Should I Sell My House And Invest The Money


Make Sure The Property Is Improved But Not Too Much

How Should I Use The Money From Selling My House?

First, be aware that a rental must adhere to strict code requirements, so make sure that you have covered all the safety bases, says Stewart.

And then, focus on improvements that will bring the most bang for the buck by giving the rental an inviting look. Start by making sure your home has adequate curb appeal.

You dont have to go all out on landscaping, but you should ensure the lawn is freshly mowed, and consider planting flowers and touching up the front door for a pop of color.

On the interior, choose a fresh paint color for the walls and new hardware on cabinets for an easy and inexpensive face-lift. But dont go overboard, Stewart warns. Its tempting to make the kinds of upgrades you see on HGTV, but focus on the basics first.

And of course, you should make sure the entire property shines from a professional cleaning, which can reap more ROI than many fancier finishes.

Should You Fix Up Your Home Or Sell It As Is

Elizabeth Weintraub is a nationally recognized expert in real estate, titles, and escrow. She is a licensed Realtor and broker with more than 40 years of experience in titles and escrow. Her expertise has appeared in the New York Times, Washington Post, CBS Evening News, and HGTV’s House Hunters.

Kyra Baker is a fact-checker with nearly 10 years of experience working and assisting on editorial projects within the culture, arts, and publishing spaces. For the past eight years, she has worked as a fact-checker at Art Papers Magazine, an Atlanta, Georgia-based art magazine. Kyra has also fact-checked and edited for The Rosarium Publishing, the publishers of the science fiction anthology, “Mothership: Tales from Afrofuturism and Beyond.”

Emilie Dunphy / The Balance

Trying to decide whether to sell your house as is or invest in repairs? Your choice will likely depend on a number of factors, including the condition of your house and the state of the housing market.

Before you put your home on the market, learn which home improvements can boost the value of your home and improve the odds of a quick saleand which may turn out to be a waste of time and money.

A Brief Rundown On Bridging Finance

If you want to buy and then sell, but you dont have hundreds of thousands of dollars casually available to you, bridging finance might be a good solution for you.

A bridging loan is designed to bridge a short-term gap in funding, and its mainly used in this exact situation. Bridging loans are relatively short, generally ranging from six to 12 months, because your old home is expected to be sold within this time frame. Additionally, theyre usually interest-only loans, as this way youre not continuing to pour equity into your older home and your new home, which means youre needing to repay less.

When you take out a bridging loan, a few things will come into play when calculating what is known as your peak debt. Mainly, how much you owe on the old property, as well as how much youre purchasing the new home for. These two combined will allow lenders to decide how much you have the capacity to borrow.

Lets use a quick hypothetical example. If you still owe $300,000 on your old home, and your new home is $600,000, your peak debt is $900,000. Typically, lenders will only allow you to borrow up to 80% of this , taking into account the likely sale price of your old home and costs of selling.

This article was originally written in May 2010 and was updated on October 26, 2021.

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Managing Sale Proceeds During A Transition Period

If a home sale accompanies a transition in your job or lifestyle, you may not be planning an immediate purchase. Homebuyers become renters for many reasons, including moving to a new city and taking time to learn the lay of the land. If youre not ready to purchase a new home right away, then consider an investment product. For example, you could put your money in a longer-term CD, which comes with a higher interest rate than its short-term counterpart.

In addition to finding the right savings option, you may also consider using the proceeds of your house sale to pay down outstanding debts, like credit card balances. Eliminating interest expenses and lowering your minimum monthly payments can help improve your overall credit, which in turn could allow you to qualify for better mortgage rates and features when you do buy a new home.

Carrying Costs Can Really Work Against You

Should I Sell My House or Rent it Out?

Say, for example, you purchase a house for $200,000, and 10 years later you sell it for $300,000. Good investment? Only if you dont look too closely at the numbers.

If the house cost you $1,000 per month for principal, interest, taxes, and insurance , plus $300 per month for utilities, you will have spent $15,600 per year, or $156,000 for the decade that you lived in the house.

If you spent another $3,000 per year on routine repairs and maintenance, you will spend another $30,000. And if you did some of the more major repairs, like replacing the roof and flooring, and remodeling the kitchen and bathrooms, you probably easily sunk another $50,000 in during the decade.

Thats a total of $236,000 over a 10 year period, to get a $100,000 gain on the sale.

