Investing after a home sale. Where to put the proceeds?

[Newtosavage]

100% agree with getting a CFP but I would recommend investing the money it in the stock market unless you have credit card / consumer debt with interest rates above 6%.

I am off the opinion is that I would rather have cash in hand / invested and have the debt in the house and pay the really low 3% interest. When you can make 10% or significantly more in other investments with the money.

Went through a similar situation, house closed mid march and got the money into the stock market the week after the crash.

The house (@2.75%) would be the only debt we have. We would also be putting enough $ away to replace our vehicles as they age out, so we can pay cash for them.

 

[AugustWest]

I think if you invest in a new house you don’t pay taxes. Otherwise, it’s taxed.

 

[JakeSCH]

The house (@2.75%) would be the only debt we have. We would also be putting enough $ away to replace our vehicles as they age out, so we can pay cash for them.

That is good. For me I would rather have loans and be making money with my cash, something that most CFP's are not allowed to recommend but do themselves.

I would sign up for a very basic service like "motley fool" and buy their top 10 recommended stocks with a plan to hold on to them / not sell for 3 to 5 years. Most basic way to make money with your money.

You can use robin hood, sofi, many others to do this.

 

[unchained]

Did you live in the home for atleast 2 of the last 5 years?
Did you make more than $250k (unmarried) $500k (married) profit from the sale of the house above what you paid for it?

If you answered yes and no you probably don't owe any cap gains barring any special circumstances. I also agree with Jake on the points he makes. That's what I do for a living. Find someone local that you like and can trust.

 

[JCohHTX]

You can roll your gain into a new house via a 1031 exchange within 180 days and defer paying taxes on that gain until the next house is sold (or just do a 1031 exchange again).

 

[efnm]

The first $250k/$500k (Single/married) in gains are not taxed by the IRS if it has been where you are living for 2+ years. There are some other things you have to check, too.

Edit: Unchained got the gist of it.

 

[Newtosavage]

Did you live in the home for atleast 2 of the last 5 years?
Did you make more than $250k (unmarried) $500k (married) profit from the sale of the house above what you paid for it?

If you answered yes and no you probably don't owe any cap gains barring any special circumstances. I also agree with Jake on the points he makes. That's what I do for a living. Find someone local that you like and can trust.

Yes and no and thanks.

 

[CJF]

Call Doug @ Cameraland.

New Swaro's hitting the streets.

On a serious note, here's my 2 cents:
If not putting the equity into the principal of the new house would cause the payment to be higher than 20-25% of your take home pay, then all of it should go toward principal no questions asked.

If you can afford to "keep" some back, then consider options b-e

 

[JBrew]

Coming from a broker, personally, I'd pay the 20% down to stay out of PMI + enough for closing costs, and then everything Jake mentioned...except i'd probably not invest every single penny of it that way. Instead, keep a chunk as a cushion. Different strokes/different folks

 

[gibby97]

I’m by far not the most intelligent guy or gal here but if it were me and I could pay off my house in 6 years with less than 3% interest and no additional principal payments I’d be investing 75% of the 100K in the stock market. and then put the remaining 25K in savings for an oh crap situation.

If your not stock savvy like most then use someone like Edward Jones to help invest. Might speed up your retirement plan you mentioned as well.

 

[tdhanses]

Fly to Vegas and try to quadruple it even if you come back broke

 

[sandhillhunter]

I was in your situation. We paid the $100,000 down on the principle 3 years ago. I could have invested in the market but with the roller coaster it’s been am thankful I did not.

If your retirement is funded, you’re nearing retirement, and you don’t have any other debt then paying off the house ASAP is a good idea to me.


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[Nealm66]

I would invest it into some stocks that have been trampled by Covid 19 but have a solid history beforehand and can weather the storm.

 

[zion zig zag]

Sounds like you're in a pretty good spot and on track to pay off the house at planned retirement date. I'd ladder some CD's to cover 6 months salary for a rainy day fund. If you don't already, I'd also max out IRA's/401's/HSA's etc for the year. I'd probably use the rest to pay down the mortgage. But I'm a keep it simple type investor.

