I am in process of selling a home and want a plan how to handle the cash while I decide how to reallocate it, maximimizing investment options, leveraging for a new home down payment and freeing some cash to pays some debts and invest in real estate investments - 1 land and 1 condo. Any ideas?
That’s a tough question because your time limits are not specified.
Money markets are safest but you will be well off to get 0.5% on your money.
Bonds and bond funds may give better yield but rising interest rates can mean you can lose money due to declining net asset value.
BLE is a closed end bond fund, fed tax free and currently paying 5.28% with monthly payments. If held til the next payment could be your best choice. But note share volatility. Most brokers don’t charge commissions. But to get your funds back could take a limit order.
Check with your bank. If you have large sums to invest, they may be able to come up with short term investments.
Bankrates.com is a good place to look for competitive rates.
Any dividend stock could be purchased just before its x date to get pretty good return. But the dividend is taxable income. Share price is marked down on the x date. It can take a while for share price to recover. XOM, VZ come to mind as possibles. There are many more.
Based on what you stated, I would just put the money into an online savings account (.5% rate, maybe you find a teaser rate) until you fully deploy the funds towards your allotted goals. Why risk investing it in the interim when you already have acknowledged you have plans for the money?
1 Like
I am in process of selling a home and want a plan how to handle the cash while I decide how to reallocate it, maximimizing investment options, leveraging for a new home down payment and freeing some cash to pays some debts and invest in real estate investments - 1 land and 1 condo. Any ideas?
If you are going to owe any taxes on the sale, you need to set aside money in a safe place (i.e. FDIC insured savings) to cover those taxes first, and be sure that you will meet a safe harbor from withholding and/or estimated payments to be sure you won’t owe an underpayment penalty. Then, take all of the money that you have ‘plans’ for (i.e. paying off debt, down payment for a new home, real estate investments), and put it in that same savings account. If you have any money left over after that, allocate it in line with your overall portfolio allocation.
AJ
2 Likes
FDIC insured saving account is safest. But most do not pay daily interest. Money market will get some interest daily. Savings account probably pays at end of the quarter. Credit union can also be a good place to checkout.
FDIC insured saving account is safest. But most do not pay daily interest.
Most ‘high yield’ FDIC insured savings accounts DO pay daily interest, even if they don’t post it daily. Nowadays, there are actually very few FDIC insured savings accounts that don’t base their interest payments on daily compounding. (CDs are a different matter - those may compound monthly or quarterly.) That said - current yields are so low that even on the ‘high yield’ accounts, a few days interest isn’t going to make much difference, even if you have a fairly large balance. A typical rate for ‘high yield’ accounts is currently around 0.5% 0.5% on $100,000 is $1.40 a day.
AJ
3 Likes