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Started By
Message
Savings into investment advice needed
Posted on 7/9/14 at 11:40 am
Posted on 7/9/14 at 11:40 am
I'm 23, only have about 5k in savings. Put 6% into my 401k every check and 3% into stock purchase plan. Going to make about 45k this year. it's my first real year working out of college. My dad wants to sell me his current home at 125k around next year at this time.
I was wondering if i should take that 5k and put it into some kind of etf's, mutual funds, or something while still adding to it every now and then in order to come up with a down payment in a year.
I know I don't necessarily need a down payment in this day and age but using it to reduce my note and build some wealth would be nice.
Would anyone strongly advise against this? Ik it is kind of risky. What would be my best bet if i were to invest this small sum?
I was wondering if i should take that 5k and put it into some kind of etf's, mutual funds, or something while still adding to it every now and then in order to come up with a down payment in a year.
I know I don't necessarily need a down payment in this day and age but using it to reduce my note and build some wealth would be nice.
Would anyone strongly advise against this? Ik it is kind of risky. What would be my best bet if i were to invest this small sum?
7
Posted on 7/9/14 at 12:05 pm to jp90
quote:
My dad wants to sell me his current home at 125k around next year at this time.
So many questions around this. Why does he want to sell it? Is 125k a fair price for it? As bad as this sounds, do you trust that your dad has your best interests in mind? I have always been told to never do business with family, so I haven't, but I could see some possible problems come from this.
quote:
Would anyone strongly advise against this? Ik it is kind of risky. What would be my best bet if i were to invest this small sum?
I wouldn't say I would strongly advise against it, but I would understand that the $5,000 could be $4,000 at this same time next year. And it could be $6,000.
It would take some guts to invest with a time frame of a year in mind, knowing the markets are at all time highs currently.
Posted on 7/9/14 at 12:06 pm to jp90
While I think it's a great idea to invest 5k into a mutual fund or ETF, it's probably best to NOT go this route if you only have a year.
I think that amount of time is too risky. As we all know, the market is at an all time high. There could be a considerable correcting within the next year...or it might keep climbing! We just don't know, thus the high risk.
Some other guys on here might tell you to just hold onto the cash, some might tell you to find a high yield online savings account. Some might suggests CD's.
I only suggest to avoid ETFs and funds in the small time frame. If it were 5 years, I'd say go for it.
I think that amount of time is too risky. As we all know, the market is at an all time high. There could be a considerable correcting within the next year...or it might keep climbing! We just don't know, thus the high risk.
Some other guys on here might tell you to just hold onto the cash, some might tell you to find a high yield online savings account. Some might suggests CD's.
I only suggest to avoid ETFs and funds in the small time frame. If it were 5 years, I'd say go for it.
This post was edited on 7/9/14 at 12:07 pm
Posted on 7/9/14 at 12:21 pm to OnTheBrink
quote:
So many questions around this. Why does he want to sell it? Is 125k a fair price for it? As bad as this sounds, do you trust that your dad has your best interests in mind? I have always been told to never do business with family, so I haven't, but I could see some possible problems come from this.
Definitely understand the concern.
He will be moving in with his gf within a month. The deal is that I can move into his house (3 bd 2 Ba) for a year and only pay the utilities while he pays the mortgage and I buy it after a year.
It is an older brick house, 1950-60's i think. He bought it for 60k and has since renovated one of the bedrooms, put in all new energy efficient windows as well as added central air.It is insured up to 150k.
Posted on 7/9/14 at 12:29 pm to jp90
quote:
He will be moving in with his gf within a month.
Prepare for the possibility that he will be moving in with you in a year. It happens.
Regarding the downpayment, if you can qualify for the best rates don't be in too much of a hurry to reduce your note.
Say you get a 30 year mortgage for 4% (just making up numbers here). If you are in the 25% tax bracket and itemize deductions, your note is actually only a 3% note. That's right around the long-term rate of inflation, so you shouldn't pay that down any more than you have to. Paying extra is the same as locking it in a 30 year CD that pays 3% - a safe investment but not one that beats inflation.
That said, if you can't qualify for a rate that low it's another matter.
Posted on 7/9/14 at 12:30 pm to jp90
for only a year, better make sure there is no front load on fund....and no back load less than a year...
Posted on 7/9/14 at 12:34 pm to foshizzle
quote:
Prepare for the possibility that he will be moving in with you in a year. It happens.
I certainly recognize that possibility, I'm going to be naive. At the same time, if it does all work out and it becoming mine, I could see it being worth much more than 125 ( if it isnt already) by the time I spend a few years in it. Just seems like too good of a deal not to give a try.
Posted on 7/9/14 at 12:42 pm to jp90
If you don't mind me asking, where is the house located?
