The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Left Bank on December 08, 2014, 09:25:47 PM
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So my wife and I just just FIRE'd and moved to a lower COL area. We sold our house and are currently renting with the plans of buying but we're having a less than easy time identifying something we would like. I do not want to rush a purchase and we have the $200k from the house sale + $75k for our living expenses for the next 1.5ish years in a 1% MMA. I having a tough time holding this much cash and not investing it. When we buy, I would like the purchase price to be <300K and the plan was to just roll the 200K as a downpayment and perhaps carry a small mortgage if necessary. So would you:
1) Continue to hold the cash from the sale and be ready to buy?
2) Invest it all but a years worth of living since the time frame is unknown?
3) Invest all but enough for 1 years expenses and a 20% downpayment with the idea that we would cash out the investments are in the green and hold if down?
Other options? What would you do?
Thanks
LB
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Seems to me that you moved so that you could unlock the equity of your old house and get a cheaper house with a small to no mortgage. I would NOT invest that money right now not even in a municipal bond fund that could return 3-5% a year. Why? Because you intend to use that money for a home purchase that would allow you to buy cash or with a very small mortgage. You objective is not maximum return right now it is preservation of capital for your very near term expenditure.
Are employed at the moment? If not then you need to make sure that you can qualify for a mortgage before you go any further with the house hunting.
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I agree. That money is not sitting there for nothing, it is needed in the near future to make a planned purchase. I only invest for 5 years or more.
You may be able to find a savings account with a slightly better rate with a 90 day withdrawal period. We have them in the UK, don't know if it's a thing where you are. You request the money, and can't have it for 90 days, but the trade-off is a better rate, plus here, 90 days would be fine for you to find a house, have a survey done, do the searches, set a date etc. You would just need to make a request as soon as you found a house.
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. . . 90 days would be fine for you to find a house, have a survey done, do the searches, set a date etc. You would just need to make a request as soon as you found a house.
90 days is too long for any active USA residential real estate market, and it is way too long for a mustachian house that is priced low for its market. As a cash or mostly cash buyer, the OP has substantial leverage over competing buyers and doesn't want to lose that advantage. A lower offer with a short time line (think 7-15 days) will win over similar or higher offers with longer time lines. Regarding the inspections and surveys, etc., I suggest the OP line up these services in advance in order to get them done quickly.
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90 days is too long for any active USA residential real estate market, and it is way too long for a mustachian house that is priced low for its market. As a cash or mostly cash buyer, the OP has substantial leverage over competing buyers and doesn't want to lose that advantage. A lower offer with a short time line (think 7-15 days) will win over similar or higher offers with longer time lines. Regarding the inspections and surveys, etc., I suggest the OP line up these services in advance in order to get them done quickly.
Definitely keep the money as cash in this case.
Note I did start my quoted sentence with the word 'here' to emphasise that it would be enough time here, but maybe not where you are etc.
Being a cash buyer is definitely a huge advantage, not having to arrange a mortgage will speed things up a lot, and sometimes sellers are willing to accept slightly lower bids for the increased convenience / security / time savings. Cash is king, as they say.
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OK, Thank you all, i appreciate the input.