What to do with your money while saving for a down payment?

Question

Hey,

In the process of saving money for a down payment on my first rental property.

It would be nice to obtain some type of return while saving. I feel like I am missing out on opportunity cost. Parking the money in a savings account will produce a negligible return.

Any suggestions on what to do with the money while saving for the down payment?

Thank you

Alexander Felice · Answer

for the short term <8 months: Ally is 1.15%. Which is not that great, but if you're going to park it at least maximize returns.

parking in a big 4 bank earning .05% is not a good decision.

Bobby Gagnon · Answer

According to Dave Ramsey put it in a mutual fund it should gain 12% but can fluctuate.

Aaron K. · Answer

@Jaime Paniagua I have not personally used these services so I don't know for sure, Lending Club has default numbers on their website, and I'm not sure about Realty shares.  My best estimate is that they are riskier than savings accounts (obviously) and less risky than the stock market.  Research is key and try to find testimonials from a number of places before you invest.  Also you might try investing with the minimum allowed to see how it works and work up from there.

Jaime Paniagua · Answer

@Aaron Klatt How risky are the investments with lending club and realty shares? Also, what type of returns are available?

Aaron K. · Answer

As far as the stock market goes your money is at significantly more risk than a savings account and it is very volatile in the short term however over long term (10+ years) low cost index funds have proved themselves reliable, unfortunately this isn't a feasible time frame if you are saving for a down payment in most cases.

Aaron K. · Answer

It depends on how far away you are from having the money for a down payment, you might try peer to peer lending like Lending Club or even something like Realty Shares where you have less control over the real estate but a lower barrier to entry.  However, if you want to avoid all risk to your principal there aren't a ton of better options than savings accounts and CDs.

Jessie Nunley · Answer

@Jaime Paniagua my fiancé and I are in the same process. We just decided to put it into a savings account with the bank we want to use down the road to develop some sort of relationship with them. There aren't a lot of banks that are going to give you anything remotely significant as a return. Also, neither of us know enough about the stock market or investing to try anything other than a bank. Your returns will come once you get the properties.

What to do with your money while saving for a down payment?

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