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Started By
Message
About to get somewhat large amount of money and would like advice my current plans for it
Posted on 4/19/23 at 3:34 pm
Posted on 4/19/23 at 3:34 pm
Whether it’s actually a large amount is debatable but it will be biggest check I’ve even held. I am Selling some real estate. I don’t have a mortgage on it, so all proceeds at sale will be given to me via check at closing. Total amount is $570,000
My current opinion is I have a few options.
1. Put it into a 1031 exchange and buy something bigger to defer the tax hit. Somewhat skeptical here bc I am tired of being a landlord. If I do this it will def be set up and managed through a RE management company so I will be a lot more hands off then what I am selling now. This keeps some cash flow coming in every month via a passive Real estate business which I am already used to.
2. Take the money, pay the capital gains on the profit, and whatever is left over (will be over 500K left after taxes) use that to pay my house off. My note on principal and interest is $2,000 a month and I owe just over 400K on home so will be house note free. My interest rate on my home is 2.75 and I have about 27 years or so left on term if I don’t make any extra payments for what it’s worth when considering this option.
3. Invest in something super safe like a CD or Bonds and take advantage of the higher interest rates while they’re here and use that interest income to pay my house note instead of just paying it off. That way I keep nest egg there and if interest rates ever drop I can take it out and still pay off the house but just owe less and be able to keep more of the money after it’s paid off.
I’m open to other options. TIA for any feedback here.
My current opinion is I have a few options.
1. Put it into a 1031 exchange and buy something bigger to defer the tax hit. Somewhat skeptical here bc I am tired of being a landlord. If I do this it will def be set up and managed through a RE management company so I will be a lot more hands off then what I am selling now. This keeps some cash flow coming in every month via a passive Real estate business which I am already used to.
2. Take the money, pay the capital gains on the profit, and whatever is left over (will be over 500K left after taxes) use that to pay my house off. My note on principal and interest is $2,000 a month and I owe just over 400K on home so will be house note free. My interest rate on my home is 2.75 and I have about 27 years or so left on term if I don’t make any extra payments for what it’s worth when considering this option.
3. Invest in something super safe like a CD or Bonds and take advantage of the higher interest rates while they’re here and use that interest income to pay my house note instead of just paying it off. That way I keep nest egg there and if interest rates ever drop I can take it out and still pay off the house but just owe less and be able to keep more of the money after it’s paid off.
I’m open to other options. TIA for any feedback here.
25
Posted on 4/19/23 at 3:37 pm to BullredsRus
donate to the "Finch is a Poor Man Foundation". you can use it as a write-off.
Posted on 4/19/23 at 3:55 pm to BullredsRus
I would put it in the S&P 500 if you don't have much money there on a relative basis. If you do, I'd put some in stocks and some in 5% treasuries. Your house note is too low for it to make sense paying off your house. I'd understand if you had like 3 years left. But 27? Nah.
This post was edited on 4/19/23 at 3:56 pm
Posted on 4/19/23 at 4:15 pm to BullredsRus
Not sure your age,
Under 3% mortgage i am letting ride.
Spread out CDs could be a nice 28k per year with no risk (not counting for inflation). $2,300 for nothing at all.
Admittedly, I am 54 yo and conservative financially and the market right now scares the crap out of me and I have a large chuck in it with a 401k that is more than your amount.
Under 3% mortgage i am letting ride.
Spread out CDs could be a nice 28k per year with no risk (not counting for inflation). $2,300 for nothing at all.
Admittedly, I am 54 yo and conservative financially and the market right now scares the crap out of me and I have a large chuck in it with a 401k that is more than your amount.
This post was edited on 4/19/23 at 4:16 pm
Posted on 4/19/23 at 4:35 pm to BullredsRus
Look into getting in some sort of syndication and keep the passive money flowing.
Posted on 4/19/23 at 4:47 pm to BullredsRus
I definitely wouldn't pay off the house note with the rate as low as you have and having 27 years left. I'd take the money, pay the taxes, and if you net $500K, try to get in a bond or something similar. If you can get a 5% yield, that'd cover your annual house note. Then in the end, you have both an appreciable asset (the house) plus the nest egg.
Although I'm pretty conservative and not nearly as smart as a lot of posters here so maybe don't listen to that
Although I'm pretty conservative and not nearly as smart as a lot of posters here so maybe don't listen to that
This post was edited on 4/19/23 at 4:48 pm
Posted on 4/19/23 at 5:07 pm to BullredsRus
quote:
My interest rate on my home is 2.75 and I have about 27 years or so left
No way I'd pay that off given current interest rates. I have 28 years left on my mortgage @ 2.25%. I'll be holding that for as long as I'm in the house and I'm even planning to retire within 10 years. Even if i move, I'd be tempted to keep it and just rent it out.
If you are unsure, just stick it in something earning closer to 5% and wait and see what happens. No reason to lock up all that money in your house when there is interest rate arbitrage available.
If you don't want to be conservative but don't want to hold the mortgage like my plan; here's what I'd recommend:
Take half and invest in something like VTI. Maybe in 10-15 years or less that will double and you can then pay off the house.
You'd still have the other half available to use:
-use it to pay your mortgage until the investment mentioned earlier can pay it off
-expand your emergency fund
-increase your investments
-take some nice vacations
Depending on your age, how close (on track) for your retirment goals would affect my answers if I was in your boat.
Posted on 4/19/23 at 5:52 pm to BullredsRus
quote:
buy something bigger
Fairly certain you don’t have to do this, you just don’t get to 1031 the entire sale. But if you buy a house that’s 2/3 the cost you can 1031 2/3 of the sale. Or their abouts. I’m not an accountant.
