Cash on sidelines for house purchase in 2-3 years?

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roadnottaken
Posts: 63
Joined: Wed Jun 05, 2019 6:01 am

Cash on sidelines for house purchase in 2-3 years?

Post by roadnottaken »

We're very fortunate to be receiving a windfall from a company acquisition (low 7-figures) and are planning on upgrading our house to accomodate our growing family. We're not really in a rush (kids are still small) but it seems likely that we'll want to move in the next few years. The housing market is insane right now (SoCal) and we'll probably also try to time it to fit with one of our kids transitions from elementary- to middle-school in ~3 years. Normally I wouldn't try to time the market in any way (real estate or stock) but in this case since we're planning on a relatively near-term purchase, do you think it makes sense to leave some cash on the sidelines (or in TIPS or something) so that we're ready to make the move no matter what the markets do?
SubPar
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Joined: Mon Apr 27, 2020 11:48 am
Location: MN

Re: Cash on sidelines for house purchase in 2-3 years?

Post by SubPar »

In a word, yep.

We are probably 18-24 months out from starting the hunt for a home to accommodate a growing family, as well. I don't want to count on existing home's equity as the basis for a down payment -- who knows what's going to happen -- so we're building a robust cash cushion to ensure we have adequate reserves when the time comes to take the plunge.
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lthenderson
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Location: Iowa

Re: Cash on sidelines for house purchase in 2-3 years?

Post by lthenderson »

Cash is king to being able to move quickly and secure a nice house, especially in a market like what we are in now. I would absolutely keep it in liquid format if I was looking to make a move in the next 2 to 3 years.
Alto Astral
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Re: Cash on sidelines for house purchase in 2-3 years?

Post by Alto Astral »

Keep it liquid and buy your next house in cash. It will give you an edge with competing offers
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tennisplyr
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Re: Cash on sidelines for house purchase in 2-3 years?

Post by tennisplyr »

Yes. We bought our current place all cash 4 years ago before it hit the market…things went smoothly and quickly.
Those who move forward with a happy spirit will find that things always work out.
babystep
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Re: Cash on sidelines for house purchase in 2-3 years?

Post by babystep »

mortgage on the current home?

If yes then maybe pay it off. Assuming planing to sell the current home then cash from sell can be used to buy the next home and then you could just invest the remaining cash per the AA. This provides guaranteed return equals to the mortgage rate for 3 years. The valuation change for the current home and new home will be inline so you know that you will be able to afford compared to investing in stocks and the stocks going down.

If no mortgage and you want to sell current home then you likely have enough equity to buy the home. You could just invest the cash.

If you don't want to sell the current home then you would like need to keep some cash position or short term fixed income for the purchase since we know 3 years is very short-term for equity.
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