Author Topic: [ADVICE NEEDED] 200k Inheritance - What would you do?  (Read 1244 times)

enemypotato

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[ADVICE NEEDED] 200k Inheritance - What would you do?
« on: December 21, 2019, 06:22:40 PM »
Hi,

I'm a 23 year old software engineer living in New Zealand.
I make 60k a year with realistic salary increases of 5k+ each year (next one due in 4 months).

I have just got 200k inheritance and i am looking for advice on what to do with it?
I already have 40k in my KiwiSaver (401k equivalent).

NZ has had a killer year in the stock markets and prices are at an all time high currently (December 2019).
I'm looking to buy a house (budget around 500k) in 1 years time. I would have to borrow 250k for that.

For the next 1 year, should i put the money in a conservative fund? balanced? or even just in a term deposit?

Is buying a house even a good idea for me in 1 years time given my current financial situation?

Any advice would be very kind.

EDIT: The above numbers are all in NZD. Currently trading at 0.66 to USD.

EDIT: I have no dept at all.
« Last Edit: December 21, 2019, 06:45:31 PM by enemypotato »

RWD

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #1 on: December 21, 2019, 06:26:17 PM »
You're young. Invest aggressively.

jafr1284

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #2 on: December 21, 2019, 06:39:51 PM »
Do you have any debt? Any large expenses planned in the future? If you don't want to buy a house don't feel like you have to. Even though the stock market is at an all time high it is better 2/3 of the time to invest as a lump sum instead of spread it out over time. Up to you though with whatever you are comfortable.

enemypotato

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #3 on: December 21, 2019, 06:53:31 PM »
Do you have any debt? Any large expenses planned in the future? If you don't want to buy a house don't feel like you have to. Even though the stock market is at an all time high it is better 2/3 of the time to invest as a lump sum instead of spread it out over time. Up to you though with whatever you are comfortable.

I have no debt and plan to travel for 3 months next year, taking leave without pay.

I only like the idea of a house because i can secure a 2.95 floating 30 year mortgage. I would go for a 4/5 room house and try an maximise rental income. Rental income could be written off against 3 quarters or 4 fifths of all house expenses, maximising my profit. I also would love to try my hand at home improvement, again another plus for purchasing a house.

I know i am very bias towards home ownership, is it justified though or do i need a reality check of the potential gains from staying in the stock market.

Sibley

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #4 on: December 21, 2019, 08:36:47 PM »
What's your real estate market look like? Because that will tell you a lot about if it's reasonable to buy a house or not. If you do decide to buy, then wait until after your 3 months traveling.

Zamboni

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #5 on: December 21, 2019, 08:46:54 PM »
Any time someone inherits a lump sum, it seems wise to put it in a fixed-term investment for now until you figure out what you want to do. Spend some time investigating the housing market seriously before you buy . . . and do your planned travel. Read some investing books (there is one on investing in different countries written by the same guy who wrote Millionaire Teacher, so check that out.)

Eventually you will know how you want to invest it, whether in securities or in real estate. No one can make that decision but you, and you shouldn't feel rushed into it.

SwordGuy

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #6 on: December 22, 2019, 07:47:41 AM »
My advice to you is this:

Go to the CASE studies part of this forum.

Fill out a CASE study using the instructions therein.

As part of that, ask your question again, in that place.

Then we'll have the information we need to give you the best possible advice.

LWYRUP

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #7 on: December 22, 2019, 09:01:10 AM »
Case study.

Excluding that, consider splitting the baby.  $67k in the stock market tomorrow.  $67k dollar cost average I'm over the next year.  $67k save for down payment.  That way you have eggs in multiple baskets

Math would probably say "throw it all in the stock market right away" but I'm just giving another option if you are stressed about that.  FWIW, my wife inherited a substantial amount and we did throw it in, 90% stock and 10% bond.  She lost two months out of the market as the money wound it's way through the system and happened to miss out on 7% gains.  She put it in at all time high.  It fell and then stagnated.  Then rose and rose again and is now well above the previous highs.

So moral of the story is you can't predict the future and you may in fact lose money in the short term but there's no way to know whether that will happen or when it will stop so you really just need to take a deep breath and jump in the game.  Decide on a reasonable plan, execute and then live your life.

Zamboni

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #8 on: December 22, 2019, 09:32:32 AM »
I'm going to chime to ask if you really want roommates . . . if you are really sure you do, then your plan for a bigger house is fine. If you are 100% extroverted, it might even help you to have company all the time. Find out your extroverted/introverted ratio here: https://www.16personalities.com/free-personality-test

But roommates can be a pain. They can be inconsiderate. They can be hard to evict if they end up down on their luck and can't pay their share of the rent. They can do things like buy pets without asking you first, then let them pee all over the place, use your laundry soap and never buy any, make lots of noise when you are trying to sleep, bring over guests who you don't like, etc. And sometimes this situation ends up really bad with people who you thought were your friends prior to the landlord-tenant relationship you are contemplating. They can be the worst roommates, actually. It's a much more awkward situation if they live in the same house as you do than if they live in a separate property that you own.

Personally, since this is a "what would you do" thread, back when I was single, if I had come into that amount of money, I would have bought a nice small house or townhouse using part of the money for a down payment and invested the rest. A 2 bedroom if I could find one I liked close to work or the center of town. I would say even a 1 bedroom, but this can be hard to find in some areas except in apartment style high rise condo bldgs, and I prefer a small yard or at least a patio. Plus, I don't like having people living above me. A smaller place gives the joys of home ownership and room for a future significant other without having a mortgage so big that I am forced to rent to other people.

Check out Herbert Derp's frugal adventures thread here on MMM to see how a young person owning a small condo can grow a stash at an alarming rate via regular investing in the stock market.

enemypotato

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #9 on: December 23, 2019, 06:13:45 PM »
Hi all,

Thanks for all of your advice!

I'm going to chime to ask if you really want roommates . . . if you are really sure you do, then your plan for a bigger house is fine.

I have lived with others for the last 5 years during university, i love the idea of living with others during my home ownership adventure. I hadn't considered how the tenant-landlord relationship might negatively affect some of my friends who i would live with, but i'm an extremely reasonable guy and i think this wouldn't be too much of an issue.

I think splitting the money between mortgage and stock market is a good idea, and i think i'll run some simulations to determine which results in the most profit (relative to all home ownership in order to pay off the house quicker and reduce mortgage payments).


Finances_With_Purpose

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Re: [ADVICE NEEDED] 200k Inheritance - What would you do?
« Reply #10 on: December 23, 2019, 08:38:00 PM »
Save it.  That's a huge boost towards FI. 

As for the house, you're looking at houses almost 10x your income.  The expenses will likely eat you alive.  It's just not feasible, at least in the USA.  But do a full case study to get better input.