Where should I keep my downpayment 1-2 years out from purchase?

Question

Hello! I was really hoping to buy another property this year but it's tough with high prices as well as a significant decrease in income from my bartending job with people staying home. I have about 30k in my savings account (interest only 0.30%APY). If I expect not to need it for 1-2 years, what are my best options? Just a higher yield savings account, or could I act as a hard money lender for a 1-2 year period? Is that amount too small? What kinds of returns could I get? Thanks for any input!

Best,

Sierra Swords

Best,

Sierra Swords

Paul De Luca · Answer

@Sierra Swords

It's wise to carefully research where best to hold that money, and choose the option that aligns with your needs and priorities. It also really depends on your risk tolerance.

If you want convenience & security above all else, stick with a savings account at the bank you already use. If you can handle the risk, investment accounts likely offer the best returns. But they present the highest risk that the value of your down payment fund might drop just at the point when you need the money.

I'm sure you could make use of those funds as a hard money lender but you should make sure to do your homework before getting into that, especially because a mistake could be costly to your future plans to buy a property. I'd recommend getting in touch with some hard money lenders and asking lots of questions. They will be able to give you a better idea on what kind of returns you could expect.