As said if your mortgage is 2.75% I wouldn’t pay I to off, I’d consider worst case the CD.
Posted on 4/19/23 at 5:53 pm to BullredsRus
You didn’t mention your age, or I missed it.
But the one thing that stuck out was the rate on your current mortgage. At 2.75% and 27 years remaining, I’d keep that like a golden egg. I have a 3% fixed rate and I plan to be buried with it.
But the one thing that stuck out was the rate on your current mortgage. At 2.75% and 27 years remaining, I’d keep that like a golden egg. I have a 3% fixed rate and I plan to be buried with it.
Posted on 4/19/23 at 5:58 pm to BullredsRus
I'm leaning towards 1031 and keepin house mortgage.
But I don't know your financial situation regarding other investments. Do you have market exposure at this time?
I'm about 75% in real estate, 25% in the market.
But I don't know your financial situation regarding other investments. Do you have market exposure at this time?
I'm about 75% in real estate, 25% in the market.
Posted on 4/19/23 at 6:08 pm to BullredsRus
570k can buy enough properties to warrant a RE management company, especially if you are OK with taking out some RE loans to go with it.
Posted on 4/19/23 at 6:12 pm to ItzMe1972
I do have market exposure. I am 41 years old and between my wife and I as of today our current value of our IRA/401K’s is $580K
Posted on 4/19/23 at 6:16 pm to BullredsRus
Research “Depreciation Recapture” to see if that applies to you. If it does it might help with 1 vs 2.
Posted on 4/19/23 at 6:20 pm to BullredsRus
I’d divide this $500,000 up for a few things.
I’d keep some liquid in case a good deal comes along. Probably 100,000 to 200,000. You can get 5% on this with fdic protection using this service:
LINK /
I’d put another 100,000 to 200,000 in stocks for long term growth. Total market or S&P500 index fund are good but I use Paul Merriman’s portfolio strategy.
I think it’s important to celebrate the wins and enjoy life. Use at least $3000 of this on yourself like taking a week vacation or buying something you’ve been wanting. Don’t go crazy and keep it under $10,000.
I put $50,000 last year into an apartment complex with this group.
LINK /
It’s a great tax savings vehicle with a solid return. My CPA said it saved me $10,000 on my taxes this year with the K1 depreciation. The head guy Omar is always available to talk and explain projects. You can 1031 any investment if you talk to them ahead of time.
With the rest, pay off any debt you have outside the house. You’ve got a good interest rate but I still think you should put something extra towards the house payment each month, like $500-1000. There is no better feeling than seeing your mortgage is under $100,000. Once you are in the 5 digit range for payoff, everything just seems stress free. Maximize the Roth or 401k of course.
I’d keep some liquid in case a good deal comes along. Probably 100,000 to 200,000. You can get 5% on this with fdic protection using this service:
LINK /
I’d put another 100,000 to 200,000 in stocks for long term growth. Total market or S&P500 index fund are good but I use Paul Merriman’s portfolio strategy.
I think it’s important to celebrate the wins and enjoy life. Use at least $3000 of this on yourself like taking a week vacation or buying something you’ve been wanting. Don’t go crazy and keep it under $10,000.
I put $50,000 last year into an apartment complex with this group.
LINK /
It’s a great tax savings vehicle with a solid return. My CPA said it saved me $10,000 on my taxes this year with the K1 depreciation. The head guy Omar is always available to talk and explain projects. You can 1031 any investment if you talk to them ahead of time.
With the rest, pay off any debt you have outside the house. You’ve got a good interest rate but I still think you should put something extra towards the house payment each month, like $500-1000. There is no better feeling than seeing your mortgage is under $100,000. Once you are in the 5 digit range for payoff, everything just seems stress free. Maximize the Roth or 401k of course.
This post was edited on 4/19/23 at 8:30 pm
Posted on 4/19/23 at 7:09 pm to BullredsRus
(no message)
This post was edited on 4/19/23 at 7:20 pm
Posted on 4/19/23 at 7:21 pm to BullredsRus
You sound like you don’t want stock exposure given the options you’re considering, but if you ladder CDs you should comfortably get $~2000/mth in interest for at least a few years. Perhaps take that money to dollar cost average into something like VTI and buy equities with “house” money.
Posted on 4/19/23 at 8:28 pm to BullredsRus
No way I'd pay mortgage.
If you keep it in CDs or bonds short term may be ok but over long term you're going to erode the value due to inflation. On otherhand, keeping the low interest mortgage and paying minimums is a great inflation hedge. In 10, 15, 20 years your payments will be static but those dollars will be worth much less and you'll likely be pulling in more from investments and income than today.
Only way you're likely to beat inflation long term is investing in equities or leveraged real estate. If your time horizon for needing this money is long term invest it with some risk if you want real growth.
If you keep it in CDs or bonds short term may be ok but over long term you're going to erode the value due to inflation. On otherhand, keeping the low interest mortgage and paying minimums is a great inflation hedge. In 10, 15, 20 years your payments will be static but those dollars will be worth much less and you'll likely be pulling in more from investments and income than today.
Only way you're likely to beat inflation long term is investing in equities or leveraged real estate. If your time horizon for needing this money is long term invest it with some risk if you want real growth.
Posted on 4/19/23 at 9:50 pm to BullredsRus
I like the real estate route. What state are you in? Seems like the best option long term.
Posted on 4/19/23 at 9:53 pm to Drizzt
quote:
I use Paul Merriman’s portfolio strategy.
An important part of his strategy is overweight small cap stocks, right? How exactly are you executing his strategy?
Posted on 4/19/23 at 11:33 pm to SaintsTiger
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