Sell investments for house down payment ?

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ps56k
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Sell investments for house down payment ?

Post by ps56k »

I've seen other similar Q&A - but will toss this out there for general feedback -

Our married son is out in San Diego - where housing prices are sky high.
They would like to buy a house - they are renting a 3bd 1ba house for $3,000 !!!

When he was a toddler, I setup a UTMA brokerage account at Schwab - and have added various stocks over the past 25 years.
The account has grown - with the likes of Disney, McD, Google, Apple, Amazon, etc -
and now it's a joint account between us.
He has never really taken an interest in the account - but knew it was there.

Here's the discussion -
does it make sense to sell some of your portfolio to fund the down payment of a house in California ?
A simple house may cost upwards of $800k - and 20% down would look like $160k.

SO....
#1 - does it ever make sense to sell some of your investments to fund a down payment on a house ?
#2 - if so - which holdings.....
those that have... largest market value, largest appreciation, and largest Cap Gains ?
or newer small balance ones with smaller tax bite of Cap Gains ?

OR ?????
tashnewbie
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Re: Sell investments for house down payment ?

Post by tashnewbie »

How much is in the UTMA?

What house price range would be his target?

What are his federal and state tax brackets?

Does he have other assets that could be used for the DP?

Does he plan to live in San Diego long-term?
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JoeRetire
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Re: Sell investments for house down payment ?

Post by JoeRetire »

ps56k wrote: Tue Apr 13, 2021 2:38 pm #1 - does it ever make sense to sell some of your investments to fund a down payment on a house ?
Yes. If there is no better alternative.
#2 - if so - which holdings.....
those that have... largest market value, largest appreciation, and largest Cap Gains ?
or newer small balance ones with smaller tax bite of Cap Gains ?
The ones with no penalties and the smallest tax hit.
it's a joint account between us
Hmm. A joint account between parent and son?
Talk with your financial advisor and/or tax professional before touching this. Make sure you understand who gets any tax hit and how much.
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sailaway
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Re: Sell investments for house down payment ?

Post by sailaway »

I am paying $2700 for a $700k house in San Diego and consider it a bargain from a rent/buy comparison. Seems like your son's numbers would work out similar. Even with San Diego's booming prices, renting has worked out in our favor over the last three years. This will be especially true if they end up looking at places that have Mello Roos (or what I like to call the hidden property tax), although with 1 bathroom it sounds like they are currently in an older neighborhood that would not be subject to Mello Roos.

I understand that they may want to buy for other reasons, but they should not necessarily buy just because they are paying $3k in rent.

To answer the question you actually asked, yes, it makes sense to sell investments. Otherwise, why are you invested?

Choose the lots with the least tax impact at the time of sale. If you have losers, the current market is as good a time as any to get rid of them and harvest those capital losses.
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ps56k
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Re: Sell investments for house down payment ?

Post by ps56k »

sailaway wrote: Tue Apr 13, 2021 3:21 pm I am paying $2700 for a $700k house in San Diego and consider it a bargain from a rent/buy comparison. Seems like your son's numbers would work out similar.
Are you renting or did you purchase the $700k house -

They are actually thinking of looking around Carlsbad .... they are around the Clairemont area now -
sailaway
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Re: Sell investments for house down payment ?

Post by sailaway »

ps56k wrote: Tue Apr 13, 2021 3:32 pm
sailaway wrote: Tue Apr 13, 2021 3:21 pm I am paying $2700 for a $700k house in San Diego and consider it a bargain from a rent/buy comparison. Seems like your son's numbers would work out similar.
Are you renting or did you purchase the $700k house -

They are actually thinking of looking around Carlsbad .... they are around the Clairemont area now -
Renting. The numbers work for us and our plans - we will not be here long term. Between Carlsbad and Clairemont is one heck of difference in any commute.
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cchrissyy
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Re: Sell investments for house down payment ?

Post by cchrissyy »

It doesn't sound correct that the UTMA account turned into joint. Are you sure? Is there a mistake? I suggest calling Schwab.
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RetiredAL
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Re: Sell investments for house down payment ?

Post by RetiredAL »

My son did that exact thing 15 month's ago using part of what had been his UGMA money.
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ps56k
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Re: Sell investments for house down payment ?

Post by ps56k »

cchrissyy wrote: Tue Apr 13, 2021 3:51 pm It doesn't sound correct that the UTMA account turned into joint. Are you sure? Is there a mistake? I suggest calling Schwab.
it didn't just happen - we made it happen after turning "age of consent"
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ps56k
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Re: Sell investments for house down payment ?

Post by ps56k »

sailaway wrote: Tue Apr 13, 2021 3:38 pm Renting. The numbers work for us and our plans - we will not be here long term. Between Carlsbad and Clairemont is one heck of difference in any commute.
He actually works in the La Jolla area - just moved down a year ago - from Pasadena
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ps56k
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Re: Sell investments for house down payment ?

Post by ps56k »

I've started creating some Sell Limit Orders to take a little off the top, and also the recent additions - to create cash.
It really is a hard decision to convert growing equity into a down payment vs higher mortgage vs .....
And... timing.... leave things until actually needed or do it now to make it more visible ?
Lastly - where to keep the proceeds for 6-12 months ..... with fixed at less than 1%
crossbow
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Re: Sell investments for house down payment ?

Post by crossbow »

In San Diego, it's probably cheaper to rent than buy an equivalent house at the moment. Whatever your son pays in rent will be less than what he pays in mortgage interest, house maintenance and CA property tax.
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Re: Sell investments for house down payment ?

Post by ps56k »

Wondering on the overall logistics or strategy for converting stocks into house down payment within 1 year.

1 - Just stay with Vanguard Total Stock (VTI) and sell parts as the timeline dictates.
2 - Sell some of the VTI and put into fixed income MM at low 0.50 % to have known amount in future..
3 - Sell some of the VTI and put into Vanguard Emerging Markets Bond (VWOB) to have high yield fixed income for future.
4 - or ...???
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