Where to put money?

Question

Hi, I am currently looking for a home to buy to use as a rental property and that process may take a week or 6 months I am not rushing into anything when I see the right place I will know it.

Now on to the point of this thread. I have roughly 10,000$ saved up and I want somewhere to put it that is safe and liquid while making me a little money in the meantime. I have been using Betterment to store my money for a while and the money has always trended upwards when it has been in there and the money is pretty liquid (it takes 4 or 5 days to get it out) but I am afraid that there will end up being a huge loss on the market during the time I find the right house and will have 2 options either let the house go or accept the loss.

So I am heavily considering putting my money in here instead. 5% interest is not to bad for a bond like this and the risk seems minimal. Worthy Bonds can be cashed out at any time, I am intending on calling them tomorrow to get a better feel for the time frame it takes to get money back.

https://worthybonds.com/index.html

I also intend on putting the rents I get from tenants in here so that can be growing a little while I wait to get enough to get another property (probably 1 year to 1.5 years).

Just seems to be a huge waste to let the money sit into a savings account and get virtually nothing for it when I can make a little. Just wanted to know what you guys thought or if you have any better ideas for a safe, liquid way to grow money. Thanks

John Acheson · Answer

According to Warren Buffet and many gurus the best return is education.

I think I read somewhere that Buffet reads 400 pages everyday!

I say the best price is FREE. Building business and personal credit is FREE.

Starting a LLC can be FREE with bank bonuses. Learning can be FREE.

I would take a little bit of that money and

1) start, grow, season a CRE favorable LLC to excellent credit

2) make as many contacts and spend a little learning CRE

3) grab cash/rewards bonuses on the way as you build two credit profiles to excellent

then in the 3rd year after you have tax returns

find your 1st CRE deal after this market cools...

This plan could be the most powerful $500 you spend in your life!

Clayton W McGehee · Answer

I actually spoke to the CEO of Worthy Bonds

Me: "Hello, I have been reading a lot that you have said on the internet! But down to business my greatest fear is me dropping a good chunk of money into Worthy and you guys going out of business I would be out of my money. I doubt I will ever have a fortune in there but I am looking to put roughly 10,000 dollars somewhere and let it grow while I look for the right rental property investment and then once I do find the right investment put the monthly rent and allow that to grow as well. 5% is not a huge amount of interest but it is much better than what you get in a savings account which is virtually nothing. Most other liquid investments offer 2% interest or so. What can you say to calm my fears of you closing the doors in 6 months?"

CEO: " Hello again. Glad you did some research and read things we said on the internet  I totally understand your concern as we are a brand with which you are not familiar. What I can tell you is that we could essentially close our doors and it does not mean your investment goes with us!  Meaning the money from bond sales does not go into our operating account. The bond sale proceeds go into a separate FDIC insured bank account until the funds are disbursed directly into our secured loans - so your money is either in the bond account at the bank or at work in a secured loan. If anything were to happen to us, a Trustee would be put in place to continue to service the loans as they worked to have the Worthy capital replaced by other lenders so all the lent capital could then be returned to our bondholders. That said, we certainly don't see Worthy going away as we are only growing!"

Me: " I really do appreciate the time you put into your responses. I'm just trying to decide what I think would be better for me. I'm not a long term investor I am just treating Betterment (or possibly your service) as a high yield savings account. What I like about your service is I do not have to worry about a 10% drop in the stock market and have to wait it out to get my money back and if I put in a year's worth of rental payments in your account I should get roughly half a payment extra because of the interest. You do seem very legit to me and I do not think you would lie to me. I am very likely to go ahead and move a small amount of money over to your service and see what i think and then take it from there."

ME: (again)." So you can absolutely guarantee that my money will either be sitting in a bank account or loaned out to a client? It wouldn't be used for operating costs?"

CEO:  " Hi Clayton.  We are regulated by the Securities and Exchange Commission and are independently audited on an annual basis so must conduct our business strictly by the book so to speak...so yes, we are legit 😀  And yes, that is how our flow of funds work - bond sale proceeds go into their own account and then to our borrowers. But also it is important to note that the bonds are backed by our entire portfolio of secured loans, your money is not just going into one loan/client as you reference above. Again, thanks for your interest in Worthy."

I am convinced enough based on this to drop in a small amount. Just thought I would pass it along. I am sticking with Betterment for most of my money for the moment and will revisit the issue later.

(All of my debt is low interest, not really much advantage to paying it off early)

Joshua Huang · Answer

If you have any debt, I would start paying those off with the $10,000. Paying off the interest on the debt is basically an investment with a guaranteed/fixed rate

Clayton W McGehee · Answer

I get that and I am OK with taking that risk with a company like Betterment or Wealthfront. It is very doubtful those companies are going anywhere and of they do I would still own assets.

But Worthy Bonds is a small startup that is much more likely to go out of business and if they do all I own is a "worthy bond" that has no value elsewhere.

If I can't find something liquid-y with around a 5% rate I will probably just stick with Betterment. I do appreciate your input though.

Aaron K. · Answer

Anything that pays more than 2.5% probably won't be FDIC insured, you might go with a no penalty CD with Ally bank, will be insured and as long as you don't need the money until a large purchase it will earn you more than a standard bank account.