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Which Is Less Bad?
Old 09-15-2016, 06:36 AM   #1
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Which Is Less Bad?

I decided to buy a house. I need to put 20% down in order to qualify for the mortgage. I have two bad choices for where to get the money from. I really want the house for multiple reasons so I will do one of these things but could use some advice on which is less bad. 1) I could sell a stock that has gone down 40% in the last but is almost certain to go up in the next year. I do have short term capital gains I could offset by doing this but i'm only in the 10% tax bracket. 2) I could sell some of my Wellesley from my ROTH. I am under 59.5 but I would only be taking contributions, not profits, so if I understand correctly there would be no penalty or tax on that money. My account has been open over 5 years.

I think it's worth either of these to get this house. I know I shouldn't even be in the position where I have to choose between these options but I am so which would you choose?
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Old 09-15-2016, 06:42 AM   #2
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What stock are you referring to and why do you feel it will go up in the next year?
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Old 09-15-2016, 06:46 AM   #3
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What stock are you referring to and why do you feel it will go up in the next year?
SDLP. It's an oil stock(sort of) that has gone down significantly but I believe oil prices will be going up in general over the next couple years so I think the stock is under priced and should climb in the not too distant future. Of course I don't know that as a fact, just an opinion.
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Old 09-15-2016, 07:09 AM   #4
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Excuse me for asking, but just a few days ago you started a thread about an RV type vehicle you wanted to buy so you could travel the country. What brings about the swift change of plans?
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Old 09-15-2016, 07:27 AM   #5
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Option 3. Sell the stock at a loss, offset the other gains, and buy the stock in your Roth by selling Wellesley. Be *very* careful to buy more than 30 days before or after selling it in your other account to avoid a wash sale, because you never get that loss back in your Roth account. Most wash sales are just deferring taking a loss, but if you buy back in your Roth you've lost that loss forever.

This gives you the best of both worlds. You get to offset the gains, no money out of your Roth, and you keep your investment in the stock.
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Old 09-15-2016, 07:51 AM   #6
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Excuse me for asking, but just a few days ago you started a thread about an RV type vehicle you wanted to buy so you could travel the country. What brings about the swift change of plans?
I wanted out of my very noisy apartment very soon one way or another. I hadn't been finding a house that fit what I was looking for so I started thinking about the RV thing instead. Then I found the exact house I was looking for so now i'm planning to buy that house. The info on the RV thread is still useful though because I may want to snowbird in Florida starting in a couple years. With a mortgage to pay, I would be looking into the cheaper options being talked about in that thread.
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Old 09-15-2016, 07:53 AM   #7
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Option 3. Sell the stock at a loss, offset the other gains, and buy the stock in your Roth by selling Wellesley. Be *very* careful to buy more than 30 days before or after selling it in your other account to avoid a wash sale, because you never get that loss back in your Roth account. Most wash sales are just deferring taking a loss, but if you buy back in your Roth you've lost that loss forever.

This gives you the best of both worlds. You get to offset the gains, no money out of your Roth, and you keep your investment in the stock.
That sounds like it could work but with my luck I would sell now at a low and in 30 days it will have gone up 20%(very possible). Then I have to decide if I still want to buy it. It's an option to think about but still considering my options.
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Old 09-15-2016, 07:58 AM   #8
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That sounds like it could work but with my luck I would sell now at a low and in 30 days it will have gone up 20%(very possible). Then I have to decide if I still want to buy it. It's an option to think about but still considering my options.
When do you close? Do you have time to buy the stock in the Roth now, and then sell in 30 days in your other account in time for the closing? You'll be doubled up instead of out of the stock, which is also a risk, but if it seems to be low now it probably has less chance of dropping a lot more.
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Old 09-15-2016, 08:00 AM   #9
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If the timing doesn't work for my suggestion, I'd probably sell out of the Roth. The Roth advantage is tax free growth. But with your income, you probably aren't paying taxes on LTCGs now or in the future anyway, so the Roth isn't as advantageous as it is for higher income people.
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Old 09-15-2016, 08:02 AM   #10
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Sell the oil stock... and if you do want it buy in ROTH...

Oil is not going up 20% in the next 30 days unless some huge event happens... not likely...
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Old 09-15-2016, 08:03 AM   #11
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I am always amused by my initial thoughts about selling an asset that has gone down in price. My thinking at first goes straight to thinking how can I get back that loss and my inclination to hold out on selling till I can sell at a profit. Then I realize that the asset is only worth what I can sell for today. In deciding which of the 2, I would suggest you review the 2 assets, and decide which is the better investment today then sell the other. Of course, you also need to consider the after tax ROTH vs the non-tax advantaged account.
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Old 09-15-2016, 08:04 AM   #12
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When do you close? Do you have time to buy the stock in the Roth now, and then sell in 30 days in your other account in time for the closing? You'll be doubled up instead of out of the stock, which is also a risk, but if it seems to be low now it probably has less chance of dropping a lot more.
I don't know if mortgage broker will require me to have the money in my bank account right away in order to approve the loan or if I just need to show I have access to enough money. I guess i'll have to wait until I talk to her.
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Old 09-15-2016, 08:10 AM   #13
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Sell the oil stock... and if you do want it buy in ROTH...

