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Started By
Message
re: What to do w/ $500,000
Posted on 2/7/24 at 6:57 pm to Jason9782003
Posted on 2/7/24 at 6:57 pm to Jason9782003
quote:
Don't mingle it with your community assets
Yeah you should have an attorney draw up an agreement that clearly states the money AND the future growth is separate property.
Inheritance like this in LA becomes community property pretty quickly even if you never touch it. The taxes owed on the interest, for example, can commingle the funds.
ETA - assuming you want it to stay separate property
This post was edited on 2/7/24 at 8:21 pm
Posted on 2/7/24 at 8:17 pm to GentleJackJones
quote:
I’d have to check, because I have a couple and my wife has a few, each, but around 5.5% - 6.25% I believe. I’m positive none are are more than 6.5. They just combine to $88,000.00. We previously paid off the highest interest student loans.
Generally, it’s not a horrible idea to get rid of high interest student loan debt. In your case, you may be eligible for tax deduction on the interest and any interest on a money market is taxed in the current year…there’s not a huge spread between them.
The Dave Ramsey logic in this thread of “pay off the loan to free up additional cash flow” is an overly simplistic way to view the situation.
Unless you need the funds in the next year or two, I would invest in the market. You’ll still get some dividend yield if you are interested in that cash flow for immediate usage. Money market funds are fine for short term but you won’t be able to lock in these rates past a year.
Posted on 2/7/24 at 8:33 pm to ApisMellifera
quote:
Random internet people aren't going to give you the advice you really need.
Posted on 2/7/24 at 11:25 pm to wutangfinancial
quote:What do you mean?
Seems like way too much money to risk when yields are frothy.
Posted on 2/8/24 at 7:02 am to Big Scrub TX
The Rock says...... take all the money, turn it sideways..... AND
Posted on 2/8/24 at 7:30 am to Mohican
quote:
Is a FA recommended for pretty much any time you receive a lump sum like this?
No. No. No.
Posted on 2/8/24 at 7:56 am to AUCE05
I would put it all in VOO. Make minimum payments on my debt. In 10 years you will have 2MM. This is a simple math problem.
________________________
I love VOO but your math has assumptions that are too optimistic for me. So it going to double twice in 10 years? Not likely. It can happen, but that is higher than typical. But the OP could do well sitting in VOO for 10 years, so not a bad option.
________________________
I love VOO but your math has assumptions that are too optimistic for me. So it going to double twice in 10 years? Not likely. It can happen, but that is higher than typical. But the OP could do well sitting in VOO for 10 years, so not a bad option.
Posted on 2/8/24 at 8:41 am to GentleJackJones
Good for you that you had someone like this in your life.
We don't know your age or risk tolerance, but you sound thoughtful and responsible with your spending habits.
Do you live in an area with reasonable economic growth? I do and am doing well in real estate. I built most of my wealth in the stock market. Once I had some money, I began investing in real estate. First with some rentals, but now thru new construction and occasional commercial. Having a decent amount of liquid assets made this a good option. Where you live affects margins, though.
Rental properties can have 2 approaches. Keep investment at a minimum and go for good cash flow with longer mortgage. Or invest more into them, and focus on total cost over long term with short mortgages and weak cash flow until they are paid off.
New construction can be very profitable. Residential is generally less risky than commercial. Buy a lot, hire a builder, agree on house design with your builder, get a construction loan, build a spec house, and sell it. With a decent amount of liquid assets, banks will love you and loan enough money to build the house. Your out of pocket is pretty low when the house sells in a reasonable amount of time. Talking with a couple of builders and realtors in your area could let you know what margins to expect. This really works in a strong economic area because companies are hiring and people with good jobs buy houses.
We don't know your age or risk tolerance, but you sound thoughtful and responsible with your spending habits.
Do you live in an area with reasonable economic growth? I do and am doing well in real estate. I built most of my wealth in the stock market. Once I had some money, I began investing in real estate. First with some rentals, but now thru new construction and occasional commercial. Having a decent amount of liquid assets made this a good option. Where you live affects margins, though.
Rental properties can have 2 approaches. Keep investment at a minimum and go for good cash flow with longer mortgage. Or invest more into them, and focus on total cost over long term with short mortgages and weak cash flow until they are paid off.
New construction can be very profitable. Residential is generally less risky than commercial. Buy a lot, hire a builder, agree on house design with your builder, get a construction loan, build a spec house, and sell it. With a decent amount of liquid assets, banks will love you and loan enough money to build the house. Your out of pocket is pretty low when the house sells in a reasonable amount of time. Talking with a couple of builders and realtors in your area could let you know what margins to expect. This really works in a strong economic area because companies are hiring and people with good jobs buy houses.
Posted on 2/8/24 at 8:59 am to Jason9782003
Don't mingle it with your community assets
_____________________
Good advice but you have to handle it carefully with your wife. This could easily cause relationship strain. But still good advice.
_____________________
Good advice but you have to handle it carefully with your wife. This could easily cause relationship strain. But still good advice.
Posted on 2/8/24 at 9:24 am to KWL85
I just wrote a novel knowing you might not read it. And real estate is not for everyone. So here are more comments...that you might not read.
