Author Topic: What to do with 100k  (Read 15203 times)

tigerty

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What to do with 100k
« on: October 17, 2013, 03:59:33 PM »
Hi All,
Thanks for taking the time to provide your thoughts to me. It would seem that this is the only place to get some quality feedback that you can trust. So here is the situation. We have just relocated to a new town for my wife to attend graduate school. We sold our house and have about 115k in the bank and I don't know what to do for it. We are currently renting a home for 1200 a month (college towns are expensive) and are trying to figure out what we should do with the cash. We are planning on staying in this town for three years and don't quite know that next step after but I should mention we would like to buy our next house with this money.

Ideas thus far include. Invest in the stock market, Buy another fixer upper house and invest in real-estate (250k Cost), put it in a different levels of investment for low risk OR.........

Let me know your thoughts and Thanks!
« Last Edit: October 17, 2013, 04:04:19 PM by tigerty »

mgreczyn

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Re: What to do with 100k
« Reply #1 on: October 17, 2013, 04:12:02 PM »
Is the cost of her graduate school taken care of?  My first thought would be use it to keep from taking out any loans.

little_owl

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Re: What to do with 100k
« Reply #2 on: October 17, 2013, 04:20:30 PM »
1) Pay off any debt / avoid future debt (particularly of the student loan variety)
2) Put some of it aside in cash
3) Invest the rest

Only you can determine how much should go to #2 and #3...but I would inform that decision by thinking about how likely it was that I was going to need cash for something soon.  For example, if you're buying a house soon, you may want to ensure you have some percentage set aside in cash in case of a market crash.

Get as much as you feel comfortable with in the market, so your dollars / employees can work for you.  The savings account rates are ABYSMAL right now.

MichelleD1977

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Re: What to do with 100k
« Reply #3 on: October 17, 2013, 04:31:38 PM »
As someone who just graduated from grad school and is paying off debt, I heartily agree that you need to pay for grad school first. It might be smart to set aside a down payment for a house where you will be settling after grad school and invest the rest in more long term investments. I don't know if purchasing a house if you will move in 3 years makes sense.

nsarwark

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Re: What to do with 100k
« Reply #4 on: October 17, 2013, 04:49:16 PM »
Hi All,
Thanks for taking the time to provide your thoughts to me. It would seem that this is the only place to get some quality feedback that you can trust. So here is the situation. We have just relocated to a new town for my wife to attend graduate school. We sold our house and have about 115k in the bank and I don't know what to do for it. We are currently renting a home for 1200 a month (college towns are expensive) and are trying to figure out what we should do with the cash. We are planning on staying in this town for three years and don't quite know that next step after but I should mention we would like to buy our next house with this money.

Ideas thus far include. Invest in the stock market, Buy another fixer upper house and invest in real-estate (250k Cost), put it in a different levels of investment for low risk OR.........

Let me know your thoughts and Thanks!

I guess the first question would be how much of that $115K is capital gains and how much are taxes going to be if you don't put the money into a new house within a certain period?  If you're going to take a major tax hit by not buying another house with the proceeds from the first house, that's a negative return on that capital.

Dee18

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Re: What to do with 100k
« Reply #5 on: October 17, 2013, 05:51:29 PM »
As long as they lived in the house two years, they do not have to pay any capital gains tax.

oldtoyota

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Re: What to do with 100k
« Reply #6 on: October 17, 2013, 06:22:53 PM »
If it won't hurt you to do so, I would do absolutely nothing with it for six months.

During the six months, plan out what you want to do. Discuss those ideas with your spouse and other smart people.

Aim to avoid anyone who stands to benefit from telling you what to do with the money (financial advisors, for instance).

PS: My general rule of thumb is not to invest $$ I might want to use soon in the stock market. If the market tanks, then you won't have the money for the house you want to buy (if you want to buy it soon).




Insanity

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Re: What to do with 100k
« Reply #7 on: October 17, 2013, 06:37:43 PM »
How about purchasing a rental property of your own?  It's a college town, lots of prospective renters.

legacyoneup

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Re: What to do with 100k
« Reply #8 on: October 17, 2013, 07:44:34 PM »
Q1. Are you taking on any student loans? Is this a private college?
Q2. Are either of you working full time? How is the $1200 rent being met? What about living expenses?

We might need more details to advise you appropriately.

If I were in your shoes, I would put the money in the bank and not spend any time thinking about it; instead, scope the town for the best paying jobs you can find.. and try to land them. Full time + part time jobs that will cover rent, all other living expenses, college tuition + a decent bit to stash away every month.

Consider that fund a resource that you should draw down from only as a last resort.


tigerty

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Re: What to do with 100k
« Reply #9 on: October 18, 2013, 09:09:03 AM »
Thank you all for your responses. To answer a few questions for you.
1. Our Graduate school is being funded and we are not having to take on any debt!
2. I have a full time job as a teacher, Unfortunately I took a pay cut to move. But the job is paying for our living cost but not providing as much saving as before. Around 300 a month.
3. The money will not be taxed by capital gains b/c we owned the house for three years.
4. I have the ability to fix up a house but not sure on the short term return when you calculate fees and Taxes and such vs. investing in the stock market.

Thanks again for your advice.

mgreczyn

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Re: What to do with 100k
« Reply #10 on: October 18, 2013, 09:49:24 AM »
Other than needing a place to live, I've never been much of a real estate guy so I can't claim to know whether buying a rental property would be a good move.  In the stock market there is obviously a LOT of short term risk at any given moment, but in the long run you can more or less count on your investment appreciating.

Intuitively I would guess the rental property is also fraught with a different sort of short-term risk for you in that for it to pay off you might need to stay in the area for a while and you don't know for certain that will be the case.  If you wind up moving you might need to sell at an inopportune moment.

Were I in your shoes, and I were confident I could keep my expenses down, I would likely keep some  cash to cover unexpected emergencies and invest the rest in the stock market.  If you kept 15K, you could then buy $100k worth of SPY shares (S&P 500 ETF, i.e. the S&P 500 index).  This would result in about $2,000 per year in dividend payments, more or less independently of what the market does, that you could treat as income or treat it as savings and reinvest it in SPY.


arebelspy

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Re: What to do with 100k
« Reply #11 on: October 18, 2013, 10:20:41 AM »
Intuitively I would guess the rental property is also fraught with a different sort of short-term risk for you in that for it to pay off you might need to stay in the area for a while and you don't know for certain that will be the case.  If you wind up moving you might need to sell at an inopportune moment.

You can pay other people to manage for you if you move. 

Heck, for most people I'd recommend they have a property manager even if they live local, just due to the type of person it takes to deal with tenants (and the various laws that affect that as well).

Also I would suggest two things related to real estate:
1) A rental does not necessarily have to be something you fix up, it can be something already close to turn key, maybe some paint and carpet or whatever.  Unless that's a big thing for you (fixing and carpentry and everything), I'd suggest not starting your first real estate project with major repairs.
2) You do not necessarily have to invest in your area.  My area doesn't make sense to invest in, I just wired money for a duplex across the country yesterday.

All things to keep in mind.
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