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How to Get the Best Return on a £50,000 Investment

Wondering what to do with £50000? If you’re lucky enough to come across a £50,000 windfall, you may be wondering how to get the best return on that investment. While there are a few key options  – from investing in stocks and shares to putting in into a cash ISA to investing in buy-to-let property – it’s important to keep your financial goals in mind while weighing up the positives and negatives of different investment strategies, the risk of losses and returns and how long you’re willing to invest.

Below we dive into some of the options for getting the best return on a £50,000 investment and why investing in a buy-to-let property might be a strategy to help you meet your financial goals.

What are the Key Things to Consider when Investing £50,000?

£50,000 is no small amount of money, and if you’re not a seasoned investor, considering how to get the best return on that investment can be confusing. The best investment for £50000 will depend on your situation and before you make any decision, you should carefully think about your expectations and financial status.

Your main considerations before making any investment might include reviewing your current and short-term financial situation, such as whether you have debts or large expenses coming up, and how large you want to keep a nest egg for a rainy day emergency. You may want to consider your current payments and how 50k can be best put to use, for example paying off your mortgage early, adding more money to your retirement fund or renovating your home to increase its value.

As well as your priorities, you should carefully establish your appetite for risk and capacity for loss. Would you be happy to potentially lose some of your money or do you prefer to be more conservative? All these factors can begin to give you insight into how you can get the best return on a £50,000 investment.

What are the Best Ways to Invest 50k?

What are the Best Ways to Invest 50k?

When looking at the most popular investment strategies, there are three main options that investors consider – investing your 50k in stocks and shares, opening a savings account in the form of a cash ISA and investing in a buy-to-let property. The right option for you will depend on your situation, appetite for risk and priorities. Below we dive into the pros and cons of each so you can understand how to invest 50k wisely.

How to Invest 50k? Stocks and Shares

Investing in stocks and shares is one of the most common avenues for investors. An investment strategy with high potential returns, it’s also usually simple to exit an investment when you’re ready to take your money out. Typically, over the long term, investing in stocks and shares is likely to generate higher returns when compared to leaving money in a cash ISA. However, this type of investment does come with drawbacks and there is the potential to lose what you invest.

Markets fluctuate and stocks go up and down in value, which can mean losses. With a longer time frame your investments can compound and grow, but investors in stocks should be prepared for investments to fall in value every now and again. If you are not prepared to keep your money out of reach longer-term, being forced to take out money when markets are down may result in losses.

Investing in stocks and shares generally requires some specialist knowledge. While there is money to be made, there are inherent risks, especially if you have limited knowledge of the financial world. Taking the reins on stocks and shares yourself requires time and effort to gain background knowledge and spend time monitoring the markets. Experts with knowledge can help you to make the most of your investment and a wealth manager can do the work for you for some cost.

 What to do with £50,000? Cash ISAs

 What to do with £50,000? Cash ISAs

A tax-free ISA is another option if you have 50k to invest. Cash ISAs are less risky than stocks and shares, and considered a safer safe place to hold cash. In a high-interest savings account, there is no risk and you can generate a cash bonus of 25% from the government if you don’t take the money out for 5 years.

Different options from lifetime to stocks and share ISAs exist, however, most ISAs come with a maximum deposit limit of £20,000, meaning you could not put to work the full amount of your investment. Another drawback is that it’s unlikely you’ll see massive returns by putting your money in a savings account, as appreciating assets tends to be more effective. ISAs are a good option for those who want to take little risk and have a financial strategy that doesn’t put a focus on large growth.

Is investing in Buy-to-Let Property the Best Return on a £50,000 Investment?

For those with a 50k budget, investing in property can be a great way to put your money to use. Despite some upheaval with the COVID-19 pandemic, the UK property market has remained resilient and housing markets across the UK are expected to remain buoyant. In 2021, Savilles expects a 4% market growth, and by 2025, property prices are predicted to rise by 21.1%, with certain areas experiencing an even greater increase. There are many areas of the UK where investors can make substantial gains. Read more about the best places to invest in the UK in 2021.