While it is certainly nice to walk away from the house with $100,000 more than you paid for it, the math doesnt support the idea of the house as a winning investment. And we havent even accounted for transaction expenses , inflation, or for the fact that the value of the house may not rise that dramatically over the next 10 years.

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What To Do After You Sell Your House

Youre going to need to do something with any proceeds you have left from the sale. Plus there are tax implications to consider, and if you havent already, you need to think about where youre going to live long term.

Here are some tips from Tyson and Brown that can help guide you after you sell your house:

Lowered Perception Among Potential Buyers

Thereâs a psychological element to selling a house soon after buying, whether you like it or not. Even if your local market has seen a big increase in demand, your homeâs price may stagnate if people assume youâre selling because something is wrong with it.

This is one reason why itâs a good idea to hire a real estate agent rather than sell by yourself if youâre selling soon after buying. A real estate agent can help with marketing and alleviate concerns of potential buyers by answering all of the questions that arise and assuring them youâre not selling because thereâs a problem.

Not sure where to start? Check out Orchard, which has services that are particularly helpful for people looking to line up the sale of their old home with the purchase of their new one.

Nick Perry

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Questions To Ask Before Reinvesting Proceeds From Your Home Sale

As were more than 12 years into a bull market. Selling a property to cash in the gains is becoming more common. At the same time, demand for real estate has never been higher post-pandemic.

With mortgage rates still low, massive gains in the stock market, and a desire to live more comfortably at home, demand for real estate will likely continue for a long time. Personally, I believe national housing prices will grow in the high single-digits for the next three years.

Before you sell your home, here are some questions you should first ask yourself.

1) How much will the sold house be worth in 5, 10, 20 years? The goal is to come up with a baseline financial target to shoot for. Either use the assets historical annual rate of return over a 50 year time period or a risk free rate plus a reasonable premium. Inflation is a powerful force that should be ridden for as long as possible. For example, it requires at least $3 million today to be considered a real millionaire thanks to inflation.

2) What does your net worth allocation look like post sale? Once you find out, you can make a better assessment on where to allocate capital. After an extended period of time, your net worth allocation may skew more towards one asset due to outperformance.

3) How do you feel about the current economic environment? You are either bullish, neutral, or bearish. Make a best estimate of where we are in the cycle by studying previous cycles and extrapolating current data into the future.

Heres How Ive Reinvested The Money So Far:

Should I Sell My Single Stock to Pay Off My House?

These are the three main categories that accounting for the majority of reinvested proceeds. Theyve all done well so far.

Municipal Bonds: $500,000 into various individual California municipal bonds with a 3% 4% tax free coupon, which is equivalent to a 4.4% 5.9% gross yield based on a 32% effective tax rate . Ive always enjoyed keeping a good amount of low-risk/risk-free investments because it ironically allows me to take maximum risk in my life: moving cities, switching firms, starting a business, retiring early, etc. Target annual return : 5%

Real Estate Crowdfunding: $250,000 into multiple real estate crowdfunding projects, which brings my total to $500,000 + a $10,000 Conshy, Pennsylvania commercial project. The fund made new investments in Virginia, Dallas, Seattle, and Utah.

This investment is my way of reinvesting a portion of the proceeds in 100% passive real estate that hopefully has more upside than San Francisco real estate, which has started to slow. Target annual return: 8% vs. their 15% target return.

My favorite two real estate crowdfunding platforms are Fundrise and CrowdStreet . Both platforms are free to sign up and explore.

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Invest Your Home Sale Proceeds To Make Money Out Of Money

Logical investments provide you with more income down the road. The key is knowing how to use your home sale proceeds to invest in financial assets that will provide profitable returns.

Buy another property.

Remember how much you bought your house for, and how much you can sell it for now? Not a bad investment, right?

Most people, when they sell a primary residence, take the funds and reinvest it into their next house, says Chris Carter, who ranks in the top 2% of 2,633 real estate agents in Jackson County, Missouri.

Its common to sell a home, then turn around and use the money youve gained to purchase another home, and repeat the process down the line.

If you dont want to buy a new home to live in, you could use the money to purchase an income property. From there, you can rent it to tenants to make immediate income and grow equity in the property over time.

If you plan to buy another property with the proceeds of your home, Carter says to be prepared to put money down upfront. You may need anywhere from 3.5-20% of the sale price as a down payment for a mortgage, depending on the loan you choose.

Talk with a professional first and figure out what you can afford, how youre going to structure your loan, what youre looking at for a monthly payment and the down payment, and where that money is coming from, Carter says.

