Need to reinvest unused house purchase cash, but retain flexibility

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One Ping
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Need to reinvest unused house purchase cash, but retain flexibility

Post by One Ping » Mon Jan 13, 2020 9:15 pm

A little over a year ago we were seriously looking at moving and buying (for cash) a "new to us" and more expensive :oops: home in a retirement community. I wanted the funds we would need to close to be liquid so we could MOVE FAST when we found the right house. I sold some assets ($400K, no CGs) and dumped them into VMFXX and we began seriously looking. Fast forward to today ... the more we looked, the more we decided we liked where we are. :oops: So now I have $400K sitting in cash in VMFXX!

My plan is reinvest this cash, minus about $50K, at our desired asset allocation. (We will need ~$50K to supplement our income shortfall (i.e., cover our expenses) until I start SS @ 70, ~about 2 years).

This seems pretty straightforward and reasonable until you realize ... there is still good chance (~10-25%?) we (i.e., my wife) will find 'that perfect house' and we will need the cash back. If that were to happen, I guess I'd just sell the assets again, only this time, with any luck, probably with some capital gains involved. :oops: (whole lotta face palms in this exercise :oops: )

My questions is:
Am I missing some other way to do this ... reinvest to potentially generate more return on the asset than just with cash, but retain flexibility to 'liquidize' it fairly rapidly in the future at little/no cost? In other words, how can I have my cake and eat it too.
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Random Poster
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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by Random Poster » Mon Jan 13, 2020 9:16 pm

Use Treasuries?

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One Ping
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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by One Ping » Mon Jan 13, 2020 10:26 pm

Random Poster wrote:
Mon Jan 13, 2020 9:16 pm
Use Treasuries?
Never thought about individual treasury funds. Some sort of diversification across these?

XX% Vanguard Short-Term Treasury Fund Admiral Shares (VFIRX)
YY% Vanguard Intermediate-Term Treasury Index Fund Admiral Shares (VSIGX)
ZZ% Vanguard Long-Term Treasury Fund Admiral Shares (VUSUX)

Or did you mean buy the individual treasury bonds?

FYI - This would be in a taxable account, so I don't how that would square with the nominal advice to hold bonds in tax-advantaged accounts.
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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by Sandtrap » Mon Jan 13, 2020 11:09 pm

In your situation. . . . . and "if" you are going to continue shopping for your "dream home". . .

Criteria for house fund placement:
1. Security of Principal (an absolute. . it wouldn't be a sound move to chase % returns over this)
2. Liquidity
3. Accessibility

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rasta
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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by rasta » Mon Jan 13, 2020 11:17 pm

buy t-bills

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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by Random Poster » Tue Jan 14, 2020 10:51 am

One Ping wrote:
Mon Jan 13, 2020 10:26 pm
Never thought about individual treasury funds. Some sort of diversification across these?

XX% Vanguard Short-Term Treasury Fund Admiral Shares (VFIRX)
YY% Vanguard Intermediate-Term Treasury Index Fund Admiral Shares (VSIGX)
ZZ% Vanguard Long-Term Treasury Fund Admiral Shares (VUSUX)

Or did you mean buy the individual treasury bonds?

FYI - This would be in a taxable account, so I don't how that would square with the nominal advice to hold bonds in tax-advantaged accounts.
Well, I was just thinking of putting the money in something that might give you a slightly better return than a money market would (although current rates at Vanguard would suggest otherwise), easy liquidity, extreme safety, and little to no tax hit upon selling.

A money market fund might be better than treasury funds or individual bonds, depending on the current yields, and would result in no tax hit at all, but I don't think that there is anything other than treasuries that would also meet your criteria.

If you were to go with a treasury fund, I'd stick with the short term ones, particularly if you think you might need the cash within the next 2 years.


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RickBoglehead
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Re: Need to reinvest unused house purchase cash, but retain flexibility

Post by RickBoglehead » Tue Jan 14, 2020 11:48 am

One Ping wrote:
Mon Jan 13, 2020 9:15 pm
In other words, how can I have my cake and eat it too.
No such thing.

CDs, Treasuries, ... - that's all cash, and you'll be lucky to 1.85 - 1.9%.

Keep in mind that the last year, when you held the funds in cash, you lost the potential for 30% returns in the market.

Assuming you did a conservative 50/50 allocation, you would have still passed 20%.

Do you have other assets you can draw on if the value of the equity portion drops, in the slim chance that you do decide to buy a house?
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