The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Madhobodisease on November 26, 2018, 07:03:28 AM
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I have no other debt.
I am renting at the moment due to a temporary work assignment.
I already took out $12K from the house sale to go towards our Roths in 2019.
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I would click invest it all because you have given us no information at all about your personal situation to go by? zippo. So i threw a dart at that one.
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More info needed. How much do you expect to pay for your new house? How long do you expect this work assignment to last? How stable is your employment and do you enjoy it? Kid sItuation? FIRE plans?
My interim answer is to do the CD for the down payment and invest the rest. More info could result in a slightly different answer. I'll refrain from voting until there's more info.
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The rule of thumb is to not have money in the market you will need in the next 3-5 years (depending on the guru). So assuming you want to put all that money towards a new house within 2 years, it's safer in a CD. If you don't intend to put all the proceeds in the new house, then put only the down payment in the CD and invest the rest.
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Sorry, here is some additional info...
I am married with a 2 year old and another on the way.
My work assignment lasts until September 2019 with the possibility of a few month extension.
I plan to buy a house around $200K with room for improvement, or up to $300K if it really doesn't need work.
I work for the US Gov right now so everything is very stable, but I might leave soon after my assignment is over. That is only if I am able to get a full time job in New York (hudson valley area) where would would like to move to.
We have a net worth of around $750K: $200K in cash right now, and $550K spread around two TSPs, two ROTHs, taxable investments, and a bit in some higher risk startups.
I am 31 and would love to reach FI by my early 40s.
Any other background info? Sorry for not putting it up front.
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Does the $200K in cash include the house proceeds?
Any funds you plan to use for a house down payment should be kept in "zero/ very low risk" (bank or short term bonds).
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yes the $200k cash includes the $175k from the house sale.
part of the dilemma in my mind is.... that $175k was my equity in my house, and I'm going to buy a new house probably within 2 years (that might need some improvements), so why not keep it all allocated to my future primary residence in order to get a smaller/shorter mortgage with a better rate?
I know the math works better for investing, but i feel we are in a very unpredictable market right now.
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The markets are NEVER predictable.
There's no shame in applying all of the funds to (future) home equity.
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As those who know me here could easily predict, I chose option 2. IMO, this is a great time to dump $$ into the market, while it's all on sale. Buy the next house with 20% down. Let the rest grow until you can pay that MoFoMortgage off in one fell swoop. This will give you maximum flexibility.
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Thanks for the input everyone. We will probably make a decision this week, and we are leaning towards $120K in the CD, and investing the remaining $55K. If we end up not needing all $120K for the house, then the remainder of that will get invested too.
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Thanks for the input everyone. We will probably make a decision this week, and we are leaning towards $120K in the CD, and investing the remaining $55K. If we end up not needing all $120K for the house, then the remainder of that will get invested too.
Better to reverse those numbers, IMO. After all, you will continue to save $ until you buy your next home. Don't lose out on years of market gains on such a big chunk of money.
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Thanks for the input everyone. We will probably make a decision this week, and we are leaning towards $120K in the CD, and investing the remaining $55K. If we end up not needing all $120K for the house, then the remainder of that will get invested too.
Better to reverse those numbers, IMO. After all, you will continue to save $ until you buy your next home. Don't lose out on years of market gains on such a big chunk of money.
I definitely understand your point of view. The reasoning for the protecting the $120K is to cover the house down payment and renovations before moving in. Ideally, we are looking for a property that has the layout location we want, but needs renovation and modernization. I have a strong interest in net-zero energy homes, which is expensive up front. I dont expect to achieve net-zero, but hopefully close to it.
And I won't be neglecting market during this time. I will still probably be putting in $30K a year between my TSP and the two ROTHs.
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I voted none of the above because you can find significantly higher rates than 2.6 percent on an 18 month CD now. However, depending on your state taxes, I would look at buying short term treasuries in a brokerage account along with some CD's. You can buy them for no fee through the three major brokers and they are state tax free.
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Just a final update for those interested. Here is the breakout we decided on.
$100k to the CD for future house
$75k into investments (plus the other $12k I already set aside to go to our Roths in 2019)
I know many of you think I should be a bit less conservative, but I am pretty comfortable with our decision with a less than 2 year horizon for the house purchase.
Thanks again for your inputs!!
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FWIW, I think your approach is smart.
We also just sold our Seattle house and had a large windfall, but we're currently renting for the next 2-3 years. I am a pretty aggressive investor, but we've decided we need to keep this money available and flexible until we have a definite plan. It's hard to give up the returns, but we are close to ER and need a paid off house to make that a reality (I know not everyone would agree with that, but it is one of my own criteria to being ready to quit our jobs).