where to park cash - saving for 2nd home

[WD40 or duct tape]

DW and I are looking to purchase a 2nd home on the Gulf that will hopefully be the primary within a few years. The plan would be to snowbird for a few years, then sell the Midwest house and move to the Gulf full time. I need some advice on making it happen. Here's some big picture facts:

• 100% Debt Free
• Primary house value in midwest - 500k
• Gulf house budget - <1M
• Mutual funds (pre-market slide) - 2M - roughly Dave Ramsey mix except heavier in aggressive growth and growth, light on international
• Retirement accounts (I'm 47, DW 46) - 1M
• Roughly 6 months living expenses in money markets
• 2 kiddos heading to college in 2022 and 2024 but 529's should cover both

I'm still "employed" as a board member / stockholder getting salary, profit sharing, and distributions. I asked for a buyout twice last year but it fell on deaf ears, so for now I'm happy sitting on the "milking stool". Really rough estimate on buyout should be in the 1.5M range, but I'm not banking on it anytime soon.

We've live WAY below our means and have been investing everything possible in the mutual funds.

So, where do we start "parking" cash for this purchase? Index funds? Money Market? or just stay the course and pull out of the 2M+ in mutual funds when the time comes? Or is this venture premature (too much house vs investments)?

Thanks for everyone's input!

 

[Montecfo]

Mix in my favorite savings account, TMobile Money, which is FDIC insured and pays 1 percent. Do this a little at a time harvesting gains.

Perhaps increase allocation to value type stocks depending on time horizon.

Consider financing part, a fixed rate mortgage is an excellent inflation fighter. You can do this now by taking mortgage on your primary with an eye toward funding 2nd home purchase. Will allow you to keep more of investment funds in place.

 

[pb4uski]

The sad reality is that your time horizon is only a few years that your choices are few and yields are meager. Online savings accounts pay 0.5% to 1%, corporate note programs are a bit better at 1.25-1.75%, 1-3 year CDs or US Treasuries are less than 2% and MYGAs are perhaps just a little north of that.

$1m is a lot of home for a couple with a $3.5m NW IMO, but it's your money. If you do it, you might be better off getting a mortgage and using portfolio income to make the mortgage payments.

 

[Luvtoride]

WD40, sounds like a great plan and congrats on your strong savings accomplished. I don't like the idea of pulling out from the mutual funds if the markets are down as they are now. You don't know where they will be when you need the money for the 2nd home. I think that type of investment is for more long-term timing/ use.

Not sure what your timing is for buying the home but if its 2 years+ I would consider a MYGA where rates will be over 2% (and higher if you go more than 2 years). Are you planning to purchase the home for all cash or take a mortgage? If you're debt free and your primary home is paid off, you could use an equity loan/ mortgage (as Montecfo suggested) from that house or borrow from your retirement account (is this a 401k type account?) if needed for the downpayment and then take a mortgage on the new home for the balance. You could always pay off/ pay down that mortgage when MYGA's matured or if the markets are favorable draw from the mutual fund accounts.
All good problems to have.

 

[SnowballCamper]

I agree with pb4uski, to stay fully invested and use a mortgage for the purchase, so long as rates remain low like they are now. FWIW we paid off our home early, only to outgrow the space with my early retirement hobbies, and recently opened a HELOC to fund the purchase of some additional space for the toys.

At a future date, when markets are relatively higher, you could always pay off the mortgage, say, after the sale of the midwest home... Good Luck.

 

[rk911]

DW and I are looking to purchase a 2nd home on the Gulf that will hopefully be the primary within a few years. The plan would be to snowbird for a few years, then sell the Midwest house and move to the Gulf full time. I need some advice on making it happen. Here's some big picture facts:

• 100% Debt Free
• Primary house value in midwest - 500k
• Gulf house budget - <1M
• Mutual funds (pre-market slide) - 2M - roughly Dave Ramsey mix except heavier in aggressive growth and growth, light on international
• Retirement accounts (I'm 47, DW 46) - 1M
• Roughly 6 months living expenses in money markets
• 2 kiddos heading to college in 2022 and 2024 but 529's should cover both

I'm still "employed" as a board member / stockholder getting salary, profit sharing, and distributions. I asked for a buyout twice last year but it fell on deaf ears, so for now I'm happy sitting on the "milking stool". Really rough estimate on buyout should be in the 1.5M range, but I'm not banking on it anytime soon.

We've live WAY below our means and have been investing everything possible in the mutual funds.

So, where do we start "parking" cash for this purchase? Index funds? Money Market? or just stay the course and pull out of the 2M+ in mutual funds when the time comes? Or is this venture premature (too much house vs investments)?

Thanks for everyone's input!

a year ago ii would've suggested an index fund but with current world events i'd opt for an FDIC money market account(s).

 

[VanWinkle]

Bask Bank is paying .70% on an interest savings account or they have an American Airlines point account that has been touted by several blogs.