By investing in property, investors set themselves up to potentially gain attractive returns from both rental income – if the property is for buy-to-let – and capital gains. Landlords can also use the rent to cover any mortgage payments. Given the UK property market’s resilience and projected future growth, property is a lower risk strategy and has the potential to enable investors to meet their financial goals in the short and long term. However, just like with stocks, market fluctuations occur, which can affect capital gains when it comes to selling the property. As with any rental property, landlords may experience periods when the property is unoccupied, which can mean loss of rental income if there is low demand from tenants. Investing in property is still usually a long-term investment and unlikely to deliver fast, high returns until it comes to the sale of the property.

What you Need to Know about Investing 50k in a Buy-to-Let Property

What you Need to Know about Investing 50k in a Buy-to-Let Property

Whether this is the first property you are considering to purchase, or a second home (read more about our tips for investing in a second property ), location is key to buying a property with potential rental income and capital gains. In certain areas of the UK, particularly in the North, properties can be had for 50k and it is possible to build a property portfolio with £50k, but investors should keep in mind extra taxes such as stamp duty and income tax on any rental income.

Where to Invest in Buy-to-Let Property with a £50,000 Investment

Which areas of the UK might savvy investors with 50k to invest consider? The ideal combination is a location with low house prices, strong potential for capital gains and an increasing rental market due to increasing tenant demand. Here are some of the top areas in the UK to look at.

Liverpool

A Liverpool investment property can offer some impressive returns and there are properties available for 50K. With relatively low house prices and high rental demand, the city continues to remain one-to-watch by property investors.

A mini housing boom in 2021 saw a 6.3% rise in house prices compared to 12 months ago and in the next five years, property prices are expected to rise by 13.1%. If inventors consider property in the right area, they can also take advantage of the city’s growing rental demand from tenants, particularly its student sector which produces a pipeline of 30,000 graduates per year. Currently, average rental yields sit at around 5.0%, one of the highest in the country.

Read more about investing in property in Liverpool.

Bradford

With growth potential, relatively cheap property, high tenant demand and strong yields, Bradford is an up-and-coming destination in the North that property investors shouldn’t ignore. The Average value of property prices in the BD1 area currently stands at £61,866. Bradford was recently named in the top 10 best buy-to-let areas in the UK, and some properties in the BD1 area can offer between 8 – 10% rental yields.

Read more about what makes Bradford an attractive place to invest in property.

Nottingham

With relatively affordable house prices, strong capital growth potential and attractive rental yields, now is a great time to invest in property in Nottingham. Student rental property is in high demand and can be a lucrative investment. Private investors have been attracted by high yields and low vacancy rates, and the fact that many of these students stay on in the city after graduation, contributing a pipeline of talent to the city’s economy and providing additional rental opportunities.

Find out more about what makes Nottingham an attractive buy-to-let property destination.

Birmingham

Rental yields are a key consideration for any property investor, and Birmingham’s rental yields offer a strong return on investment sitting at 5.4 – 6 %, comparable to destinations like Liverpool. B4 postcode areas near the city’s east side can reach up to 11%.

Since 2019, rents in Birmingham have grown by 28% and are set to grow by 10% over the next four years. The affordability of housing makes the city particularly appealing for first-time investors due to lower initial costs – Birmingham is one of the UK’s most affordable places to invest in property relative to its size.

Find out more about investing in property in Birmingham.

Leeds

The average house price in Leeds is around £178,735 and predictions put house prices to increase 19.9% and rents by 18.8% by 2022 – second only to Manchester. Leeds currently offers some of the highest rental yields in the country at around 4.29 %. Apartments in particular can mean investors can expect to see decent property growth in the coming years.

Find out more about investing in Leeds property.

We’ve outlined some of the best ways to invest 50k and if you’re wondering how to get the best return on a £50,000 investment, stocks and shares, cash ISAs and investing in buy-to-let property are all options to consider. Investing in a buy-to-let property is generally lower risk and gives you an appreciating asset as well as potential rental income. The key is to carefully consider the right areas of the UK for your property investment. To find out more about how to build a property portfolio with 50k, get in touch with our experts today.