Where to stash future investment savings?

[Aaron Daniel]

Hello BP, 

I am saving money for my first investment property and would like to hear recommendations as to where this money should be stored until ready for use? 

I had the idea of saving the money in an ETF that tracks the S&P 500, but is this too risky? Another option of course would be a high interest savings account, but unfortunately that interest is about .50% for most savings accounts right now. Any input would be truly appreciated!

Thanks, 

Aaron

[Jennie Kesselman]

Hi Aaron,

All good options. I commonly see investors using self-directed IRAS and/or whole life insurance policies (see Nelson Nashs book "becoming your own banker") to fund real estate investments. The idea is that with either you have an asset that allows you to pull from your own money from it, invest, and then pay yourself back with interest that compounds for you. Just be careful if you explore either of these avenues it is set up correctly and you use a professional for further advise. Good luck!

[Thomas Rutkowski]

@Jennie Kesselman

That's not exactly how it works. You do not pay yourself back with interest. When you invest in real estate with life insurance, you are leveraging the cash value of a policy. Just as with a home equity loan, you are getting a loan secured by the cash value of the life insurance policy. As a result, you are paying the bank or the insurance company interest, not yourself.

This is a way to truly put your money to work in two places at one time. The cash value never leaves the policy and as long as you earn more than your cost of money, you are creating wealth outside of the policy as well. And, as long as the policy is a maximum over-funded policy, this should result in greater wealth accumulation than simply investing the same amount directly into real estate.

[Jennie Kesselman]

@Thomas Rutkowski Great input. I was more referring to a self-deferred IRA for interest/compounding, but by no means is this my area of expertise. Sounds like you would be a great resource for @Aaron Daniel with your wealth of knowledge in this area!