What to do with savings in the next 2 years?

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fujmeister's picture
fujmeister
Status: Member (Offline)
Joined: Apr 24 2009
Posts: 4
What to do with savings in the next 2 years?

Hi all, I live in an apartment in the Bay Area right now, paying $1,500 in rent, utility is only $30/mo. I am thinking of buying a house to settle down (have a bit of land etc.) in 2-4years, maybe more in the outer Bay Area where I can get a bit more area. Because I do have family here, I am reluctant to just pack up and move to a different state where I don't know anyone and have to start life all over again. Unfortunately, the Bay Area is expensive and earthquake prone.

Because of my work situation I cannot move to the area I would like to purchase a home until at least 2 years later. Renting in an apartment complex w/o a balcony, installing solar panels & growing my own food, etc are out of question.

I have bought some gold, silver (about $15K) and been doing some survival prep (storing water/ food etc). I have $150K saved up and should be able to save another $30-50K per year in the next few years if current income is an indication (I am self-employed, have multiple streams of income), 

But what should I do with the saved up money in the next 2-4 years so I can at least match inflation?

I would have bought more gold/ silver if it is for long-term (10-20 years). But I do want my money to be more liquid (in case we see a house we want to buy in 2 years, and Gold happens to be down)

Right now I am getting 0.25% interest in my savings account, not even close to match inflation.

I would be happy to make 3-5% on my savings if there is a safe way, painless to invest.

Here are a couple of ideas:

1) invest in LendingClub.com. I'd probably get 5-8%

2) switch to an online bank that pays more interest. Ally Bank has 0.9% (still not beating inflation though)

3) Buy T-Bills (though they seem complicated)

Any thoughts? 

Thanks!

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1461
Ally Bank used to be GMAC;

Ally Bank used to be GMAC; General Motors Automotive Credit. Possibly not in good financial shape, yanno? Check what shape they (or any other bank) is in before you invest.

If I were in your position I'd buy a place to move to, preferably farm land, and rent it out to qualified tenants to cover the mortage.

TechGuy's picture
TechGuy
Status: Silver Member (Offline)
Joined: Oct 13 2008
Posts: 155
"If I were in your position

"If I were in your position I'd buy a place to move to, preferably farm land, and rent it out to qualified tenants to cover the mortage"

Unless you know the tenenats very well do not rent it out. I've heard too many horror stories about tenants trashing properties, selling off appliances, etc when the landlord is far away. Its can be a bitch to evict non-paying tenants, since the courts usually favor the tenants over the landlord.

To be honest there are no really low-risk investments that will beat inflation. However why the prices of food and energy are rising, Real Estate is still in a long term decline. Consider that the by delaying a purchase, your making an investment because the prices of real estate continue to fall. 

I think your best effort over the next two years to develop income sources that are not dependant on the area which you live. Ideally if you decide to relocate to a rural region and don't won't have cash left after a RE purchase you need a good income source. Focuse on that investment.

Unfortunately I don't think $200K-$250K in savings is going to be enough. You'll likely need to save up around the $300K-$500K, so you can purchase a decent sized properly in a good region with plenty of rain fail, with a modest home. have some savings left over for preps and emergencies. If your handy and willing to endure some hardship, you can save money by preping the land (clearing, driveway, etc) and building the house yourself. You could also save on land costs if your willing to relocate to the redoubt (Montana, Wyoming, Idaho).

One last note: if you see investments advertised on TV (ie Ally Bank) stay away!  Consider that just about every investment company that advertizes on TV has had serious problems. Rememeber all those MF Global Commericals? How about the AIG commericals, Enron, Repco, UBS, RBS, Investco, Merrill Lynch, etc. These companies are desperate for cash and almost certainly have major issues that are never disclosed in their advertisments.

Wendy S. Delmater's picture
Wendy S. Delmater
Status: Diamond Member (Offline)
Joined: Dec 13 2009
Posts: 1461
tenants - FYI

I've been a landlord and learned some useful lessons. First all, all prospective tenants get a credit check. You get three referrals from each potential renter, too, and ask for a first and last months's rent and another month's rent as a damage deposit. This weeds out the drones.

But renting out farm LAND is even easier. If you can afford it just mothball the house, if there is one, through a property management company who will check on it once a month to make sure no one is squatting. (If nearby I'd drive out and check on it, too.) Then rent the land to a nearby farmer to use for a small sum This means the land will not grow bushes and trees which are very expensive to remove. Here in the Carolinas we rent family land to local farmers for easy crops like Bermuda hay: they get 3-4 crops of fodder a year and we get income from the land - or they let cattle graze there and we get free fertilizer. And some of the land is under the family's direct control as forested land: we pay a forester to come in and keep the brush down and every so often a logger comes in and we replant. Very low maintenance. You can do things like that from a distance.

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