re: About to get somewhat large amount of money and would like advice my current plans for it

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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.

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This path is entirely dependent on the price of the exchanged asset. I would certainly not want to overpay just for the sake of deferring the taxes. But if you find something actually compelling, then you should absolutely consider this - insofar as you wind up with a work load you are comfortable with.

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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.

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I can't imagine even considering this "option". You are borrowing at a clearly negative real rate for 27 more years - with no prepayment penalty and no margin call. This is an asset, not a liability.

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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.

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I'm not exactly sure what you are saying, but you need to lose this concept of "paying off" the house. Your goal should be to have that mortgage outstanding for as long as possible

You haven't listed the rest of your financial situation, so it's impossible for anyone to give you any actual relevant advice. If you tell us your net worth away from all of this is $50 Million, then it doesn't matter what you do. If you tell us this will be your ONLY money after the sale, then it's the opposite.

Need more info...

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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.

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I wouldn't pay the whole thing off at that rate, but I would seriously consider paying enough to remove PMI. It could be a very quick ROI.

I am confused on why I my comment was downvoted…. Why not keep the TE money in the RE world and look to become a limited partner in a larger deal somewhere?

You could always put $400k for the house payoff in Tbills or some other high yield safe instrument. That way you win twice. Have piece of mind that you could pay it off if you wanted and still earn a couple points on the interest spread.

Heck, you could peel $2k a month off of the $400k to pay your note . That way your still making money on the spread and have $2k/month “extra “ cash flow to invest/spend/whatever.

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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

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From his previous post.

Already a lot of good advice so just here to say congrats! Make the right moves and you’ll retire early!

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Or ask a fiduciary fee only CFP for advice? I know it costs some money but big dollars can lead to big mistakes and you don’t know what you don’t know.

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This is probably the answer

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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

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Congratulations on being a millionaire.

You’re fairly young, so if this all went to “Super safe” investments, you’re going to be fairly heavy on them- assuming you have zero in bonds/cash/gold in the 401k, this would put you at 50/50 stocks/bonds. Even the most conservative recommendations say that your age in bonds is a good target (it’s a bit too conservative for me).

Assuming a fixed rate mortgage on your other property, i would drag it out another 27 years- your rate is less than the cost of inflation recently, and you won’t refinance into something like that again.


Kids? Plans to pay for school? Good way to get into 529s (I’m not sure about actual benefit here…you can take an income tax deduction for the money that goes in, don’t think there’s a way to do a 1031 into a 529, but be benefit would almost certainly be better to take on the income side anyway. You can also take an income deduction by paying tuition directly years from now if I’m not mistaken, so you get some free growth with some strings attached).

If I got an unexpected check like this, it would go to my taxable account. We have a few items on a list that we are going to work towards in the next few years (still have about $30K of med school loans 5 years out of training, new car for wife, outdoor kitchen, sealing the attic with foam and decking it so it becomes a more suitable place to store things). We may pick one or two of those items with an influx (rather than making extra payments or increasing the monthly amount, we both agree to just wait until we’ve saved about $30K extra and hit it at once - we have had a lot of curveballs the last few years and keep a bit larger emergency fund that we don’t like to touch) but our main goal is retirement/financial security. So most of this would go into a taxable account with our standard investments (60% SPY, 20% small cap, 20% total international).


Now, in 2020 I front loaded my SIMPLE IRA and watched the market plummet 3 days later. I would’ve been quite a bit better off by investing periodically (monthly) than throwing it in up front. So there’s a decent argument to put it in at regular intervals or dollar cost averaging over 6-24 months. But I would probably lump it in the day I got it except for the amount I set aside for “fun “ as above.

If you are serious about building wealth, 1031 is the only answer.

There aren’t 9-11% consistent funds. You can get 5% easily right now though and it’s practically risk free.