I tried to think of my money in 3 buckets over the years. Keep some in each bucket.
Short term money. Emergency fund and money I might need in the next year. Money market, CD, Bonds.
Medium term. 1-5 years. Stock market with a mix of individual stocks that I buy/sell depending on results and new opportunities. Keeps me paying attention to the market. Also, some indexes like VOO. Real estate spec houses.
Long term. 5+ years. Stock market indexes and mutual funds. Seldom change these. They increase nicely over time. Also, my consistent individual stock winners (AAPL, HD, BRK types). Rental properties if that works for you.
I tried to think of my money in 3 buckets over the years. Keep some in each bucket.
Short term money. Emergency fund and money I might need in the next year. Money market, CD, Bonds.
Medium term. 1-5 years. Stock market with a mix of individual stocks that I buy/sell depending on results and new opportunities. Keeps me paying attention to the market. Also, some indexes like VOO. Real estate spec houses.
Long term. 5+ years. Stock market indexes and mutual funds. Seldom change these. They increase nicely over time. Also, my consistent individual stock winners (AAPL, HD, BRK types). Rental properties if that works for you.
Posted on 2/8/24 at 9:27 am to GentleJackJones
I have no valuable input except Congrats!!!
Posted on 2/8/24 at 9:39 am to lynxcat
Several have given you good advice.
Keep your 3% mortgage. Don't pay extra on it.
Pay extra on student loans to reduce or eliminate. Paying off in full depends on what you would do with that amount of money. Opportunity cost of money is real, but 6.5% isn't cheap these days.
Once you are in position to buy a vehicle with cash, you can do that for life with proper discipline. Save/invest for the next vehicle ahead of time.
Knowing you expect to move in a few years, it sure is nice to be able to buy a house without being contingent on selling old house for a down payment. Reduces stress. Can get you the house if ever in a multiple offer situation. So have some liquid assets at that time.
Keep your 3% mortgage. Don't pay extra on it.
Pay extra on student loans to reduce or eliminate. Paying off in full depends on what you would do with that amount of money. Opportunity cost of money is real, but 6.5% isn't cheap these days.
Once you are in position to buy a vehicle with cash, you can do that for life with proper discipline. Save/invest for the next vehicle ahead of time.
Knowing you expect to move in a few years, it sure is nice to be able to buy a house without being contingent on selling old house for a down payment. Reduces stress. Can get you the house if ever in a multiple offer situation. So have some liquid assets at that time.
Posted on 2/8/24 at 10:04 am to 3D
quote:
The Rock says...... take all the money, turn it sideways..... AND
shove it up your candy arse?
Posted on 2/8/24 at 4:46 pm to GentleJackJones
Pay off the student loans today.
Invest the rest in the stock market
Take the $890 student loan payment every month and put it in a savings acct and in 3 years use that money to buy a vehicle
Invest the rest in the stock market
Take the $890 student loan payment every month and put it in a savings acct and in 3 years use that money to buy a vehicle
Posted on 2/8/24 at 8:30 pm to GentleJackJones
quote:
I’d have to check, because I have a couple and my wife has a few, each, but around 5.5% - 6.25% I believe. I’m positive none are are more than 6.5. They just combine to $88,000.00. We previously paid off the highest interest student loans.
Student loans are simple interest and your money markets and other investments are compounding. So even assuming a very conservative 5.5% compounding investment return and high end 6.25% student loan simple interest cost, you'll come out ahead paying the loans down over time.
Also, if you're on the SAVE plan and make timely payments, your balance can never go up because of interest, to say nothing of forgiveness possibilities.
Posted on 2/9/24 at 9:06 am to Fe_Mike
quote:
For the other stuff, definitely don't pay down house.
Can you explain why?
Posted on 2/9/24 at 10:37 am to Gings5
quote:Let's assume the OP marginal tax rate ($150k/yr MFJ) is 26% fed/state.
For the other stuff, definitely don't pay down house.
---
Can you explain why?
$300K loan at 3.1% runs ~$15.4K in annual interest cost. The $15.4K is deductible at marginal rate, so real cost of carry totals ~$11.4K. Paying off the home would save that $11.4K/yr
Meanwhile, ROI on $300K at 5.4% (his current MM rate) is $16.2K (+$4.8K over paying off the home). Were he to invest the $300K at a 10% ROI, he'd be ahead $18.6K/yr.
The combination of a low (3.1%) rate, and tax advantage, makes it a fairly straightforward decision.
Posted on 2/9/24 at 10:43 am to NC_Tigah
Great explanation, thank you!
Posted on 2/10/24 at 4:11 pm to KWL85
quote:
Residential is generally less risky than commercial.
Ive been remote for like 17 or 18 yrs, so this doesnt really affect me personally- but im wondering what you are hearing in re to ‘return to work’ policies , since you are intimately familiar and have skin in the game.. i am hearing mixed things; of course most employers want employees back in the office, but since the labor market is tight - many employees are tying their job searches to which jobs let them work from home, at least for a few days per week.. What are you hearing re commercial real estate and return to work ?
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