sitting on cash and home equity

[columbus]

Hello! I was hoping to get some ideas and opinions on my situation. I'm 33 and married with one baby. We have about $50k in cash not earning more than .5% or so and another $250k or so in home equity spread across our personal residence and 3 rentals. Any thoughts on how to put this money to work?

[LOL!]

The home equity is working, so nothing needed to do with it.

The cash ... is it your emergency fund or do you already have an emergency fund? I've read about 2% CD's nowadays. There are I-bonds from Treasury Direct. There are short-term bond funds.

If it is not needed for an emergency fund, then there are lots of possibilities, but one should have a long-term plan first. What's your plan?

[columbus]

I was thinking if I could get a cheap heloc then that could be my emergency fund if money was tied up in an investment earning more than the heloc rate? I was reading about lending club and double digit returns but that's not a sure thing. What do you mean by the equity is working? Just that its thay much less interest I'm paying? Thanks!

[brewer12345]

Quote:

Originally Posted by columbus I was thinking if I could get a cheap heloc then that could be my emergency fund if money was tied up in an investment earning more than the heloc rate? I was reading about lending club and double digit returns but that's not a sure thing. What do you mean by the equity is working? Just that its thay much less interest I'm paying? Thanks!

Uh, don't you remember just a few short years ago when lenders were cutting off HELOC borrowers even when they had lots of room left on their lines of credit? You need a cash emergency fund, not a line of credit that can be cut off at any time for any reason.

[oldnews]

NEVER EVER take money out of your house to put in the market. The financial advisors want you to do it, in order to make fees off your money, at no risk to them. Your best investment is your debt, retire it.

[traineeinvestor]

When I was at your stage in our financial journey, our primary objective was to save up enough deposit for our next property purchase.

If no asset class looks like a good investment to you right now, then paying down some debt may be a safe default option.

[frank]

I think getting rid of high interest debt is always a good idea. if your paying 4% on debt and getting .50 percent on interest. it a no brainer.

[Fishingmn]

I'll take a little different direction - what has been your experience with the rentals?

Do you have a track record on them of earning 10%+ and can you find more?

As a real estate investor my biggest issue is that my market has few listings, rising prices and lots of investors so what was easy to find 1-2 years ago is getting really hard to find right now. That said, if your market still has opportunities and you have a strong track record of real estate investment success it can be done. We moved a year ago and instead of paying cash for our house we got a loan so I could buy more properties and the 4 places we've purchased are turning out enough money to pay the loan and then some.

[pb4uski]

Quote:

Originally Posted by columbus Hello! I was hoping to get some ideas and opinions on my situation. I'm 33 and married with one baby. We have about $50k in cash not earning more than .5% or so and another $250k or so in home equity spread across our personal residence and 3 rentals. Any thoughts on how to put this money to work?

I would determine how much you need for an emergency fund (typically 3-6 months of living expenses) and put that amount in an online savings account that will earn 0.8 to 1.0% rather than 0.5%.

Do you have access to any tax-deferred accounts (401k, IRA, etc) or tax-free accounts (Roth IRA and Roth 401k)? If so, you could start contributing to them and use any excess of the 50k over what you need for emergencies to fill the gap.

The equity in rentals are already working - they are bringing in rental income. If you really want to you could borrow on the rentals if you have any borrowing capacity on them and use the proceeds to buy another rental, but I would try to keep the borrowing modest (say 65% or less of value for each property).

[columbus]

Thanks all! I do have access to roth ira abd traditionsl but no employer 401k. Its hard to calc after refis and mortgsge pay downs but I think we probably avg around 20%. I dont thimk we can get a fifth property with conventional financing so would have to look at other options.