Personal finance knowledge/questions

Zenchick101 · Mar 23, 2021

Hi @Sweetsunrise as not to clog up the previous thread we we're chatting on, I thought I would make a new one since pm isn't an option. I also figured this thread might be a good idea for people to help each other out with personal finance tips, questions, and just become more educated in general on the topic. @Sweetsunrise perhaps our conversation may help others as well? (also if you don't feel confortable answering any of these or if they need to be rephrased feel free to change them).

These are the questions I've come up with so far:

If you had to start from scratch how would you start over?
What is the first property someone should buy? ex: single family home, duplex, condo.
Should you buy your own home first before buying an investment property?
are condos viable properties to invest in?
How much should you borrow when buying your first property (investment property or personal home), precisely what percentage of your monthly income should go to your mortgage repayment?
is a 15 year fixed better or worse then a 30 year fixed?
Is it always best to look for a property as close as possible to the city center, or is a property farther out but near an employer just as good?
(Assuming near the city center and employer) how do you evaluate wether a property is a good deal or not? (ex. number of bedrooms? the financial value?)
What percentage of your budget should be allocated towards needs? how much towards retirement investing?
Do you invest in single stocks?
Mutual funds vs index funds vs ETFs which one is better in your opinion?
What books would you recommend to explore these topics further?
Any other advice young people should know?

I hope that lecture went well? lol

Sweetsunrise · Mar 24, 2021

Hi! I hope you’re well. I grilled my dad today, I told him a friend asked me these questions for him, and he offered to give her a phone call to discuss more (but I couldn’t say it was a tattle friend haha), I told him she wasn’t comfortable lol. So these were his answers to everything, sorry it is in note form, I was furiously typing away as he was speaking fast! I hope this helps you

1. I would do two things - 1. target properties in two areas (up and coming areas and areas that will be popular in 5-10 years). NOT in a year, because then everyone will know about them and get into them fast, so always go long term. If you do good research for the next 5-10 years you will capitalise on the increase in value better if it’s long term and less people know about it. 2. Invest in areas with high employment because professionals will always need accommodation. Don’t invest in flats. Do free hold, not long lease hold (I have no clue what any of this means, maybe you will )

2. Houses, but depends on affordability. Preferably houses that can be split into flats

3. It depends what you are after. Remember residential mortgages are typically 10%, commercial mortgages need to be at least 25%, sometimes higher. Your investment property should stand on its own two feet, because the bank will do a stress test to check your income against your mortgage and you must pass a stress test of 170%. Example: if your mortgage is £100 your rent should be £170

4. Not typically, go for houses

5. (Sorry I can’t remember if he answered this or not or if he went off on a tangent!). But don’t put in too much deposit, because it reduces the amount you can put into another house, so as little as you can get away with.

6. Who knows? Mortgage rates go up and down, the longer the fix generally the better, more assurity

7. Near city centre because the city centre will always have major employers. Or near hospitals, because there are a lot of people with job security and it’s good for doctors, nurses etc, who need accommodation close by

8. Look at your target market to establish whether a it’s a good property - I.e if it’s a student town, the number of bedrooms is crucial. One important thing to look at: auction websites, look at the guides, what’s on the market and what they typically go for to see if it’s good value. (He mentioned some sites I think one called Allsop auctions for commercial properties)

9. (I think he was confused by this question haha) save as much as you can, not for retirement just yet if you are young but for a deposit for your first house, that’s the important thing

10. No, it’s high risk. The ones that are guaranteed are very slow return

11. Index funds, as they will always grow. Don’t invest your money into anything you haven’t researched. (Honestly he never talks about stocks so I’m assuming he doesn’t know as much about them as property, and doesn’t invest in them)

12. Not sure sorry I’m not a big reader

13. Research, get advice and be a risk taker, you will always learn something. The market is very high right now, wait 6 months, there’s an expected recession. In the meantime research where to buy and what to buy. Commuter rail lines are good investments for professionals, also high speed network areas - prices always go up here. Check your local authority for what license you need e.g. HMO license - selective, additional, mandatory. Good luck

That’s everything! I hope that’s okay
He was happy I’m so interested now and I’m happy I had the chance to sit down and talk to him and he really opened up about everything, so thank you.

