I have 100K - New to investing. What should I do?

[Marimar Hernandez]

Hello,
I am brand new to investing. My husband and I bought our first house when we were 22; using my parents as co-signers.
Now, we are 25 and we have rented our 4 bedroom house and moved back with his parents to save some $$ in order to buy a condo in cash (the 4 bedroom house was too big for us; and far away from work). The tenants paid a full year of rent upfront.
Properties in the Bay Area are selling fast to all cash investors.

As of now, we have been able to save 100K but need it grow in order to buy our condo for cash.

What do you recomend? We do not have any investments as of right now.

[Jon Holdman]

First, don't post on public forums like this that you have money available. That's just asking for trouble.

Second, be sure that property you've rented actually cash flows. Not much in the bay area actually does. So, that may be actually hurting you. Unfortunately, buying then selling three years later is almost certainaly going to cost you a ton of cash with the closing costs. So a small loss on the rental may be better than a big cash hit to sell.

A years rent up front makes me nervous. Have you been there and had a look?

A residence you live in isn't really an investment. It might seem that way if you compare the value now to the price paid 30 years ago. But factor in interest, insurance, taxes, maintenance and 30 years worth of upgrades, and you're probably spent more than you could net from a sale. There are certainly exceptions, but they're exceptions and not the rule.

That said, you have to live somewhere and living with parents probably isn't a long term solution. Buy what you can afford that meets your needs.

DO NOT invest that money in anything riskier than bank CDs. You say you want it in less than a year. You can't afford to take any risk. Nothing is going to significantly grow that money in one year without a LOT of risk. And that means your money may shrink just as well as grow. You can't afford the risk.

If you want to pay cash, you're just going to have to wait. But interest rates are incredibly low right now. Locking in long term, fixed rate financing may be your best option if you want to buy sooner rather than later.