharply in some areas – However lets consider that you can get a buy to let mortgage of 70% LTV fixed for 5 years at 5%, and also a decent 6% net yield, and the market remains stable over the period. With £50,000 down you could expect closing costs of £5,000 including stamp duty and legal fees, and the mortgage app. Fee. However you could possibly then buy with the £45,000 a property at £150,000, with a net £9,000 a year income after repairs, service charges etc. The mortage interest payments would be 5000 a year so a steady £4,000 a year income would be yours.

End Yr 1 – £49,000
End yr 3 – £59,000
End yr 5 – £69,000 or 38% return over 5 years.

Investing Via Abbotsinch

50,000 pounds will translate currently (say at 145 exchange rate) as $72,500. With closing cost of $2500 you could buy a single unit ($25,000) and two double units ($35,000 each) with 30% loan at 10% interest rate. Typical net yields will average at 15%. This would equate to net income of $15000 per annum minus loan interest of $3000, ie $12,000 per annum.

End Yr 1 – $82,000
End yr 3 -$106,000
End yr 5 – $130,000 ie 79.31% return over 5 years.

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