Oil is not going up 20% in the next 30 days unless some huge event happens... not likely...
This stock doesn't necessarily track the price of oil. It seems to have a mind of it's own. Very unpredictable and volatile. In the last 3 weeks it's gone down 15% then up 20% then down almost 20% and now I 'think' it's ready to go back up 15-20%.
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Old 09-15-2016, 08:18 AM   #14
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Since you are low income have you asked your broker about any fed/state/local programs that might be around to assist with low income home buyers. There might be something out there you could take advantage of in your situation. The broker might be looking for the option that makes them the most money.
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Old 09-15-2016, 08:21 AM   #15
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I have to wonder if you are simply doing a knee jerk reaction to living in a lousy apt, and not finding a good RV solution.

Originally you said you would be travelling around the country doing contracts, but if you buy a place, are you still going to travelling around doing that, leaving your place unused and empty for months at a time ?

This seems to be the case of impulse purchasing.

Also in the other thread you said you had sold your house, so what happened to the money from the sale ? Why not use it, and get a mortgage ?
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Old 09-15-2016, 08:32 AM   #16
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I have to wonder if you are simply doing a knee jerk reaction to living in a lousy apt, and not finding a good RV solution.

Originally you said you would be travelling around the country doing contracts, but if you buy a place, are you still going to travelling around doing that, leaving your place unused and empty for months at a time ?

This seems to be the case of impulse purchasing.

Also in the other thread you said you had sold your house, so what happened to the money from the sale ? Why not use it, and get a mortgage ?
I have been doing the contract jobs for the last 4 years. I don't have to be away from home for more than a few weeks at a time and often less than 2 weeks. There are enough jobs that I don't need to go more than about 150 miles from home if I don't want to.

The money I got from selling my condo was invested into that oil stock.
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Old 09-15-2016, 08:47 AM   #17
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As an owner of SDLP, sell the stock. It's not going up that much in 30 days. Or if it does, it will go right back down. Like Running Bum suggested, buy the stock now in your Roth while it's near it's one year low, then sell the after-tax stock after the wash sale date. You'll get the capital losses (probably), and still own this PITA stock in case it ever does go back up. That's all assuming you have the money in the Roth to buy with.

Leaving out all the maneuvering, if worse comes to worst, sell in the Roth and avoid the tax issues. I'd hate to do it, but unless you'll have lots of capital gains to offset in the future it's just not worth it.
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Old 09-15-2016, 08:48 AM   #18
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At 150 miles, or even 100 miles you basically have to rent somewhere while you do the job as commuting every day would be impossible.
Who pays for the temporary renting is a big factor in this decision.

Since most folks have to work as much as possible, it means you will be away a lot, probably 70% of the time, at least M-F and come home Friday night for the weekend.
The house would not get used much.

I see the house is not used much, you could be paying for 2 places at once, so perhaps you just need to rent a quieter apt as that should be cheaper, and you can rent out in the boonies for cheap rent, since you don't need to in any specific location as the contracts are far away.
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Old 09-15-2016, 09:01 AM   #19
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At 150 miles, or even 100 miles you basically have to rent somewhere while you do the job as commuting every day would be impossible.
Who pays for the temporary renting is a big factor in this decision.

Since most folks have to work as much as possible, it means you will be away a lot, probably 70% of the time, at least M-F and come home Friday night for the weekend.
The house would not get used much.

I see the house is not used much, you could be paying for 2 places at once, so perhaps you just need to rent a quieter apt as that should be cheaper, and you can rent out in the boonies for cheap rent, since you don't need to in any specific location as the contracts are far away.
I don't want to go into details about what I do but over the last 4 years of doing it I have been away from home 80-110 days/yr. The other 250+ days I am at home 20-24 hours a day usually. So I would be using my home more
than the typical full time worker. When i'm on a job I stay at the job site free of charge. Basically I have to drive to the job site and spend a few days to a few weeks there then drive home. Then start looking for my next contract. I don't work as much as possible. I work as little as needed to cover my expenses which should be 100 days/yr or less.
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Old 09-15-2016, 09:08 AM   #20
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+1 to finding a better apartment (or call the police on the noise makers and complain to the management if it is residents).

Purchasing a house should not be a reactionary event IMHO. Stressful enough under normal circumstances.

-gauss
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