R650k - best way to invest...?

[Willie Trombone]

So here's the situation...
My mom has R650k to invest but wants the interest monthly. There aren't a lot of options out there it seems.

I have a plot and want to build a house. The banks don't give out loans for building these days (ok, perhaps they do if you can already afford to pay cash).

I'm trying to think of ways I can maximise this lump sum for my ma. Obviously every method has it's risks...

I've thought of spreading it over about 3 decent but stable funds and giving her a monthly amount from my own salary... then taking a look at it in 5 years again and splitting the returns to make it worth both our whiles... I'll have to carry the risk. Previously she had invested in SA retail bonds, but the rate has gone to pot - I think it's 7% over 3 years or 7.5 over 5.

The other option is to borrow it from ma and pay her what i'd pay the bank over the next 10-20 years... that way I get my place and she gets a better monthly return... obviously on the premise that after it's paid off we will look after ma. the risk here is more for her than me I guess.

What do you guys recommend? Any decent funds that will allow her to take monthly interest with more than 7.5 or 8% return?

 

[Other Pineapple Smurf]

Take the money and build your house.

I just bought my first house a few weeks back and I know how hard it is. Your mom has a secure asset and get her to claim rights on your property - not expensive apparently. This was advised by a lawyer friend and confirmed by a magistrate bud of mine.

Sign an agreement that makes it a fair payment. R650K would be R6K pm over 20 years at prime. Increase the amount by 10% per year and you pay her off after 9-11 years.

 

[DJ...]

Or she can invest in high div yield equities and invest the dividends into a monthly interest bearing account/fund.

You need to factor in the tax on these deals, so I'd suggest chatting to a tax accountant before making any moves that you might later regret. The dynamics of your relationships among the family might result in there being tax benefits in opting for the loan-house options.

Bottom line is that the idiosyncrasies of analysing the optimum investment(s) requires a level of detail that you really wouldn't want to be sharing on a public forum imho...

 

[LinuxMan]

bricks and mortar is a good start, property as said above

 

[syntax]

Building a property is not the easiest thing. If you are on a budget and dont have experience, I would avoid it.
Rather buy something that is already completed if you are going to get a property

 

[Cius]

There is better value for money right now on second hand properties as compared to building new. Also, returns on 650K in an investment that pays monthly will not be that high.

 

[DJ...]

There is better value for money right now on second hand properties as compared to building new. Also, returns on 650K in an investment that pays monthly will not be that high.

Which is why it requires capital appreciation. IMHO looking long term, you should seriously consider a high div yield portfolio, either self-managed or fund managed. Once property is on the up again you can always relook at the investment strategy and put a bit into property if need be. Over the short-medium term though, the ALSI is looking good and can be lucrative if managed well...

 

[AlmightyBender]

10 year inflation linked RSA Retail Savings Bond could be a good option for monthy payments. R650000 would yield just under R4500/month.

Additional benefit would be that you would be guaranteed to keep up with inflation.

As DJ said though, the most appropriate investment vehicle will depend on too many personal details to list in a forum. Ideally you should go and speak to an independent financial advisor: http://www.fpi.co.za/YourFinancialPlanning/FindaFPIApprovedProfessionalPractice/tabid/3851/Default.aspx

 

[Other Pineapple Smurf]

There is better value for money right now on second hand properties as compared to building new. Also, returns on 650K in an investment that pays monthly will not be that high.

Agree

I paid R735K for a R1.2 million house

 

[atomcrusher]

10 year inflation linked RSA Retail Savings Bond could be a good option for monthy payments. R650000 would yield just under R4500/month.

OP can read about that option here: https://secure.rsaretailbonds.gov.za/Details.aspx?MenuId=55

 

[Willie Trombone]

We're in the position that we have a really decent plot at a seaside resort and getting shot of it is going to be harder than building IMO so the building option is looking compelling...

 

[Willie Trombone]

OP can read about that option here: https://secure.rsaretailbonds.gov.za/Details.aspx?MenuId=55

That's fixed rate...
AC was suggesting inflation linked?

 

[Other Pineapple Smurf]

We're in the position that we have a really decent plot at a seaside resort and getting shot of it is going to be harder than building IMO so the building option is looking compelling...

Vacant property is the worst investment because its not. At least with a home you can turn it into an investment property. I would say that building is the way forward.

 

[Willie Trombone]

Vacant property is the worst investment because its not. At least with a home you can turn it into an investment property. I would say that building is the way forward.

+1 I think we might just do this... Mom scores too IMO. I'd much rather be paying it back to her...

 

[AlmightyBender]

^ only difficulty with this approach is that there is always the risk that in a few years something happens to you and you can't pay her back. For most people the risk of this happening is just too high.

 

[Other Pineapple Smurf]

^ only difficulty with this approach is that there is always the risk that in a few years something happens to you and you can't pay her back. For most people the risk of this happening is just too high.

Life Insurance and if his mom claims rights to the property, the property cannot be taken away that easily.

 

[Alton Turner Blackwood]

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[RiaX]

if you cant afford to gamble dont buy shares. Essentially its the same thing if its not capital guaranteed. Even if its capital guaranteed you can still lose money from broker charges. Thats what I think, I just use a fixed deposit and earn interest from the bank.

Im no expert in investing so I try to stay away from brokers.

 

[DJ...]

Im no expert in investing

Agreed...

 

[AlmightyBender]

LOL