So I recently graduated from college. Throughout college I worked 30-40 hours a week and even worked two part time jobs over the summer getting around 70 hours a week. I over accumulated and have about 32k USD in the bank doing nothing. I have no debt, no student loans, no credit card debt, and I own my own car that I paid for in cash. I paid for my degree in cash as well. I currently live at home with my parents. I have a degree related job that pays me state average for my degree. I'm still going to school for other degrees but my company reimburses tuition.
The only problem is that I commute over an hour to work. I don't like that. Some people do some people don't. I personally don't. I have a want to move closer to were I work. I also get really twitchy with all my money in the bank doing nothing losing purchasing power. I want to spend it on a house. I think renting is silly when I can get a fixer upper for about 50k ish. I just want a structurally sound fixer upper with only cosmetic issues. As long as it's structurally sound, running water, electricity, bathroom, I'm good. I good just repair whatever is broken along the way. If I can just save up more money and buy a fixer upper in cash, I think that would be a good idea.
I suppose I could get a dirt cheap home in the hood for like 25k, but with a high crime rate it doesn't matter if it's free. So if I can get a fixer upper for around 50k and pay in cash, for the town I want I think that would be good.
I understand that there's some risk. I could loose my job and that would defeat the whole purpose of buying a house closer to my work. But I suppose I could just rent it out if that happens and move back in with my parents or just commute if possible to a new job if that ever happens, hope it never does! I also see it as a risk that the home could go down in value. But you take that risk in any investment! Regardless if I buy a 50k fixer upper or a beach house for 500k the value could up and down 10% but 10% of 50k is a lot less than 500k. So I like the idea of not being to heavily invested into a home for the uncertainty of its value and the threat of loosing a job.
Part of me just wants to live with my parents for as long as possible to save money. But than I run the risk of my savings purchasing power loosing value because of inflation. I feel at some point I'll either have to move out or do something with it to preserve my purchasing power. But I'm unsure if I want to invest it because I like the liquidity if I ever do purchase a house.
I want to move closer to my work, that's just me. I spend 200+ a month on gas alone. Moving closer to work is worth the risk of loosing the job for me and defeating the purpose of moving down there. I would like to save up as much as possible to buy a house in cash and just pay for whatever I need to fix it up as I go. I don't want to spend 12-15k+ a year on rent down there.
But a part of me is like even if I did have enough cash to buy a fixer upper on there, I would save more money just living with my parents. Because the 200 in gas each month is nothing compared to electricity, property tax, internet, food, water, heating, the cost of a house...
But a part of me gets to twitchy of having so much cash doing nothing.
I currently have it good at home. My parents don't mind me and I get along with them. I'm gone 10-12 hours a day because of the commute so there's not much time for me to screw up the relationship. I pretty much just sleep there.
Thanks for any financial advice!
Thu Jul 21, 2016 1:33 am
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
quote: But a part of me gets to twitchy of having so much cash doing nothing.
Consider the comparison of real estate vs investing in stocks. (and living at home in both cases).
1. A $32k investment in an 11%/yr stock index fund would be $733,000 in 30 yrs. If you added $5000/yr to the investment it would be $1,833,000 in 30 yrs.
2. A $50,000 paid-for house would be worth about $215,000 in 30 yrs.
3. A leveraged $200,000 house (with a $32k down payment). The house would be paid-for in 30 yrs, and worth about $865,000. You would have paid about $350,000 in payments.
During my 40 years of landlording, I bought houses that were 2 to 6 years old. The houses were near-new, new appliances, new AC, new furnace, and the first owner had hung the drapes and planted the grass, all I needed was a renter. Whenever one of my houses built equity, I refinanced, removed my equity, and invested that money into the SP500 Index.
The houses all did well, made money. But the seed money from the houses that I placed in the SP500 did better.
In my experience, I would avoid option 2, the 'junk' houses are usually money pits - and if everything goes well, the profit is small. As you say, losing 10% of a small house is not a big risk - but it is also not a big gain.
So if you use real estate, buy top quality, good units, and leverage them, do not tie up your cash in them.
But as I said, option 1 was my winner. Do not underestimate the power of longterm compounding (Einstein said that it was one of the great equations of all time,.)
What field is your degree in? And what graduate degree are you working on?
Thu Jul 21, 2016 2:58 am
First Choice Member
Cash: $ 4.00
Joined: 26 Jul 2016
Location: Valdosta, GA
I agree with oldguy
Don't let your money just sit there, of course that's a bad idea. I also think real estate is a pretty bad idea also, speaking from experience. I've got four mortgages (three are rentals) and I'm not doing much better than breaking even after taxes, insurance, repairs, etc. Sure, they're getting paid off for me, and if I could have gotten them all without any money down then sure... but you've got $50k.
As oldguy said, the S&P 500 is where it's at for long term investing. In the last 50 years, nearly a 14% return if you just left it in and reinvested. Compound that up and your head will explode. Rates are so low right now, buy a house with the lowest amount of money down so that you can live in it - but only if you need to. Enjoy living at home as long as you can handle it. Congrats on being so financially responsible, by the way.
Tue Jul 26, 2016 9:46 pm
Cash: $ 2.65
Joined: 15 Aug 2016
Location: Lexington, KY
Go into business for yourself doing something. You'll get a lot better return on yourself than you will on the stock market.