I have been educating myself the last few months about real estate investing (here, books and podcasts). I love how everyone offers the strategies that work for them and the mistakes they’ve made.
We are saving cash to have money for a 20-25%down payment as well as to have enough in reserves for anything that comes up.
Where would you recommend saving this money?
1. Ally savings (where our emergency fund is for our home @ 1.9%
2. Vanguard prime money market taxable brokerage account @ 2.16%
3. Vanguard total stock market fund in taxable account (I ask this because I heard Dave Ramsey mention he puts money for real estate in an S&P fund until he’s ready to buy). This is not a debate about Dave Ramsey-we are out of debt and have 6 months emergency fund and don’t adhere to his investing advice but I liked this idea when saving to buy real estate.
Welcome @Jeremy Lohman !
I think it all depends on what your risk tolerance is, and what your timeline is for how quickly you need to access the money. If you want quick access for when you find a deal and need to act quickly, it may be better to have it in a more conservative place (i.e. Ally or Vanguard Money Market).
You could put it in the market if you wanted to chase returns, but you have to be ready for some swings (kind of how the past week has gone). If the large loss would have put you at a big disadvantage if you found a deal today and needed the money, then I'd still go with safety and accessibility (savings) over the brokerage.
But ultimately its up to you!
An alternate option to also consider would be taking the money and using it be a private lender on a deal with an experienced investor. This should not only provide much higher returns than the options you've listed above, but also get you exposed to real estate in a passive format which can prove extremely valuable to you in the long-term. I like this strategy as it's a nice intermediate step between reading/learning and having to go actually do everything without actually seeing how it's done.
@ Tom Shallcross, that’s a good idea. I’ll reach out to a few people I know that may be able to help with that.