Author Topic: $400k windfall - what to do?  (Read 1612 times)

rahby1us

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$400k windfall - what to do?
« on: January 18, 2022, 02:06:16 PM »
Ok, so many be not a windfall… but leaning towards selling a paid off investment duplex for ~$400,000. Don’t see any attractive 1031 options, so what would you do with this mone?. Dump it into vanguard (even at todays valuations)? Dollar cost average into the market? Put together a high yield portfolio with the $ to maintain the $1,200 monthly cash flow (equivalent to cf after tax, maint, etc. of house)?

Retire-Canada

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Re: $400k windfall - what to do?
« Reply #1 on: January 18, 2022, 04:46:26 PM »
If it was me I would buy stock index funds in accordance with my AA.

JLee

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Re: $400k windfall - what to do?
« Reply #2 on: January 18, 2022, 04:47:22 PM »
If it was me I would buy stock index funds in accordance with my AA.

Yup - the same thing I'd do with $4k.

Weisass

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Re: $400k windfall - what to do?
« Reply #3 on: January 18, 2022, 04:53:06 PM »
If it was me I would buy stock index funds in accordance with my AA.

Yup - the same thing I'd do with $4k.

Me three. Unless that duplex mortgage is cray cray interest, I would invest.

Omy

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Re: $400k windfall - what to do?
« Reply #4 on: January 18, 2022, 05:08:04 PM »
We're considering a DST to get out of the landlord business and to postpone dealing with recapture taxes and capital gains from our rentals. (In 2004 the IRS ruled that a Delaware Statutory Trust is a qualified replacement property for a 1031 Exchange.)

MustacheAndaHalf

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Re: $400k windfall - what to do?
« Reply #5 on: January 19, 2022, 06:18:32 PM »
Ok, so many be not a windfall… but leaning towards selling a paid off investment duplex for ~$400,000.
If you're closer to retirement, some favor paying off their own mortgage first.

If this money will be invested for 10+ years, the stock market seems like a good place to invest.  If you're worried about valuations (like I am), you could buy "value" funds or ETFs, which aim for lower P/E values.

Also might be good to reflect on your experience with the investment property.  How much time, cost and effort did it take?  Do you want to do that again, or move to more passive investing?

uniwelder

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Re: $400k windfall - what to do?
« Reply #6 on: January 20, 2022, 05:06:51 AM »
We're considering a DST to get out of the landlord business and to postpone dealing with recapture taxes and capital gains from our rentals. (In 2004 the IRS ruled that a Delaware Statutory Trust is a qualified replacement property for a 1031 Exchange.)

Can you explain the DST a bit more?  I never heard of it and just looked up some basic info. 

Do you get a choice of the properties or lease terms?  Number of properties that it will be part of?  How often a particular DST grouping becomes available for the 1031 exchange?  How many companies are available to choose from for your DST?  How do you gain any confidence about the performance--- I suppose this has to do with the number of properties risk is spread over, sector of real estate, and the management company?

I wonder if anyone else on MMM forum has done this before or knows about DST's.  Might be worthwhile to create a thread in the real estate section.

goodmoneygoodlife

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Re: $400k windfall - what to do?
« Reply #7 on: January 20, 2022, 07:10:54 AM »
Depends if the $1200 monthly cash flow is good for you or not.

But the simplest is often the best: just put it in a low-cost index fund, or SP 500.

You *could* DCA it if you just 'want something to do' but if you're holding onto indices for the long term, it won't make a big difference whether or not you DCA it or put it in immediately. (You might actually lose some alpha in DCA in case the market continually rises).

FLBiker

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Re: $400k windfall - what to do?
« Reply #8 on: January 20, 2022, 10:34:22 AM »
I agree with the previous posts.  If it were me, I'd pay off my mortgage first, then invest the rest.  We're very close to FIRE, and I want to pay off the mortgage first.  I think just investing it is also perfectly reasonable.  As far as lump sum or DCA, I might DCA it, but that's not necessarily wise.  We sold our house in July 2020 and cleared about $100K.  We DCA'd it in at $10K per month and absolutely would have been better off just doing it as a lump sum.

Omy

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Re: $400k windfall - what to do?
« Reply #9 on: January 20, 2022, 11:56:20 AM »
We are just in the beginning stages of looking into a DST so we have many of the same questions. I don't think there are many in this community who have dealt with DSTs so the thread would probably not go very far.

The company that presented a zoom seminar that we participated in was called Exchange Right. They talked about 6% income as being an average number. You can choose from a variety of properties. It sounded like property came available regularly. There was a 7 or 10 year commitment depending on the property. I loved the idea of postponing recapture and capital gains...while no longer dealing with tenants and toilets.

talltexan

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Re: $400k windfall - what to do?
« Reply #10 on: January 24, 2022, 06:05:00 AM »
So many people get stuck with a big lump of cash trying to find an entry point. Don't let that be you.

Put 40% of it into stocks like today. That will leave you to gradually ease into your target asset allocation. but the big move will be done.

Jack0Life

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Re: $400k windfall - what to do?
« Reply #11 on: January 24, 2022, 10:12:33 AM »
Market is at a correction stage. Great time to buy indexes for discount.

nereo

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Re: $400k windfall - what to do?
« Reply #12 on: January 24, 2022, 10:51:56 AM »
So many people get stuck with a big lump of cash trying to find an entry point. Don't let that be you.

Agree. Inaction is a bad path to follow - especially in a high interest environment. The longer it sits the harder it seems to be for people to just do something with it. Can’t tell you how many case studies have come up here over the years where people have been sitting on a six-figure pile of cash for YEARS because they just didn’t do anything with it and then it became a fixture of their finances.

I would invest it according to my AA and be done with it