Posted on 7/9/14 at 12:46 pm to kennypowers816
Thibodaux
Posted on 7/9/14 at 12:48 pm to jp90
quote:
I know I don't necessarily need a down payment in this day and age
Posted on 7/9/14 at 12:50 pm to jp90
quote:
I could see it being worth much more than 125 ( if it isnt already) by the time I spend a few years in it. Just seems like too good of a deal not to give a try.
When you mentioned he paid $60K for it, I got a little nervous, but as long as you feel you are getting a good deal, and the house is worth more, go for it. I just wanted you to look out for you in this deal, and make sure you were moving in a house that you wanted to live in and own.
As far as what to do with the down payment money, good luck.
Posted on 7/9/14 at 1:02 pm to OnTheBrink
Would it maybe be a better idea to not put as much into savings and increase the % i put into stock purchase plan from my company which purchases at 15% discount?
Posted on 7/9/14 at 2:10 pm to stonerolledaway
quote:
better make sure there is no front load on fund....and no back load less than a year...
There is no need to invest in funds with a sales load at all.
Posted on 7/9/14 at 2:12 pm to jp90
quote:
stock purchase plan from my company which purchases at 15% discount?
That's free money, almost always worth taking advantage of.
Be aware of when any extra shares vest, you may not have them available for the downpayment. But free money is, well, free money.
Posted on 7/9/14 at 6:26 pm to jp90
What do you do for a living? Since age 23, I've moved 3 times before I found the place where I will want to live/raise a family.
Just make sure you are going to stay in Thibodeaux for a while before doing it (unless you can get positive cash flow if it is converted to a rental).
Just make sure you are going to stay in Thibodeaux for a while before doing it (unless you can get positive cash flow if it is converted to a rental).
Posted on 7/9/14 at 9:25 pm to jp90
Just my 2 cents, but if you had no connection to this house whatsoever, would you seek it out and purchase it for 125k at your age? Hell no you wouldn't.
When did your father purchase the house for 60? Is it not a little fishy to you that he's proposing this deal that more than doubles his money?
Make these huge financial decisions when you are comfortable with them and when they make sense for you. Just way too many red flags in this deal...
If you do go through with this, get a home inspection.
When did your father purchase the house for 60? Is it not a little fishy to you that he's proposing this deal that more than doubles his money?
Make these huge financial decisions when you are comfortable with them and when they make sense for you. Just way too many red flags in this deal...
If you do go through with this, get a home inspection.
Posted on 7/9/14 at 9:49 pm to Costanza
I understand all the caution with doing business with family and all that goes along with the deal I've described.
FWIW:
-It sold for 60k about about 5 years ago because the sellers were old and motivated to sell to move to lafayette for their health/family
-It is a relatively safe neighborhood with avg homes priced at 140-180k
-My dad has put at least $30k into it since he's moved in
-Most 2br homes I've looked at in Thibodaux go for a little under 125 if not right at that
-As I stated before it is insured up to 150k
I really do understand all the words of caution and up until a couple months ago i was completely against something like this, but the year I'll be given to live there and save up is just too good to pass up at this point. I'm also not bound by any contract so it's not like I can't just buy something else come a year from now.
FWIW:
-It sold for 60k about about 5 years ago because the sellers were old and motivated to sell to move to lafayette for their health/family
-It is a relatively safe neighborhood with avg homes priced at 140-180k
-My dad has put at least $30k into it since he's moved in
-Most 2br homes I've looked at in Thibodaux go for a little under 125 if not right at that
-As I stated before it is insured up to 150k
I really do understand all the words of caution and up until a couple months ago i was completely against something like this, but the year I'll be given to live there and save up is just too good to pass up at this point. I'm also not bound by any contract so it's not like I can't just buy something else come a year from now.
Posted on 7/10/14 at 2:20 pm to jp90
The insured thing doesn't me diddly. My house is insured for 20% more than I paid for it.
Luckily, you will have to get it appraised for a bank to give you the loan. Honestly, it sounds like you are getting F'd.
Luckily, you will have to get it appraised for a bank to give you the loan. Honestly, it sounds like you are getting F'd.
Posted on 7/10/14 at 3:50 pm to TheHiddenFlask
quote:
Honestly, it sounds like you are getting F'd.
Yep. And dad makes out like a bandit under the guise of helping you out.
Posted on 7/11/14 at 3:38 pm to jp90
You need the 5k at least just for emergencies. Anything you may need in under two years isn't a good candidate for investments. At 23, if you are putting 9% back now plus any employer match your retirement is on a good track already. Take the extra cash now and save an additional 5k+ for the down payment. If you're still in good shape after the home purchase, then look to add to your stock purchase plan.
As for the amount the home is insured for; that's if a brand new one had to be built. It isn't a good gauge for estimating current value. If you know a realtor, have them run a market survey for you.
As for the amount the home is insured for; that's if a brand new one had to be built. It isn't a good gauge for estimating current value. If you know a realtor, have them run a market survey for you.
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