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Would would you do with 350k?

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Advice101
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Would would you do with 350k?  Reply with quote  

I am a 28, just finished grad school and accepted a job making 65k gross annually. I also just came into about 350k (net) cash. My only student debt left is subsidized (0 interest). I own my car, and rent an apartment.

My parents bought a home during a bubble in another state, continued payments under water, and now owe their home’s market value (about 300k). They are both 62 y/o teachers , and plan to retire in a few years. They probably have two car payments and possibly some credit card debt. They are kind, generous, and hardworking but not great with financial planning. They do not need money per se but it sure would be nice to help them out.

What is the best way to invest/use this money? I was looking into buying a foreclosed home under market value for my parents to retire to, but do not know if there are better ways to invest. What would you do? What are some considerations?
Post Mon Jul 07, 2014 6:24 pm
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JonCartoon
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Re: Would would you do with 350k?  Reply with quote  

quote:
Originally posted by Advice101
I am a 28, just finished grad school and accepted a job making 65k gross annually. I also just came into about 350k (net) cash. My only student debt left is subsidized (0 interest). I own my car, and rent an apartment.

My parents bought a home during a bubble in another state, continued payments under water, and now owe their home’s market value (about 300k). They are both 62 y/o teachers , and plan to retire in a few years. They probably have two car payments and possibly some credit card debt. They are kind, generous, and hardworking but not great with financial planning. They do not need money per se but it sure would be nice to help them out.

What is the best way to invest/use this money? I was looking into buying a foreclosed home under market value for my parents to retire to, but do not know if there are better ways to invest. What would you do? What are some considerations?



you can invest money in something new. Like NFC (exchange credit card) or medical marijuana companies (they just be legalized in USA) . Both way so undervalue. And they shares cost no so much.I think they can help you and your parents.
Post Mon Jul 07, 2014 8:51 pm
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oldguy
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quote:
What is the best way to invest/use this money? I was looking into buying a foreclosed home under market value for my parents to retire to, but do not know if there are better ways to invest. What would you do? What are some considerations?


Congratulations on your degree, and new job, as well as your windfall.

Don't be too quick to gift lump-sums of money to your parents - and they are probably doing better than you are guessing - a pair of teachers earning $60k/yr each ($120,000) are probably funding their 403b plans plus building up strong pensions. Their house mortgage has 20 to 25 years to go - at retirement they can downsize and nearly pay cash for a new house. (Eg, sell for $400k, pay off $250k loan, use the $150k for a smaller house in a LCOL. Or - if they seem to be in trouble, that could be a good time for you to help.

The average windfall winner - lottery, heir of a fortune, large judgment, etc, is broke in 7 yrs. So - don't let that happen. Here's what happens to them - they do what seems logical to them, ie they pay off their debt, their cars, their houses, their mothers cars, her house, and so on. And then they invest that last $50k or $100k 'for a rainy day'. Ie, they scatter the windfall except for a small sum. Absolutely wrong - do the opposite, keep the windfall intact.

The average US Market return is 11%/yr over a longterm, about 30 yrs. On average that means that it doubles about every 7 years ON AVERAGE (the Rule or 72). You're 28, your opportunity is to have $700k at 35, $1,400,000 at 42, $2,800,000 at 49, and so on. (When it hits a million you may want to gift some to your parents.)

One way to look at it - $350k at age 28 equals a lifetime opportunity - you are free to spend every dime that you earn from now on (altho I would not), simply by not touching the $350k and letting it grow into the millions.

A for foreclosed houses - there is a reason that they are cheap. I have a contractor friend in the business, he buys houses for cash, about $150k He has crews - outside paint, inside paint, flooring, new appliances, new bathrooms, kitchen, landscapers. Spends about $35,000, puts it on the market. Sells it for $235k. $12k to the realtor, the $35k, leaves about $38k gross, about $25k net.
You can avoid all of that by paying an extra $40,000 for a non-foreclosed house, one that hasn't been trashed and refurbed. The urban legend is that you can buy a foreclosure cheaply and save money - I doubt that you'll like the result. Very Happy
Post Mon Jul 07, 2014 9:41 pm
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Wino
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I think instead of oldguy's plan, you should pay off YOUR debt first, regardless of the interest rate. Whatever amount remaining should then be invested. I won't go so far as to suggest only the S&P500, but that's not a bad choice. Personally, I'm spread out more than that, but much of my money is in the S&P500.

Once you are debt free, use your income to invest more. At $65K per year, you should be getting more than $4K per month after all taxes and fees, or at least close to that. Investing $600 per month (15% of your take-home) will net you $7200 per year. In 30 years, that will be approximately $900K after inflation. I used 4% for inflation and 12% for actual returns, giving you 8% net spending value.

Assuming you then retire, you can withdraw at a rate of about $6K per month for the rest of your life without touching the principle, in today's dollars. This plan is more secure than oldguy's "leverage your investments with credit/debt" plan. Also, I doubt you have $350K in debt today. Assuming $100K of debt, the amount you'll have at retirement - with less risk than the leveraged method - should be about $3.6 Million.

You should do nothing to pay off your parents' debt. If you like, pay for a long-term care policy if they cannot afford it, but otherwise, let them handle their own finances. I am certain this is what they would want you to do.
Post Tue Jul 08, 2014 4:33 am
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Sander2018
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buy a new house?
Post Mon Apr 30, 2018 5:45 pm
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pillaishiv
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When I started saving, I decided to invest in Megacoin. I was about 17-18 then. Now I am 25 and managed to make more than double the amount on my initially investment. So glad I had the sense to start investing so early. Better start saving & investing early kids!

You can check out how to invest in megacoin here https://www.megacoinwealth.com
Post Fri May 25, 2018 11:46 am
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