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Learning, Sharing, and Teaching => Investor Alley => Topic started by: modernpythagoras on April 28, 2016, 10:17:12 AM

Title: House downpayment in 1 year
Post by: modernpythagoras on April 28, 2016, 10:17:12 AM
Hi y'all, long time reader, first time poster. I'm hoping to get some advice from this awesome community on an interesting issue-- saving for a house down payment over one year.

Context: my partner and I have gone through some huge transitions in the last 8 months.  We got married, moved from the super-expensive CA Bay Area to the super-expensive Los Angeles area, and started new jobs.  We will be moving again in fall 2017 to a small, rural college town where the cost of living is thankfully much lower, and we are hoping to buy a house.  The real estate market is very steady in this area due to the presence of the university, so we are thinking of buying a condo or townhouse near the university and keeping it as a rental property if/when we move to something bigger (we have no kids but are planning to start a family in 3-5 years). 

We're planning to save $40-60k for a downpayment over the next year, but we're concerned about liquidity.  We have $15k right now scattered around in various savings accounts from before we got married, and our savings rate is about $3k per month right now (in addition to maxing out our retirement accounts).  We could dump this into a savings account and hit the middle range of our target pretty easily, but I'm hoping there is a better way.  We've considered money market funds, but I am worried about liquidity since we will be continuously contributing to this fund over the next year.  I'm thinking a high-yield savings account might be better for us than a money-market fund, but if you have any ideas (or recommendations for specific funds or accounts), I'd be very glad to hear them!
Title: Re: House downpayment in 1 year
Post by: mskyle on April 28, 2016, 10:26:56 AM
You shouldn't need to worry about liquidity with a money market account - could you explain your concerns about this a little more clearly? A lot of money market accounts let you write checks and everything. Theoretically, yes, your investment can lose value, and they have to put that on the prospectus. But this has only happened a handful of times, during the absolute worst economic downturns.

Go with whatever gets you a higher rate, the high-yield savings account of the money market (the fact that you can get similar rates on MMAs and FDIC-insured savings account is a clue to how very conservative a money market account is). You could also consider a bond index fund.

I mean, my down payment money goes into a total stock market index fund, which is fairly volatile and risky, but I don't have a specific time frame for buying the way it sounds like you do.
Title: Re: House downpayment in 1 year
Post by: SwordGuy on April 28, 2016, 10:43:21 AM

Most people buying a house to live in for now and rent later are like folks who buy a sports car and then try to rent it out as a school bus...

Here's a great book on how to run the numbers to see if a property will be a good rental. (

If you aren't willing to learn how to do those calculations your odds of making money in real estate are slim to none.

And buying a fixer-upper at a fraction of the retail price and fixing it up (mostly) by yourselves over 2 years is a great way to do things.