Very intelligent.. i'd most likely do the same
£1,000,000 now or £10,000/month for 10 years?
- Thread starter SexyGreyFox
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Very intelligent.. i'd most likely do the same
I wish this wasn't the first thought of everybody and their dog.
Just shows how screwed up the property market is, that everybody just sees $$$ and investment potential, rather than house - a basic human need.
If you're not leveraging your money (by having mortgages) then the stock market may actually be a better bet over the longer term. It's easier to cash out too.
If I wanted to invest such a substantial amount in property I'd set up a company and buy a load of properties on 75% mortgages.
I was actually thinking of something completely different
Are you allowed to talk about it?
I would just take the £1m and then not worry about investing it in houses because I'd go do something fun instead and enjoy the freedom I'd been granted due to not having to log on to work every day and having enough funds to travel
Normally they make the numbers on these sort of choices a bit more interesting, i.e. a lot more money if you take it over the longer term.
If you accept the £1m up front, you can take out exactly the same monthly stipend of £10k a month, so you have an identical income. Whatever you were going to do with that £10k (spending, investments, whatever) do EXACTLY the same with the £10k you are taking out from the capital. So it nets off to zero exactly.
Initial capital of £1m.
Capital reduces by £10k every month.
Capital earns say 0.2% interest every month. [EDIT - I miscalculated, this should be more like 0.4% to turn a decent profit]
Now after 120 months, in both choices you have received £10k in income every month. The difference is, with the £1m option, you are now left with over £100k of capital.
I've tried to approach this from an absolute angle, by netting off to zero the monthly payments to prove that £1m is the better option. In reality, there could be far better things to do with the with £1m, but we don't need to talk about them to demonstrate that £1m is clearly the best choice.
Not from where I'm sitting, £1m looks much better. The way I look at it is:
If you accept the £1m up front, you can take out exactly the same monthly stipend of £10k a month, so you have an identical income. Whatever you were going to do with that £10k (spending, investments, whatever) do EXACTLY the same with the £10k you are taking out from the capital. So it nets off to zero exactly.
Initial capital of £1m.
Capital reduces by £10k every month.
Capital earns say 0.2% interest every month. [EDIT - I miscalculated, this should be more like 0.4% to turn a decent profit]
Now after 120 months, in both choices you have received £10k in income every month. The difference is, with the £1m option, you are now left with over £100k of capital.
I've tried to approach this from an absolute angle, by netting off to zero the monthly payments to prove that £1m is the better option. In reality, there could be far better things to do with the with £1m, but we don't need to talk about them to demonstrate that £1m is clearly the best choice.
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Soldato
Your example is worse than taking the 10k option. to end up with £0 (ish), after 120 months, withdrawing 10k you need to earn interest of 3.7371% to have 100k left over you will need around 5%
If the interest is less than that (while taking out 10k per month) then its worse.
If you are happy to simply not withdraw anything at all, and stick that into a savings account, you need 2% interest for it to be equal.
So the interest rate needs to be between 2%-3.73% for the sum of 1million to be better than the 10k per month for 10 years, depending how much you withdraw per month.
Soldato
Take the 1m.
It sounds like you'd be back to work in a few years after blowing the lot.
Which was the result of my calculation - £1.6M vs 1.5M.
Soldato
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How many of us are disciplined enough to take the money and not dip into it other than the £10k month? I might be tempted with the £10k a month because of the restraint it places on my behaviour.
Soldato
10k per month definitely. Would force me to keep working, keep getting out of bed - but on the plus side enable me to enjoy many of the finer things in life.
1m I'm pretty sure would end up gone in 6 months. We'd want to give money to all our family and friends etc. Nice holiday, pay off the mortgage and buy a new car and that's it.
1m I'm pretty sure would end up gone in 6 months. We'd want to give money to all our family and friends etc. Nice holiday, pay off the mortgage and buy a new car and that's it.
Edit: You're right, I miscalculated the breakeven point. I still think £1m is the best option, but you need a decent investment option.
£1m is just much more flexible. You can take £10k/month but you retain the option to withdraw more if you need to e.g. you may be better off repaying other debts.
In terms of discipline, just make it hard for yourself if you need to. Lock [some of] it away in bonds or whatever, don't just have 900 grand lying around in your current account.
Constraints on income like drip-feeding aren't a good solution IMO, as it isn't addressing the root cause which is lack of discipline, and means you are worse off than having all the money up front.
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