Author Topic: One year or less until we buy a house, where to put her 50K 'stash?  (Read 2983 times)

isaakthepirate

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Hi All,

Thanks in advance for the usual friendly and generous help everyone shares!

My partner and I are planning to buy a house as a shared investment, and have saved the appropriate amount (about 100K) for a downpayment on a multi-unit in the area. My very mustachian partner has saved 50K through her frugal living and great savings rate, but *gulp* has it sitting in a checking account. 25K of it receives 1.78% APY, the rest, 0%.

Yes, I consider this an emergency, and now so does she, but we're a little stymied with the best place to put this money until then. As we've discussed, it's risky to invest it since it's likely we'll pull it out in a year or less to buy.

We need to wait a year to buy a house because I'm self-employed, and my rental and self-employment income needs 2 years on the tax returns, so my debt-income ratio will look too low until I can factor my strong current income in 2015. She is currently unemployed before she begins nursing school, and in a year will likely be employed as an RN. In a year, we'll both have a bigger stash and qualify for a loan that we can't get now (we tried).

What would you do? Here's what we're considering, but I'd love some help:

1. Put it in a money market
2. Put it in index, run the risk
3. Don't buy a house (fine with us, I own already) and invest in something else with a good return
4. Other??

Thanks for your help!
« Last Edit: April 06, 2015, 02:28:47 PM by isaakthepirate »

forummm

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #1 on: April 06, 2015, 02:37:16 PM »
It sounds like the "don't buy a house" option has some potential. You say "as an investment" but make it sound like you mean 'to live in'. Buying a house to live in isn't an ideal "investment". In the long run, housing prices go up at around the rate of inflation, but with big variations depending on area. And there are a lot of transaction costs to buy/sell. It could be cheaper than rent in some cases. But you already own a house. I'm generally confused about your situation.

If you are sure you need the $50k in 1 year, don't put it in stocks. Something more stable like money market or short term Treasuries would be fine.

isaakthepirate

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #2 on: April 06, 2015, 02:38:54 PM »
Thanks, forumm.

We are looking to buy a multi-unit to live in and rent out the other, because my property actually is more valuable rented out (triplex).

We're in the Bay Area which has a strong upward trend (at least at inflation, if not higher) for properties.

Where would you consider a good alternate investment?

wtjbatman

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #3 on: April 06, 2015, 02:48:41 PM »
A year or less? That money needs to stay in a savings account. There is virtually no scenario where I would attach any risk to 50k I would need in less than a year.

I would not "invest" that money at all. Having 50k sitting in a bank when you don't plan to touch it until retirement 20+ years down the road may qualify as an emergency, but 50k sitting in an FDIC insured savings account until you need it in a year is just plain smart.

Dodge

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #4 on: April 06, 2015, 02:58:14 PM »
One year or less?  A savings account.  Many online banks are paying around 1% now, no strings attached.  I presume the 1.78% you're currently getting on the first 25k, has many strings attached (has to use a debit card 10 times a month or something like that).  Personally, I don't like keeping track of strings, so here's a good website to find the best savings account rates currently available:

https://www.depositaccounts.com/savings/

For your other question, on where to invest if not real estate, I'd recommend making a thread over the Real Estate section.  It varies based on your area, how much you're willing to spend...etc.  Personally, I'd just throw it all at a stock/bond portfolio, but that's because I prefer my investments to be passive.  In the Real Estate forum, you'll likely get a more specific answer than that :)

TomTX

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #5 on: April 07, 2015, 05:15:44 AM »
Apparently Solar City is selling bonds directly via their website. 1 year is 2.00%.

Unlike a CD, they are not FDIC insured.

sb_NoVA

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #6 on: April 07, 2015, 09:04:42 AM »
Since OP hasn't mentioned anything about other assets, I'd assume $50k is not the only asset OP has. 

Depending on where OP lives, I'd recommend a municipal bond fund.  In Virginia, that would be USVAX or similar.  Currently yields around 3.5% all tax exempt.  If OP's 401k is all stocks, this adds a nice diversification.  Volatility is very low, yield is good, and no taxes.  Now, if I was living in Michigan, things would be different and I might just buy the Vanguard Interim Term federal tax exempt bond fund. 

I don't believe in keeping house down-payment money in FDIC insured savings accounts.  House prices are not FDIC insured, if local/state economy was to tumble, so will the house price and down payment required.  I'd only keep money in CDs or savings accounts if I owed someone exactly $50k after 1 year.

My 2 cents. 

SantaFeSteve

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #7 on: April 07, 2015, 10:33:14 AM »
I would leave the $25k that is earning the 1.78% where it is and then open a savings account with an online bank (GE Capital, Capital One, other) where that other $25k can earn something between 0.75% and 1.00%. 

With a timeline of less than 1 year I would not invest it in anything other than a guaranteed, FDIC (or NCUA) insured, return (savings, CD, etc). 

Bob W

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Re: One year or less until we buy a house, where to put her 50K 'stash?
« Reply #8 on: April 07, 2015, 10:54:11 AM »
Contrary view here ---  Invest it in a nice index fund.

Two scenarios could play out.

1.  Market goes up
2.  Market goes down

1 happens about 2/3 of the time and probably closer to 5/6 in a bull market scenario that we are now in.

So in the 1/6th likelihood that the market goes down you would simply add additional funds which I'm sure you are acquiring or wait another year or so while you continue to buy more funds.

The correct answer IMHO is to just keep the money in the market long term and forget about San Francisco real estate.   It seems like a very high risk/return investment.   You know the market,  so would it be cash flow positive?   Or are you just banking on continued bubble like appreciation?

I also question why you can't find a bank that will do this today?   It would seem with several phone calls you could pull it off.   If it is indeed a good investment and cash flow positive then it would seem that banks would play regardless of relatively short income history.