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Started By
Message
Unique financial situation- could a financial advisor help?
Posted on 2/11/15 at 8:48 pm
Posted on 2/11/15 at 8:48 pm
This is very very long but I would greatly appreciate any advice if you take the time to read it. If not, I understand, but please don't detail this thread with trolling and tl,dr
I'll try to get the important details in here but obviously I'll probably need to seek additional help to really determine what's the best thing to do.
I'm 24, inexperienced with money, and only a year out of college. So I have a lot to learn but I think I have a unique opportunity in front of me.
I'm thinking of buying a home. Right now I live with my parents and have been saving as much as I can. I don't have a lot (as far as a nice down payment goes), but enough. I have $6000 in savings, and $6000 in my own contributions to a Roth. My salary is 46,000$ a year and I'm as secure in my job as I could be at such an inexperienced level. I have zero debt. I'm thinking of putting all my savings and Roth toward a down payment. I could qualify for a 150-170 mortgage (I think- if I've done the math right), and that would get me a nice 3-4 bedroom home in my area. I know it's not wise to unload my retirement money and all savings like this but here's why I think it might be advantageous for me-
1) I know 3-4 good friends who would be instantly down to move in with me and pay rent. They'd be good for the money and good roommates. Eventually I'll have a family and won't want to rent out the house. This would be a good way to earn extra income and pay the mortgage off sooner, or create additional cash flow to make up my emergency fund and retirement savings I took out.
2) normally it's really dumb and risky to not have anything left in an emergency fund- but with my situation I think it's different. My parents are very wealthy. If I ever was in desperate need of money, I could easily go to them. I would hope it would never come to that but that's what an emergency fund is for. So I would feel safe having nothing for emergencies, plus a decent cash flow still to build that up.
3) tax deductions plus expensing furniture for my house which I would otherwise not be able to when I bought one for my family someday.
Additional info-
I wouldn't be grabbing a mortgage where I would be relying on the rent money. It's something I could afford even if they all moved out. Also I'm set to my pass CPA exam by the end of the year and get a $5k raise, which would help make it even more affordable.
Any help or advice on any/all of the above points would be appreciated. Sorry it's so long.
Any idea what kind of professional would be the right one to discuss this matter with in person, more in depth?
12
Posted on 2/11/15 at 9:11 pm to Tigerfan56
If I was in your shoes, I would wait a few months to a year and have a more solid down payment. I would not cash out my Roth.
Posted on 2/11/15 at 9:28 pm to Tigerfan56
Where u live? Houses cost money but if u got roommates could be good
Posted on 2/11/15 at 9:40 pm to Chad504boy
I have a friend who did this. He essential ly made mortgage from friends but other key was charged himself rent in his budget and out it toward paying off the house.
The key was that with accelerated payments he built enough equity in the house that he had flexibility if he wanted to move.
Additionally he barebones his budget to ensure he built back up savings which was huge.
Could be very very financially lucrative if you do it. I'd recommend it if you plan on staying in the same location
The key was that with accelerated payments he built enough equity in the house that he had flexibility if he wanted to move.
Additionally he barebones his budget to ensure he built back up savings which was huge.
Could be very very financially lucrative if you do it. I'd recommend it if you plan on staying in the same location
Posted on 2/11/15 at 10:22 pm to Tigerfan56
You don't need to pay someone to talk about that. Talk to your family. You work at a firm? Talk to your managers and partners.
I would personally NOT cash out the Roth. Stay where you are 6 months, save up another 6K, and then go do it.
Talk to your parents - are they willing to gift you a down payment?
I would make sure you are wanting to stay in that area. If you are working for a big enough firm, you might have to move around.
Pass the exam - that should be priorities 1 - 5 for you right now, knock it out now while your parents can leave you along and you don't have roomies wanting to drink beer every night.
I would personally NOT cash out the Roth. Stay where you are 6 months, save up another 6K, and then go do it.
Talk to your parents - are they willing to gift you a down payment?
I would make sure you are wanting to stay in that area. If you are working for a big enough firm, you might have to move around.
Pass the exam - that should be priorities 1 - 5 for you right now, knock it out now while your parents can leave you along and you don't have roomies wanting to drink beer every night.
Posted on 2/11/15 at 10:34 pm to LSUFanHouston
Def talk to your parents first and ask if they are willing to be a safety net if you try this.
Gifting you some type of downpayment would be huge.
As I mentioned earlier if you pay off early and build equity, the issue with "staying in the area" becomes less and less as it is easier to sell the house
Gifting you some type of downpayment would be huge.
As I mentioned earlier if you pay off early and build equity, the issue with "staying in the area" becomes less and less as it is easier to sell the house
Posted on 2/12/15 at 7:45 am to GenesChin
I agree with the others. The plan is good, but dont cash out the retirement to do so. You can easily save the $6000 you have in retirement, but I would shoot for a full 20% or greater down payment. You have no bills living at home..... this is the time to pile up cash.
Posted on 2/12/15 at 8:01 am to Tigerfan56
I would put together a proposal of sorts to your parents where they help with the down payment and you pay them back with interest (or none if they are good) over time.
Posted on 2/12/15 at 8:08 am to Tigerfan56
If you are living at home, getting some free food and your utilities paid for, you should be banking at least 1500-2000/MO with the 1500 if you have a car payment.
You can sub 4 months of saving in for your roth while in the process of looking for a solid home
You can sub 4 months of saving in for your roth while in the process of looking for a solid home
Posted on 2/12/15 at 8:21 am to Tigerfan56
I would get the CPA exam passed first!!!!!
