How to Invest Money After Selling Property

How to Invest Money After Selling Property How to Invest Money After Selling Property

With house prices growing at their fastest rate since 2004, you may feel like now is the perfect time to sell your home. 

But what should you do afterwards? Is property investment a good option, or should you explore alternative ways to invest your money?

For many, receiving a substantial cash windfall from a property sale means investing, but with so many options out there, you may feel unsure about which road to take. 

In this blog, you will learn how to invest money after selling property with six different ways in the UK.  

Other topics in this post include: 

  • Investment ideas 
  • What happens when you sell your house and make a profit? 
  • The safest place to put house sale money 
  • Short term investment of house sale proceeds 

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What Happens When You Sell Your House and Make a Profit? What Happens When You Sell Your House and Make a Profit?

What Happens When You Sell Your House and Make a Profit? 

Before you decide what to invest in, you need to know how much cash will be available to you after selling your house. 

Unfortunately for sellers in the UK, there are several fees you’ll need to factor in before selling your house and gaining access to your capital gains (the profit made on the sale of a property). 

Basic costs include: 

  • Energy Performance Certificate 
  • Estate Agent Fees 
  • Conveyancing Fees 
  • Removal Costs 

TheAdvisory estimates that the basic costs of a property sale is around £4,621. 

Optional expenses include: 

  • Capital Gains Tax – Tax on the profit you earn after selling a property. Not paid if you only own one home, which is known as Private Residence Relief. 
  • Mortgage Exit Fee 
  • Early Mortgage Repayment Charge 
  • Home improvement before selling to boost fee 

While these fees can certainly add up, they shouldn’t dramatically impact your earnings. In fact, data from the Land Registry shows that over the last 10 years, the average UK property price has increased by over £100,000, putting you in good standing to earn a healthy profit. 

How to invest your money after selling a property How to invest your money after selling a property

How Should I Invest My Money After Selling My House? 

Now that you’ve completed the sale of your property, it’s time to think about investing money into appreciating asset classes. 

Before that, though, it’s important to address if you’re actually ready for an investment. 

If you’ve sold your primary residence, you’ll likely need to buy a new home instead of investing, or you may be more interested in renting. 

You should also consider your personal finance situation and pay off any outstanding debts that need addressing. It may also be a good idea to consider proper wealth management and build an emergency fund for any rainy days on the horizon. 

However, if you have enough money and are ready for an investment, then keep reading for six ways you can earn extra cash and more money through investing. 

If you want investment guides catered specifically to the cash you have available and risk tolerance, you can read our guides to: 

1. Real Estate Investments 

The first port of call when considering re-investing your home sale proceeds is likely through real estate. 

Real estate is currently one of the best investment options in the UK. This is for three main reasons. 

  1. Rental Income – Real estate income is currently the highest it has ever been, with HomeLet reporting that the average UK rent reached an all-time high of £1,061 PCM in September 2021. 
  2. Capital Gains – The potential to make a profit on a home sale is even higher in 2022, with property prices increasing at the highest rate since 2004, and with further predictions from Savills of prices rising by up to 18.8% by 2026. 
  3. Rental Demand – Rental demand is currently at the highest level it has ever been, with a report from Hamptons finding that it takes just 8.9 days to let a home – down from 31.9 days in 2019.  

You can invest in rental property in many ways, but likely the most popular strategy in 2022 is a residential or student property off-plan purchase. 

This means buying a property that hasn’t yet been completed for a cut market price to extend your purchasing power in the property market. 

While property prices are currently at an all-time high of £269,945 on average according to the Land Registry, by buying off plan property you can increase your chance of finding a great deal, with some investments often below the £100k mark. 

It’s important to note that there isn’t just the entry cost of buying real estate that you’ll need to consider. You will also need to factor in a down payment on a buy to let mortgage, mortgage rates and interest payments, real estate taxes, and more. 

You can read our full guide to the costs of investing in real estate by following the links. 

Of course, investing in residential and student property isn’t the only way to invest in property, with plenty of other investments perfect for the near future. 

These include: 

  • Commercial real estate 
  • Real estate crowdfunding 
  • Real estate investment trusts 
  • Holiday lets 
  • HMOs 
  • House flipping 
  • Property development  
  • Rent to Rent 

You can check out a guide to the best real estate investment strategies by checking out our full 2021/22 guide. 

Alternatively, you can learn more about student property investment and buy to let property by clicking the links to read our detailed guides. 

Overall, though, real estate is likely the best choice for those wondering how to invest money after selling property. 

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Invest in the stock market Invest in the stock market

2. Stock Market

An alternative to real estate property, stock market investing is a more short term investment of house sale proceeds and has long been considered one of the best ways to invest. 

With the potential to earn huge income through both dividends and capital growth, stock investing is one of the first methods considered by house sellers. 

However, while income potential is high, risk is also incredibly high, with stock prices known to rise and fall hour by hour. 

This volatility stems from stock prices being impacted by a variety of external factors you have no control over, including foreign policy and tax changes. 

While Barclays Equity Gilt Study found that stocks have produced 5.4% annual returns on average over the past 50 years, this pales in comparison to some real estate investments, with the potential to earn 8% NET on properties in areas like Liverpool.  

