Best Way To Set Money Aside For Down Payments
What is the recommendation for where to put money for down payments and how much do you keep in cash? I’m wanting to slowly accumulate rental properties (maybe one a year). If my buy box is $200,000 homes and I need $50,000 for a down payment and closing costs, should I keep $50,000 in a high yield savings account and then sell stocks to replenish it when I buy a home? Should I keep a portion of my portfolio in a risk parity allocation and use that to replenish the cash or keep my portfolio growth focused and sell whatever is doing well at the time to replenish the cash?
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I'm also not a real estate investor and have no expertise in this field. But what makes sense to me is basically what you said. Funds that I cannot risk to lose value (such as needing $50,000 for a deposit), I will have in a high-yield savings account. For money I want to grow to use at a somewhat longer-term future date is invested in the stock market. And if you want short to midterm growth that isn't just sitting in a high-yield savings account, I think your idea of risk parity is a good one.
I would keep down payment money in cash, like a high-yield savings or money market. If I knew I wanted to buy about one property a year and needed roughly $50k, I’d keep that amount fully funded and ready. That money has a specific job and growth wouldn’t be the goal.
Personally, I wouldn’t plan on selling investments to replenish cash. I’d let my portfolio stay focused on long-term growth and keep a clean separation between investing money and near-term purchase money.
After buying a property, I’d rebuild the next down payment with new savings and cash flow rather than reshuffling the portfolio. For me, simple buckets would beat trying to optimize every move.
Hi! Um, not a real state investor. But I preemptively took some money out of investments for my own downpayment last year, and am currently slowly saving up for my next car which should happen in the first trimester of 2027.
Any money that I expect will be used within that kind of timeframe sits in a money market fund until I'm ready.