He lectured me a little but honestly it was quite a bonding experience, he’s always so busy and feels like I don’t take this seriously or I don’t care, but I’m glad I talked to him tonight. He came from nothing, my grandad immigrated here and worked in a factory, supporting 5 children. As cliche as it sounds, he’s my hero...so thank you for making me sit down and speak to him

Zenchick101 · Mar 24, 2021

Sweetsunrise said:
Hi! I hope you’re well. I grilled my dad today, I told him a friend asked me these questions for him, and he offered to give her a phone call to discuss more (but I couldn’t say it was a tattle friend haha), I told him she wasn’t comfortable lol. So these were his answers to everything, sorry it is in note form, I was furiously typing away as he was speaking fast! I hope this helps you

1. I would do two things - 1. target properties in two areas (up and coming areas and areas that will be popular in 5-10 years). NOT in a year, because then everyone will know about them and get into them fast, so always go long term. If you do good research for the next 5-10 years you will capitalise on the increase in value better if it’s long term and less people know about it. 2. Invest in areas with high employment because professionals will always need accommodation. Don’t invest in flats. Do free hold, not long lease hold (I have no clue what any of this means, maybe you will )

2. Houses, but depends on affordability. Preferably houses that can be split into flats

3. It depends what you are after. Remember residential mortgages are typically 10%, commercial mortgages need to be at least 25%, sometimes higher. Your investment property should stand on its own two feet, because the bank will do a stress test to check your income against your mortgage and you must pass a stress test of 170%. Example: if your mortgage is £100 your rent should be £170

4. Not typically, go for houses

5. (Sorry I can’t remember if he answered this or not or if he went off on a tangent!). But don’t put in too much deposit, because it reduces the amount you can put into another house, so as little as you can get away with.

6. Who knows? Mortgage rates go up and down, the longer the fix generally the better, more assurity

7. Near city centre because the city centre will always have major employers. Or near hospitals, because there are a lot of people with job security and it’s good for doctors, nurses etc, who need accommodation close by

8. Look at your target market to establish whether a it’s a good property - I.e if it’s a student town, the number of bedrooms is crucial. One important thing to look at: auction websites, look at the guides, what’s on the market and what they typically go for to see if it’s good value. (He mentioned some sites I think one called Allsop auctions for commercial properties)

9. (I think he was confused by this question haha) save as much as you can, not for retirement just yet if you are young but for a deposit for your first house, that’s the important thing

10. No, it’s high risk. The ones that are guaranteed are very slow return

11. Index funds, as they will always grow. Don’t invest your money into anything you haven’t researched. (Honestly he never talks about stocks so I’m assuming he doesn’t know as much about them as property, and doesn’t invest in them)

12. Not sure sorry I’m not a big reader

13. Research, get advice and be a risk taker, you will always learn something. The market is very high right now, wait 6 months, there’s an expected recession. In the meantime research where to buy and what to buy. Commuter rail lines are good investments for professionals, also high speed network areas - prices always go up here. Check your local authority for what license you need e.g. HMO license - selective, additional, mandatory. Good luck

That’s everything! I hope that’s okay
He was happy I’m so interested now and I’m happy I had the chance to sit down and talk to him and he really opened up about everything, so thank you.

He lectured me a little but honestly it was quite a bonding experience, he’s always so busy and feels like I don’t take this seriously or I don’t care, but I’m glad I talked to him tonight. He came from nothing, my grandad immigrated here and worked in a factory, supporting 5 children. As cliche as it sounds, he’s my hero...so thank you for making me sit down and speak to him

This is great honestly, it's a lot of new information for me to sink my teeth into and look into further. Thank him for me? I'm glad this was a bonding experience for you guys, really I'm happy for you. I hope this is perhaps something that you can bond over with him even more, imo this is valuable knowledge one should know. If it's a cliche well I don't mind it, raised in a mostly single parent house myself and the previous 2 generations have put in a lot of work to climb the socioeconomic ladder so that I could enjoy a comfortable middle class life - (when mum was a small child the appartment building shared a toilet/bathroom - those buildings don't exist anymore nowadays/she taught herself how to read/write aswell for the most part) She's my hero aswell and I'm just hoping to achieve something similar. I'm fluent in french (i'm a mixed french woman) so if you had a question relating to that let me know. Again maybe this is something you might be interested in yourself or could continue to bond with him over I wish I could thank both of you in person - but I'll just send some virtual hugs your way. I hope in the futur if I have any more questions I could ask you?

Sweetsunrise · Mar 24, 2021

Zenchick101 said:
This is great honestly, it's a lot of new information for me to sink my teeth into and look into further. Thank him for me? I'm glad this was a bonding experience for you guys, really I'm happy for you. I hope this is perhaps something that you can bond over with him even more, imo this is valuable knowledge one should know. If it's a cliche well I don't mind it, raised in a mostly single parent house myself and the previous 2 generations have put in a lot of work to climb the socioeconomic ladder so that I could enjoy a comfortable middle class life - (when mum was a small child the appartment building shared a toilet/bathroom - those buildings don't exist anymore nowadays/she taught herself how to read/write aswell for the most part) She's my hero aswell and I'm just hoping to achieve something similar. I'm fluent in french (i'm a mixed french woman) so if you had a question relating to that let me know. Again maybe this is something you might be interested in yourself or could continue to bond with him over I wish I could thank both of you in person - but I'll just send some virtual hugs your way. I hope in the futur if I have any more questions I could ask you?