You can even see double-digit returns in some areas, with Liverpool seeing over 10% gross returns in certain postcodes. 

Therefore, while the stock market can be an incredibly effective asset class for making huge income returns, you will need a high risk tolerance to be successful. 

For this reason, stocks are certainly not the safest place to put house sale money, and may not be the best answer for how to invest money after selling property.  

Consider investing in mutual funds Consider investing in mutual funds

3. Mutual Funds 

An easier way to invest money in stocks, mutual funds are an investment vehicle that uses pooled funding from investors to invest in assets like stocks and bonds. 

Typically, mutual funds are managed by money managers who allocate funding to earn income and returns for their investors. 

You can earn income from a mutual fund in three main ways: 

  1. Dividends on stocks/interest on bonds. 
  2. Capital gains if the fund sells securities that have increased in price, with proceeds given to investors. 
  3. Capital gains if shares in the fund increase in price, which investors can then sell these shares to others. 

There are a variety of different types of mutual funds including equity funds, fixed-income funds, index fundsexchange-traded funds, and more. 

The vast majority of investors will find that index funds are far easier to invest in than individual stocks as you’re essentially leaving the hard work of choosing stocks to a professional money manager.  

They’re also an excellent way of diversifying your portfolio and are an incredibly liquid asset, although the lack of transparency in what the fund chooses to invest in may put some investors off. 

While it is by no means risk-free, and may not be as effective and safe as real estate, mutual funds are an interesting way of investing home sale proceeds in 2021/22. 

4. Cryptocurrency 

The new kid on the block, cryptocurrency is fast becoming one of the most prevalent investment strategies in the world. 

Simply put, cryptocurrency is a digital form of income that can be purchased and traded online. 

There are several types of cryptocurrencies, with the most prevalent likely being Bitcoin and Ethereum 

Each unit of cryptocurrency is worth real money, with one Bitcoin currently worth £43,659. 

The potential for returns from currency like Bitcoin is astronomical, with The Times reporting that Bitcoin investors saw returns of 525%. 

However, like stocks, cryptocurrency is incredibly risky, with a quote in Time magazine saying: 

“You have a high chance of losing it all, but a small chance of winning it big.” 

For this reason, risk-averse investors should consider avoiding putting too much money after selling a house into this asset. 

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Low-risk investment - Money Market funds Low-risk investment - Money Market funds

5. Money Market Funds 

We’ve looked at four ways to invest money, but what about more safe options? 

Well, if you aren’t ready to invest right now, and are looking at the safest places to put house sale money, then a money market fund is an excellent way to go. 

money market fund is a low-risk investment that acts as a safe way to hold your cash. 

Unlike mutual funds, money market funds don’t avoid in higher-risk assets like stocks, and instead, opt for corporate bonds and overnight bank deposits – the trade-off being lower returns. 

You’ll need to make a money market account/ money market accounts to invest in the fund, but they’re an interesting option to consider for those asking “what do I do with proceeds after sale of investment property? 

6. High Yield Savings Account 

Likely the safest place to put house sale money is a savings account. 

Unlike other forms of investment on this list, savings accounts are a good choice for both long term and short term investment of house sale proceeds. 

There are plenty of options for putting your cash into a savings account, all depending on how much time you’re willing to lock your funds away. 

Moneyfacts reports that the best easy-access savings account is currently Paragon Bank with 0.65% AER at a variable rate, which will likely increase or decrease if it’s a low-interest-rate environment. 

Meanwhile, if you want to lock up your funds for three months, you can get a 90-day notice account, with the Bank of England and The Middle East offering a 0.90% expected interest rate in November 2021. 

Whatever you choose, you can feel confident that putting your cash into a savings account is a smart choice after selling your house, although it won’t generate the most returns or capital growth further down the line. 

FAQs

No, you don’t need to reinvest profits from a home sale. Instead, you can use the money to pay off debts, or put it into a savings account to keep safe. However, investing is a popular strategy and can help you generate more money in the long run.

You have an unlimited amount of time to reinvest your own money after selling a house. If you wait, you can find a more opportune moment to invest to increase your buying power and make money go further. However, this isn’t strictly true with real estate, as prices will likely continue to increase over the coming years. 

What you do with the proceeds after a sale of investment property is up to you. Most people will choose to re-invest their funds and buy additional property to fill out their property portfolio. 

Do I Have to Reinvest Profit From House Sale?

No, you don’t need to reinvest profits from a home sale. Instead, you can use the money to pay off debts, or put it into a savings account to keep safe. However, investing is a popular strategy and can help you generate more money in the long run.

How Long Do You Have to Reinvest Money After Selling a House?

You have an unlimited amount of time to reinvest your own money after selling a house. If you wait, you can find a more opportune moment to invest to increase your buying power and make money go further. However, this isn’t strictly true with real estate, as prices will likely continue to increase over the coming years. 

What Do I Do With Proceeds After Sale of Investment Property?

What you do with the proceeds after a sale of investment property is up to you. Most people will choose to re-invest their funds and buy additional property to fill out their property portfolio. 

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We hope you’ve enjoyed our guide and are now more familiar with how to invest money after selling property.  

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With over 17 years of experience in residential and student property, RWinvest is an award-winning property investment company named the North West’s best in 2020. 

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