Where to safely invest capital.

I have a friend who has asked me for advice (don't we all!). He normally lives in LOS, has recently sold the ex-matrimonial home in the UK. He (wisely) doesn't want to risk bringing the capital over to LOS, but would happily draw on the income. He had been thinking of buying a small flat or similar base/bolt-hole in the UK, thus retaining a stake in the Uk property market (and not 'burning his bridges'), and renting it out, as an absent/overseas landlord. That would then be available to him, if in the fullness of time it all went wrong in LOS and he wanted to return to the UK (or if he wanted to take any partners back to live in the UK)!!

However, as an absent Landlord he would have to use a Letting Agency, who would want 12% commission/charges, they in turn have to deduct income tax at 22% (and notify the Revenue), which along with maintenance charges would reduce his rental income by at least half, - he reckons giving him a return of less than 3% net. Also, as he wouldn't normally be living in the property, he would become liable for Capital Gains Tax upon it's eventual sale, or until he (re)occupies the property

Understandably, he is beginning to wonder if it is worth all the hassle for a relatively low return, and has asked me for any ideas on whether he should follow that route, or what other alternatives might be available to him, such as investing in an off-shore bank account, or in a spread of equities (or maybe a property fund!).

Does anyone have any sensible thoughts, ideas or suggestions on this??!!

I asume your friend doesn't know how long, but i think his duration of stay in LOS would have a major bearing on any possible advice. A 1 year stay would warrant completely different advice to a 10 year stay.
Maybe the best advice you could give him in the first instance would be to try and commit to a rough plan of intended stay (subject to all the curve balls that will be thrown at him) and take it from there.

He needs to think about how much risk that he is willing to take with his hard earned money, always remember that high returns = high risk.

It is fairly easy, with the internet, to operate an investment portfolio on the London Stock Exchange through a reputable internet broker - however operating the portfolio at a profit requires both quite a lot of work and quite a lot of luck.

Much will depend on just how much effort he is really prepared to put into managing such an account. One advantage of operating from Thailand is that with the 6 / 7 hour time difference he could play golf in the morning and be back at the computer in time to operate the account through the afternoon and evening (LSE operating hours)

I think he is very much a long term stayer in LOS, but wants to protect his capital and keep the door open should he wish to return to the Uk in the fullness of time, if for example his health deteriorated, or earlier if Immigration policies became intolerable.

I think his concern was that the return after tax and various related fees was quite low, and maybe there was an alternative investment out there which would produce a better return and with less hassle.

I had had similar thoughts about putting most into a high rate deposit account, (maybe off-shore), and some into a mix of broad based equity products like unit trusts.

This article from the BBC website, is also something to keep in mind, if one is a UK taxpayer.:

UK taxman targets offshore wealth

Big tax evaders could be prosecuted

British tax authorities are broadening their search for tax dodgers who use offshore accounts, an HM Revenue and Customs official has told BBC News.

The Revenue is to press small private banks that cater for wealthy clients to agree to hand over details of their customers' offshore accounts.

The Revenue is asking 170 stockbrokers and wealth managers to cooperate.

The Revenue is already pursing some 40,000 UK citizens who have offshore accounts with High Street banks.

Following a legal ruling, Barclays, HSBC, HBOS, Royal Bank of Scotland and Lloyds TSB have already been ordered to hand over the names and details of their UK customers who had accounts with branches based offshore..

This amounted to some 400,000 accounts, based in locations such as Isle of Man, Guernsey and Jersey, which the Revenue is currently trawling through to try and root out those who have not paid the tax due.

Wider audit

Accountancy firms describe the Revenue's efforts to broaden its investigation as a "filtering down exercise", with the banks with the greatest volume of offshore accounts topping the list.

"It makes sense," said Stephen Camm, head of PricewaterhouseCoopers tax investigations.

"The Revenue looks to audit the financial firms that have a high potential of being the most profitable for its efforts in terms of the amount of tax being avoided."

While self-employed entrepreneurs and freelancers might hold an account at an offshore branch of a major UK bank, the customers of wealth managers and private banks will be more financially sophisticated, according to Mr Camm.

Encouraged by a partial amnesty until the end of June, about 60,000 people have owned up to unpaid taxes.

They have registered to pay the outstanding amount plus interest, and in doing so took advantage of the Revenue's reduced penalty charge of 10% of the total amount owed.

This leaves about 40,000 people whom the Revenue believe have not complied fully with UK tax law and who could now face fines up to 100% of their backdated taxes, and in extreme cases, prosecution.

I dont know what the Tax implications are but it might be worth looking at a Condo in Pattya or Chiangmai that could be rented out to Tourists etc which would also give him an investment in Thailand and could help with his Visa applications. I spoke with someone not long ago who has a number of properties in Thailand and he said he was making up to 15% a year on property values, so when time comes to leave a tidy profit could be made.

15% rent on property in Thailand?! think the norm is about 2% with the renter doing the maintenance on basic needs.Not quite the same as in the West.

Sorry Stan I meant the increase in property values, not the rent.

it would be safe to deposit your assets in my savings acount I assure you LOL

Hi,
Some of the previous answers hit the nail on the head. What heshould do with investments really depends on his goals, investment timeframe, how much he has to invest etc.

For ultra safe, you can get a UK based online high interest account to park your money in, earning around 5% pa. Not a lot, but if you have 1 million in there you can see the money you earn isn't chickenfeed. No idea how much he has to invest.

