Quote:
Originally Posted by booztedgt
I was a first time homebuyer 4 yrs ago, and now that my townhouse is under contract I'm about to be a first time homeseller. I moved out of town and am currently renting, and still have 10 months left on my lease. I should consider myself lucky I suppose, but I will be making money on this deal, and when it's all over I'll have a nice chunk of change that I have no idea what to do with. I plan on using it as a downpayment for the next house I buy....but since I just moved to the area (DC) and I think prices are still outrageous here, the housing market is still dropping, and I'm not sure how long I'll stay here....buying a house here may not be the best decision. So I can either tuck it away in a safe 5% Money market account, or maybe buy an investment rental property. The stock market seems too volatile right now, and I don't want to risk losing basically my nest egg. What do people usually do in these situations? I figure with an investment property for rental I still have access to my capital (via a home equity LOC or loan), I'm making money off the rental and any price appreciation in the property (or risk depreciation in this market), plus with the housing market in bad shape I'm thinking there will be plenty of renters (like myself). What do you all think?
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for every year the money will sit, consider putting 10% of in in equities. Put the rest in intermediate term bonds.
So if you could see yourself buying in less than 12 months, keeping it all in bonds or money markets makes sense.
If you could see yourself not buying for 7 years, then a 70% equity-30% bond position makes sense. If you do this, each year sell 10% to bonds (so 6 years out is 60%, 5 years 50%, 4 years 40%... the last year would be 10% equites and 90% bonds, for example).