Of course, I’ll tell him you said thank you. The talk got quite emotional, my siblings were there and we got upset and said we didn’t know what to do if he died, none of us know anything about business, we don’t even know everything we own/have shares in. We got quite scared that our family members would try and con us out of money/property due to our ignorance and my dads legacy is thrown out the window. So I’m really glad we had the talk and he got a wake up call that he should introduce us to the businesses now and make a list of everything that’s ours

Wow it sounds like your previous generations worked really hard for you to have a comfortable life and your mum sounds amazing I hope you achieve what you wanted

Thank you for the virtual hugs Of course, if you have any other questions, feel free to ask me any time! And good luck

JoeBloggs · Apr 11, 2021

I wondered if I could jump in and ask people thoughts on savings. I have recent found out I am to received a decent amount in inheritance from my grandmother.

I already have savings so I am looking to put most of it away (have a few home improvement projects I want to do). My dad suggested premium bonds as my mum has been quite lucky on them but I’m not sure if I should perhaps go for a locked away bond. I currently have a Marcus account giving me the best instant access I think there currently is.

I’m not prepared to buy stocks and invest with the money right now.

Zenchick101 · Apr 11, 2021

JoeBloggs said:
I wondered if I could jump in and ask people thoughts on savings. I have recent found out I am to received a decent amount in inheritance from my grandmother.

I already have savings so I am looking to put most of it away (have a few home improvement projects I want to do). My dad suggested premium bonds as my mum has been quite lucky on them but I’m not sure if I should perhaps go for a locked away bond. I currently have a Marcus account giving me the best instant access I think there currently is.

I’m not prepared to buy stocks and invest with the money right now.

I'd personally make sure my 6 month emergency fund is complete, then a bond until I'm ready to invest. or 50% bond 50% index funds. Only because index funds/mutual funds have a higher return then bonds and it's good to diversify

JoeBloggs · Apr 11, 2021

Zenchick101 said:
I'd personally make sure my 6 month emergency fund is complete, then a bond until I'm ready to invest. or 50% bond 50% index funds. Only because index funds/mutual funds have a higher return then bonds and it's good to diversify

Thank you. I have more than enough in savings so looking to invest 80% of it. Do returns on investments count towards your savings interest income as I will be bordering on the £1000 I suspect so need to work out if it makes it worth it.

Do you have any suggestions where to begin reading about investing? My dad does shares and buys gold but I am unsure if he does much else.

ispywithmylittleeye59 · Apr 11, 2021

JoeBloggs said:
Thank you. I have more than enough in savings so looking to invest 80% of it. Do returns on investments count towards your savings interest income as I will be bordering on the £1000 I suspect so need to work out if it makes it worth it.

Do you have any suggestions where to begin reading about investing? My dad does shares and buys gold but I am unsure if he does much else.

It depends on the type of investment, but usually income would be a paid by a dividend (some are interest though so you would need to check). Everyone is entitled to a tax free dividend allowance of £2,000

You can hold funds in a stocks and shares ISA though which would be tax free (income and gains).

I have a stocks and shares ISA with Hargreaves Lansdown which I would deffo recommend.

Half of my money I invested using their portfolio plus and the other half is in funds that I chose myself after research on their website. Their portfolio plus is a ready made portfolio of several HL managed funds basically. I feel safer with funds - I’m too nervy to choose what companies to buy!!

Zenchick101 · Apr 11, 2021

JoeBloggs said:
Thank you. I have more than enough in savings so looking to invest 80% of it. Do returns on investments count towards your savings interest income as I will be bordering on the £1000 I suspect so need to work out if it makes it worth it.

Do you have any suggestions where to begin reading about investing? My dad does shares and buys gold but I am unsure if he does much else.

The reply you got from the other poster was good, but I would consider some things if I were you. Any funds that are managed by someone else (mutual funds) comes with added fees that will be taken out of any earnings you make out of your investments, to pay the fund manager. Mutual funds are actively managed by people who most of the time are not able to beat the market, which imo seems a bit of a waste (but i'm comfortable doing my own research). Index funds to put it simply, have smaller fees since they simply follow an index of how the companies in the fund you bought are doing (ex. the S and P 500 index fund). I would stick to funds in general because they are less volatile and offer a good return, whereas single stocks (ex. buying one part of amazon) are risky - if the company tanks you've lost it all. I personally would not buy gold : (but to each his own).

In terms of reading material I'm debating getting the intelligent investor by benjamin graham.

I've been educating myself through youtube so I'd recommend:
- Dave Ramsey (American focused but good for general knowledge and some things are applicable to non-americans)
- https://www.youtube.com/channel/UCxgAuX3XZROujMmGphN_scA Mark is UK focused and has some good information.
- https://www.youtube.com/c/RetireCertain
- https://www.youtube.com/channel/UCIbslwukNCyVp-XMz_2-gmw and this is good for some basic knowledge.

I'll finish off with two things - never invest in what you don't understand, and I don't like the idea of investing in a premade portfolio/funds that I didn't choose myself because it feels like giving my money away without knowing what's going on (at least to me).

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