Get that and then see what comes up at work and go forward. I would not cash out Roth.
Get that and then see what comes up at work and go forward. I would not cash out Roth.
Posted on 2/12/15 at 8:30 am to Tigerfan56
1. Do NOT cash out ROTH.
2. Aim lower for home budget, something around $120k. Starter home if you will. If you're dead set on buying one right now. I'd wait until after passing the CPA.
3. Don't count on your parents for your emergency fund, regardless of their wealth.
4. Only get 1 roommate.
That's my advice.
2. Aim lower for home budget, something around $120k. Starter home if you will. If you're dead set on buying one right now. I'd wait until after passing the CPA.
3. Don't count on your parents for your emergency fund, regardless of their wealth.
4. Only get 1 roommate.
That's my advice.
Posted on 2/12/15 at 8:34 am to Tigerfan56
Owning a house is over rated as an investment. Buy a house if you like it and want to live in it. Neighborhoods change. You may move away. Absentee landlord is not something I would recommend.
I would save for retirement, however, I respect that others would choose a house. I own my house, but it has been a terrible investment. Nice house to live in, but if I had to move I would lose money.
It's weird: If you make money on a house, you have to pay capital gains tax. If you lose money on a house, you do not get to take a capital loss. The IRS sucks.
I would save for retirement, however, I respect that others would choose a house. I own my house, but it has been a terrible investment. Nice house to live in, but if I had to move I would lose money.
It's weird: If you make money on a house, you have to pay capital gains tax. If you lose money on a house, you do not get to take a capital loss. The IRS sucks.
Posted on 2/12/15 at 8:36 am to makersmark1
quote:
If you make money on a house, you have to pay capital gains tax
Not if you live in it as a primary residence for 3 of the previous 5 years from the date of sale.
Thanks Clinton!
Posted on 2/12/15 at 8:36 am to Tigerfan56
Overall this can be a good idea, but I would be concerned with your current budget. I understand you just recently graduated, but making 46k and living at home you should be saving much more money. I would live with the parents for another 6 months to a year and experiment with how much you can save. If You end up saving a lot, put it down on the house.
Posted on 2/12/15 at 8:41 am to Creamer
quote:
but I would be concerned with your current budget.
yea, making $46k and living at home, i was a bit surprised by the numbers saved.
doing this could be a good option, but i think the "stick it out til you pass the test" advice upthread was pretty smart. less distractions, keep saving, unless you are looking at a once in a lifetime deal that you need to act NOW on.
Posted on 2/12/15 at 8:45 am to Creamer
Count me in the camp of thinking a house isn't the right move for you, right now. Keep stacking the savings, get the exam passed, and go job hunting. Who knows what sort of opportunities will come your way? Why feel remotely tied to a place/house at this point in your life? Houses can be more trouble than they're worth: new roof, unexpected plumbing problems, termites, dry rot, roommates who flake out and don't pay, roommates who get flaky boy/girlfriends who go nutso and cause problems...
I'd rather stack some cash and start up a decent stock portfolio. You need mobility & portability at this point in your life, not real estate.
I'd rather stack some cash and start up a decent stock portfolio. You need mobility & portability at this point in your life, not real estate.
Posted on 2/12/15 at 10:54 am to Tigerfan56
This might indeed be worthwhile provided you know you aren't going to sell the property for the foreseeable future. Mortgage rates are insanely low right now so the time is certainly right for it. Just understand that this is a long-term play because the payoff is probably not going to be as much from appreciation on the property as it will be from borrowing now while it's stupid cheap to do so. If you sell in ten years and get another mortgage for a new place at, say, 7% then you lose most of the benefit.
Regarding taking money out of your Roth, I'd try to avoid that if I could. See if you can borrow the money from your parents or something like that. But it isn't as terrible an idea as some people say. Your investment in the house is free of capital gains just like the Roth, so if it is a make or break decision it's a gutsy call but it could pay off.
Regarding taking money out of your Roth, I'd try to avoid that if I could. See if you can borrow the money from your parents or something like that. But it isn't as terrible an idea as some people say. Your investment in the house is free of capital gains just like the Roth, so if it is a make or break decision it's a gutsy call but it could pay off.
Posted on 2/14/15 at 10:14 pm to Tigerfan56
Yes they could help
Posted on 2/15/15 at 12:34 pm to Tigerfan56
I bought my first house 2 years ago at age 25 and have 2 roommates who have lived with me since I bought the place. It has worked out GREAT. They cover the mortgage completely...
However, I wouldn't consider touching the Roth. I didn't have a lot to put down either. I put down the minimum I could for a conventional loan, which was 5%. For the price range you are looking at, 5% is only a few grand more than the $6k you already have in savings. Living at home, you should be able to save this up with some cushion in 2-3 months easily.
I have to ask though how you don't have more saved up at this point? I was in a very similar position about a year out of college. Similar salary and savings, but I didn't have my living expenses and meals covered. And I still blew money at the bar on a weekly basis like an undergrad idiot. Not sure where all your money is going but it seems that you could be a more diligent saver.
However, I wouldn't consider touching the Roth. I didn't have a lot to put down either. I put down the minimum I could for a conventional loan, which was 5%. For the price range you are looking at, 5% is only a few grand more than the $6k you already have in savings. Living at home, you should be able to save this up with some cushion in 2-3 months easily.
I have to ask though how you don't have more saved up at this point? I was in a very similar position about a year out of college. Similar salary and savings, but I didn't have my living expenses and meals covered. And I still blew money at the bar on a weekly basis like an undergrad idiot. Not sure where all your money is going but it seems that you could be a more diligent saver.
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