 

[bwhntMT]

We were in a similar spot three years ago. Sold a place and had a bunch of equity rolling into the next place, but the next place needed lots of work. We kept $30k back, used it for new windows, new HVAC, new water heater, new flooring, new lights, new paint, etc. Home has appreciated about 40% in the past three years and we are busting out butts to pay it off because I hate debt. I hear what people are saying about earning better returns in the market, but you can't put numbers to what it feels like to not owe anyone a dime. We have 15% going into investments and are paying about 4x on the mortgage. Should be done in 2.5 more years, then it is total freedom. There ain't a pricetag for that in my mind.

 

[Newtosavage]

Sounds like you're in a pretty good spot and on track to pay off the house at planned retirement date. I'd ladder some CD's to cover 6 months salary for a rainy day fund. If you don't already, I'd also max out IRA's/401's/HSA's etc for the year. I'd probably use the rest to pay down the mortgage. But I'm a keep it simple type investor.

Yea, I'm maxed. Have been for the past 10 years (like I said, we are used to living very modestly).

I'm not savvy on investing or CD's or anything of the like bc as I said, we've always paid everything we have into our debt with the highest finance charges. So having a chunk of cash to invest is very new to us.

 

[Newtosavage]

We were in a similar spot three years ago. Sold a place and had a bunch of equity rolling into the next place, but the next place needed lots of work. We kept $30k back, used it for new windows, new HVAC, new water heater, new flooring, new lights, new paint, etc. Home has appreciated about 40% in the past three years and we are busting out butts to pay it off because I hate debt. I hear what people are saying about earning better returns in the market, but you can't put numbers to what it feels like to not owe anyone a dime. We have 15% going into investments and are paying about 4x on the mortgage. Should be done in 2.5 more years, then it is total freedom. There ain't a pricetag for that in my mind.

We think alike. That's probably the route we'll go, but I wanted to ask around first. Some solid experience above to consider. Good ideas for us to talk to our CFP about.

 

[CJohnson]

Please do your due diligence before talking to a “CFP”. Before you know it you’ll be buying high fee mutual funds and whole life insurance. Find a CPA first and then get some recommendations for fiduciaries in your area. Talk to more than one and make them work for your business. If you’re going the route of Edward Jones, just open up a vanguard account and invest the surplus an index fund that tracks the S&P500.

I was in your shoes a few months ago and I set aside 75% of the proceeds to be invested into the market over the next 12 months to help ease my nerves with all the volatility right now. I kept 25% in cash and I happily pay my new mortgage monthly with its 3% interest rate. The problem with paying off a mortgage is that the most you’re saving is the 3%. Most investments, even in a terrible market, are going to net you better than that over 6-9 years.

All that being said, your problems are good problems to have and I’m an electrical engineer not a financial advisor - so take everything I said with a grain of salt.

 

[Newtosavage]

Please do your due diligence before talking to a “CFP”. Before you know it you’ll be buying high fee mutual funds and whole life insurance. Find a CPA first and then get some recommendations for fiduciaries in your area. Talk to more than one and make them work for your business. If you’re going the route of Edward Jones, just open up a vanguard account and invest the surplus an index fund that tracks the S&P500.

I was in your shoes a few months ago and I set aside 75% of the proceeds to be invested into the market over the next 12 months to help ease my nerves with all the volatility right now. I kept 25% in cash and I happily pay my new mortgage monthly with its 3% interest rate. The problem with paying off a mortgage is that the most you’re saving is the 3%. Most investments, even in a terrible market, are going to net you better than that over 6-9 years.

All that being said, your problems are good problems to have and I’m an electrical engineer not a financial advisor - so take everything I said with a grain of salt.

LOL you don't know me very well. I haven't made it to this point from where I started because I bought things I didn't need. But I do appreciate your concern, and your advice. Thanks.

 

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