What To Do With Your Real Estate Windfall After Selling Your Home
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Many homeowners have made money in the hot real estate market over the past year, with some selling their homes despite not having planned it because the offer they received was irresistible. These homeowners may now have an unexpected financial windfall. So what are they supposed to do with these resources? Invest? Are you using it to buy another property? Allow everything to flow into retirement provision?
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Here is what financial experts say with a big cash gain right now.
Buy a less expensive home
Reinvesting your funds in real estate is one of the best ways to use those funds, especially if you’ve sold your primary or sole residence. Ideally, you will use the money from your sale to pay for the new property in full – and have money to spare.
“Buy a less expensive home than what you just sold,” said Ariel Acuna, president of LTG Capital. “Hopefully it’s one that doesn’t require you to take a mortgage.”
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You may even be able to buy multiple properties and use one for rental income.
“I’m a great example of how to take unexpected profits and invest them in rentals during this market,” said Deb Cleveland, real estate investor and founder of Small Town Dynasty.
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Cleveland sold their Rochester, New York home for $ 345,000 and used the money to buy and renovate a two-family and three-family home.
“All told, I invested $ 280,000 in both properties, with $ 65,000 left to use as you see fit,” she said. “I moved into the two-family house and have a passive income of $ 3,400 a month from the other four units – money I didn’t have in my four-bedroom house, which was $ 345,000.”
Funnel it into savings
If you’re buying a cheaper home – or aren’t buying a new home after you’ve sold a second home – you should put any leftover funds into savings, Acuna said.
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“Any excess money should be used to make sure you have adequate savings or emergency money reserves,” he said.
repaying debts; to repay debts
If you have outstanding debts – such as student loans – use your windfall to pay them off. However, according to Acuna, having an adequate emergency fund should take precedence over debt settlement.
Add money to retirement accounts
“Any cash left over after the debt is paid off should be used to ensure that your retirement income plan is on target,” said Acuna.
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Even if you achieve your goal, it’s still a good idea to add funds to retirement accounts so that they can top up over time. In addition, these funds can give you more financial flexibility in retirement.
Enjoy the leftover money
“If there is any cash left – and that would be great – feel free to spend it on yourself and give gifts to family, friends, charities, or other causes, or all five,” said Acuna.
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About the author
Gabrielle joined GOBankingRates in 2017 and brings a decade of experience in the journalism industry. Before joining the team, she was a writer and reporter for People Magazine and People.com. Your work is also at E! Online, Us Weekly, Patch, Sweety High, and Discover Los Angeles, and she was featured as a celebrity news expert on Good Morning America.