Author Topic: Invest my downpayment savings?  (Read 249 times)

ellanvannin

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Invest my downpayment savings?
« on: April 30, 2021, 02:50:52 PM »
Hello everyone,

I'm in the process of saving money for a down payment to buy a house for my mother (for more details, in case you're curious, read my p.s.) I have $20k saved so far and my goal is to get enough to put 20% down (which will be about $50k) I'm predicting I can reach my target savings by the end of 2022. However, my numbers are based on what the house prices were pre-pandemic.

The reality is, I live in South Florida and right now the market's inflated and it looks like it's going to stay like that (or get worse) for some time. So, I'm seeing that even if I had all the money now, I'd wait to buy, because properties are overpriced.

Now, my need to get a place for my mom is somewhat urgent. So, I'd like to do it as soon as I'm ready and (hopefully) once the housing market looks more reasonable. I've been holding back from investing these savings because I didn't want to "gamble" with them. I figured the money would have to be available as soon as I needed it and I didn't want to risk the stock market being down when the time to buy a house finally came.

So, should I invest those $20k in something like VTSAX, since it looks like the house buying won't happen for another two years? I know nobody can predict the future but in your experience, what's good advice?

Thanks in advance for your input,

Tamara

P.S.: For those interested, I've been paying for my mom's rent for over 8 years. At the moment it's $1350 a month and it keeps going up. I've decided that I rather put my money towards a mortgage. More on my story here: https://forum.mrmoneymustache.com/case-studies/40-wanting-to-retire-in-1015-years-max-new-to-fire-humbly-asking-for-advice/msg2686896/#msg2686896 (BTW, I haven't updated my case study because it hasn't been a year yet and I'm still working on de advice I received)

MDM

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Re: Invest my downpayment savings?
« Reply #1 on: April 30, 2021, 03:03:30 PM »
So, should I invest those $20k in something like VTSAX, since it looks like the house buying won't happen for another two years? I know nobody can predict the future but in your experience, what's good advice?
"Don't put money in stocks that you expect to use within ___ years" is generally good advice.  One can quibble about what number to fill in the blank, but at least "2 to 5" is what one usually sees.

Of course, the market could go up and you would be happy if you had the money in VTSAX.  But markets can also go down, so if you really want that money to be available, ....

Finances_With_Purpose

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Re: Invest my downpayment savings?
« Reply #2 on: April 30, 2021, 03:35:47 PM »
Over just a few years: no.  You're taking on a huge risk.  The market might easily tank 20-30%, at which point, you're at a loss.  And that's exactly when houses might become cheaper, too. 

For longer term, sure. 

It sucks that you're going to watch returns come in that you couldn't get, but that's the nature of needing to stay low-risk.  You don't gamble with money you can't afford to lose. 

ellanvannin

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Re: Invest my downpayment savings?
« Reply #3 on: April 30, 2021, 04:23:54 PM »
Thank you so much to both who replied! I had the feeling that was the answer. Better be safe than sorry, in this particular case.