What about managed funds? You can manage them yourself online and they're easy to look after. Google Top UK Managed Funds and you'll find things like -

http://www.find.co.uk/investments/funds ... buys_table

There are Income Funds (google them) in which you place your money with a manager and it pays out on a regular basis.

Don't know how much he wants to live on either - 50,000 baht per month? If he's retired then there's Allocated Pensions, Shares etc.

I'm actually getting out of property slowly as I want to live in LOS and don't want the hassle of agents, bad tenants, maintenance etc. I'm investing heavily in managed funds until I grow it sufficiently enough to plonk a large amount in a secure online high interest rate account from which I'll get about 6.5% pa and live off that. It's easy online maintenance and research from then on.

Actually, if you buy a car in LOS and have money o/s earning only say 6% or thereabouts, it's worth taking out LOS finance at around 3.5% to buy it. Depends if he wants to buy a car/bike.

Need more info really to be able to help. Oh, yes I used to work in global financial markets, and am a financial planner.

Cheers
Phil

Aardvark wrote:............... he said he was making up to 15% a year on property values, so when time comes to leave a tidy profit could be made.

Take care before following this route.

I have heard (but have no definitive proof) that it can be extremely difficult to get your money out of Thailand unless you have a complete audit trail on the monies involved.

The current political situation in the region as a whole (reports of riot police taking action in Burma today) does add another set of risks to investing in Thailand.

This is an area where I would invest in some good legal advice from an international practice before taking the risk of a major investment - but, in the end, risk is a personal choice, so up to you

Phil, his goals are to protect and modestly grow his capital. I think he has enough (income) to live on currently, but may want to take some income from the new capital. We are talking of a half share in a substantial Uk ex-matrimonial home. That should give you a feel for how much is involved, without actually quoting figures. Though it would only get him back onto the lower end of the housing ladder in the UK!

I also know he doesn't want to bring money to LOS. He has pretty much what he needs in LOS already.

Whilst I am aware of, and would myself relish the opportunity to carefully invest in some, stable "cautious managed funds, I am concerned that I don't point him at anything too risky, in case he was to lose his capital, which is irreplaceable, as he is retired!! However, whilst bank deposits will produce a reliable income stream, they won't grow his capital.

In terms of buying something modest in the UK, I think he may feel more secure by retaining a base in the UK, so that he could return if things went wrong in LOS. That said, his long term plan is to remain in LOS. I am wondering if "buy to let" has had it's day in the Uk and whether he should embark on something which can create a lot of hassle for not that big a return!

You speak as if you have lots of adverse experience of renting out in the UK. It maybe helpful if you could give more of an insight into that too.

I have spotted that the UK tax authorities have been homing in on offshore bank accounts, requiring the Uk parent bank to divulge UK names and addresses.

Hi,

Yes I had a few disasterous tenants in the UK after I'd spent a bomb renovating the place only for them to wreck it and the furniture I provided, carpets, bathroom etc. I was paying the real estate agent their fee and they were useless. Didn't make a quid after owning the place for 10 years. Now I live in Australia and have residential property investments here. However as I say I'm getting out of them, to concentrate on managed funds. I've mentioned some of the reasons, but the other is that I really know how to research them. My minimum growth aim is 20% pa, but I always exceed it - and get usually around 30 to 40%pa - every year, and that's with some diversification to minimise risk as well! Even my ING advisor mate here in Oz wants to know how I do that!My pension (superannuation) more or less tracks managed funds (but slightly more conservatively because it's longer term) and so is going very well too. Key reason though is that I will be coming to live in LOS and don't want the hassles that go with offshore property.

Yes his stage of life is important too. I'm not retired so I'm trying to make things grow as fast as possible so I can retire early. However, once I retire I don't want the high risk - none of us should! I'll be looking at a nice steady income stream from a high interest fund, plus a few thousand to invest in a higher risk/return fund to top up the online account. All that is prior to me getting my pension.

All that is ignoring a nice middle road. There are plenty of moderately rated funds earning around the 12 to 18%+ pa mark. Fairly low risk. Possible some of his money could go into those. As an example, if he had 0.5 million and wanted to be safe, he could put 80-90% in the safe income stream fund, 15-5% in a moderate/balanced fund and dabble in a higher risk fund with the rest - use this to top up the safe fund when you can. Other things to consider is the level of interest a person has in investments (seeing as you're doing it yourself) and their experience with investing.

But it's so hard to give advice without talking to the person to acertain all the facts, their risk profile etc. So please don't take what I say as the way to go! Everyone is different and has different needs and different risk tolerances.

Wow, I think I'll come to Udon and set up business doing this!! Or a bar! Actually, last time i was there I was talking with a few people about finance stuff (falangs), so might be a good idea anyway!

Cheers
Phil

Oh something I was going to say - another one of my reasons for managed funds vs property is that funds are liquid (cash accesible in a few days normally) whereas property can be a pain sometimes. Come a market downturn, you can't get your money out of property quickly, sometimes taking months. With funds, at least in a few days you can swap it to a more defensive fund relatively quickly.

as you say renting out can be a nightmare especially if they know you will be living abroad they will take the piss and stop paying rent after you leave.
too many stories about bad tenants if you are away .
there are scoundrels who specialise in ripping off property owners .a mate of mine in aus rented out his flat in bournmouth UK and after he went home to aus the nightmare started ,no rent ,place was trashed and mega bills were owed.