Where to park money?

Question

Where would you recommend to park your money while you are saving to buy a rental property?

David Martin · Answer

@Trent Egenlauf really depends on your appetite for risk and desired returns while going through your accumulation. Additionally will depend on how available you want it to be.

Tough to help someone decide what kind of pizza to order when we have no perspective on what characteristics you think a good pizza has.

David Martin · Answer

@Bryan Devitt One of my gifts... taking topics and grinding them down to seemingly absurd analogies off the top of my head, that after being spewed out, actually make sense.

David Martin · Answer

@Trent Egenlauf sounds like you're looking for pretty low risk and a short time frame, so just keep it simple and liquid in case you just find a stellar deal along the year. Find some high yield CD's or savings to just offset the eat from inflation, it's not sexy, but beats traditional savings rates. Shouldn't be hard to find something around 2%, which is slightly above current inflation, which is probably going to stay pretty flat around 1.8-1.9 this year. Fed is still being delicate in their methods to balance everything out, and I'm pretty sure their waiting to see where elections 2020 goes before they make any big moves.

Use small bits of money to economize where you can as well. I could easily state that my kitchen knives and crock-pot have achieved a nearly incalculably high internal rate of return.

John Pelaez · Answer

@Trent Egenlauf I m using cryptocurrency. I know it seems like a gamble or fake money but I'm getting 10% percent returns with no fluctuation. I'm staking stable coins. If you are not knowledgeable about crypto currency it probably doesn't make sense

Scott Brown · Answer

In lending, there are 3 things to consider.

DTI - Debt to income ratioCredit - 720 plus will get you the best rates and lowest down payment. LTV - Loan to value or down payment.  What's that got to do with where to invest your money?  A lot...according to Debt.org the average household in the USA carries $8,398 in credit card debt.  And the average interest rate paid is 19.02% according to Wallethub.com  If that happens to be you...then my opinion is to invest your money in the payoff of the credit card(s) and earn 19.02% and get your DTI lower so you can qualify for the best loan that's available.

Betty Klein · Answer

Vanguard Prime Money Market account pays 2% taxable interest

Municipal bond fund depending on your state income tax and your income pay 6 to 8% tax free.

David Martin · Answer

@Trent Egenlauf Not sure what your current stash is, but on this list are 7 currently banks offering rates matching or exceeding current inflation rates, but with different minimum balances.

https://www.bankrate.com/banking/savings/best-high-yield-interests-savings-accounts/

Anthony C. · Answer

Hi @Trent Egenlauf, don't know if I have the "right" answer for you but I can tell you what my thinking was when saving for my first property.I saved the majority of my money in a savings account with higher yields than traditional savings accounts (usually based on how much money you have within the account). Talk to your bank to see what options they have. I also saved a portion of my money in a mutual fund. This fund was intended to be a last resort for use with purchasing the property and acted as more of an emergency fund. I ended up not touching this to close on my first property. I was able to finance with a 5% down conventional loan. If I had needed to use my mutual fund, I had plenty of shares that were considered long-term capital gains so taxes would not have been a huge blow.6-12 months is not a lot of time in investing terms. You will be paying short-term capital gains tax on any gains for shares held less than one year. As @David Martin said, you want to stay liquid in case the right deal comes along before you are expecting it. Investing in stock is not a short term strategy and comes with it a lot of risk.

I hope this helps, good luck!

Jacob Ritter · Answer

Hey, Trent! I would personally look into 2 different options.

1) A high-yield online savings account that pays anywhere from 1.5-2% APY OR

2) A Short-term bond fund that pays anywhere from 2.5-4% in interest.

This all depends on your comfort with risk - it's a big head game. While both options are very secure relatively speaking, one is still invested in the market (but you can find some funds offering bonds backed by the full faith and credit of the US Government) while the other is, usually, FDIC insured (still a government backed operation). If you have other questions don't hesitate to ask me or any of your fellow members. Best of luck, Trent!!

Trent Egenlauf · Answer

@David Martin thank you very much for your thoughts and help!

Where to park money?

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