Explore the stock market.

Take all the money you made in your home sale and turn it into more money with the purchase of stocks and bonds.

Should I Make Repairs

As a seller, youll be required to disclose any known issues with your home to buyers. You arent required to make repairs, but youll likely need to price your home based on the costs of needed repairs or you may need to offer a concession to the buyer so they can do the repairs themselves. Expensive repairs like fixing anHVAC unit or fixing a pool, for example, can be a deal breaker for buyers looking for a move-in ready home.

One of the advantages of selling to Opendoor, iswe can handle any necessary repairs allowing you to skip the work and move on your timeline. Our philosophy is to look for things that the next reasonable buyer would want to fix. These are items that impact the safety, structure, and functionality of the home. Here arecommon repair items our estimators find.

Before selling, it may be tempting to undertake large renovation projects to improve your home value, but not all projects will significantly increase your home value. The impact of a home improvement project or upgrade varies based on the market youre in, and youre existing home value.

For example, based on data from our home improvement value calculator, a finished basement in Portland is 5x more valuable than finishing a basement in Atlanta, a roughly 13% increase on the median home value versus 2.5% respectively.


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You Will Save Money Over Time On Mortgage Interest And Mortgage Insurance

When you buy in cash, youll save on mortgage interest, which can add up to a small fortune over time. A homebuyer purchasing a $200,000 house on a 30-year fixed-rate mortgage with a 4% interest rate will pay a whopping $143,739.01 in interest over the lifetime of the loan. A homebuyer purchasing a $200,000 house in cash will not pay a dime in interest to a mortgage lender.

Additionally, a homebuyer that puts less than 20% down will have to pay private mortgage insurance , which ranges from 0.5% to 1% of the loan amount annually. When you pay in cash, private mortgage insurance is not required.

You Can Offer To Waive The Appraisal Contingency

What Should I Do With the Money From Selling My House?

The reason cash offers are held in higher regard is because they alleviate some of the contingencies in a traditional purchase agreement, says Erick Monzo, a top-selling real estate agent in Detroit. Buyers who are purchasing a home with a mortgage loan must have the home appraised so the lender is assured they arent loaning more than the house is worth. If someone offers cash, as an agent representing a listing, I know that person is not going to have to get the home appraised, says Monzo.

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Appreciation Is The Magic Ingredient But Its Not Guaranteed

Finally, lets revisit the primary reason why so many people consider their house to be an investment. The whole notion rises and falls on the future value of the property. During times when the value of the house increases, people commonly think of their houses as investments.

But during the financial meltdown, and particularly in certain markets, not only did property values not increase, but most fell. Some fell spectacularly. For people in that situation, not only was their house not an investment, but it had become a major liability.

The possibility of a flat or declining housing market can no longer be discounted. Should that happen, youll be forced to live in your house much longer than you expect, and youll probably find that you can neither sell the property, nor borrow out the equity.

That doesnt sound much like an investment at all. And its probably best that you think of it as a place to live, rather than as an investment.

So where are we going all this? Basically here: Dont think of your house as an investmentand make sure that you continue to put money into true investments, like financial assets or real estate that produces rental income.

And then kick back and enjoy living in your house. Thats the real purpose of owning one.

Where Should You Put Your Money When Inflation Is High

It’s been a long time since Americans had to worry about inflation. Inflation is the rate at which prices go up in the economy and it’s measured as a percentage increase from year to year. Inflation is why the average new car cost $3,000 in the late 1960s, but now sells for closer to $40,000. Inflation isn’t a problem as long as it increases slowly and steadily, and wages are able to keep pace.

Since the Great Recession of 2007 and 2008, the inflation rate hasn’t inched higher than 3.2 percent and has mostly stayed below 2 percent. In fact, you’d have to go back to the late 1970s and early 1980s to find double-digit inflation rates in the U.S.

But a May 2021 report from the Bureau of Labor Statistics has some economists sweating. In April 2021, the inflation rate for the previous 12 months jumped to 4.2 percent, an increase that caught even the Federal Reserve by “surprise,”according to The New York Times. This was the fastest pace of increase since 2008. From March to April, the price of used cars and trucks rose a whopping 10 percent, which was the largest one-month increase since the BLS started tracking such data in 1953.

But what if conventional wisdom is wrong and high inflation is here to stay, for months or even years to come? What can the average American do to protect their savings and investments against a slow and steady erosion of value? We spoke to a pair of financial experts to identify the smartest places to put your money when inflation is high.

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