Do you still invest while saving for a house?

Question

Hi there, I have a VA loan and am saving to buy my first house. Saving to pay for the 2.3% processing VA loan fee. Although when saving, do you still invest into retirement and the stock market? Or just retirement? Or none?

Thank you for any insight.

Brandon Rush · Answer

Hey Kole,

Good question. As I always say in my posts, I believe lots of this comes down to your personal goals and where you are in life. If you are a younger man looking to get into investing, your real estate investments will outpace your traditional retirement investments. As you may already know, real estate investments have the key 4 benefits, cashflow/appreciation/tax benefits/loan paydown vs retirement investments which hold your money hostage until 59.5 in most cases or stocks, which are less guaranteed and highly volatile. I am not against retirement accounts, but I do believe it would be wise to get some investments under your belt and let those produce money for your first.

I would recommend listening to the Bigger Pockets Money podcast #212. A young lady here was in a similar situation and questioning whether she should be putting money into her various cash deferred accounts (ex. HSA, IRA, and etc) or investing them.

Lastly, for your first house, I would highly recommend it be a house hack. Its such an easy way to get started and make good use of your hard earned money. Jumping into a single family, just to have a single family for your first purchase, in my opinion, is one of the biggest waste of money.

Good luck on your journey, its going to be a fun ride!

Julia W. · Answer

Hey Kole you may also want to look into maxing out your TSP and using that as a way to fund things like down payments, etc. That way you are saving for "traditional retirement" with the option to deploy the cash (not all of it, there are are max caps) at very low penalty if the opportunity arises.

Maksu Ize · Answer

Use assets to buy liabilities.

Assets being investments

Personal house being a liability

James De Leon · Answer

Hi @Kole Moore,

Thats awesome that you're trying to buy your own house! You don't necessarily have to save for the VA funding fee because it gets wrapped in the loan, but I do understand if you want to pay it during escrow. Just know that you don't have to save for it, you could just take that 2.3% into account when doing your numbers. When saving, I try to put some of my money into the stock market just so that I know it will grow while not being used. You can also use a high-yield saving account, but do a lot of research to find out what works best for you. Personally I don't have a retirement right now, the RE I own is my retirement, though I don't recommend it to everyone. Good luck! Don't hesitate to reach out if you have any questions.

Brandon Rush · Answer

Hey Kole,

I can't tell you if thats a good or bad idea as we may have different goals and live in different regions. Fortunately, where I live in CT allows for me to house hack 3-4 family properties for good prices. I would say as long as you have a plan for growing your wealth and not becoming "normalized", you are on the right path. If you have not already, I would recommend reading David Greene's book on house hacking to get some ideas.

Good luck on your journey!

Bradley Dosch · Answer

Hey Kole,

This is a good question and one I think about a lot. First off, if there is an employer match, yes take it, no questions asked. Besides that it's up to your goals. Of course using stocks as a savings account is riskier but it's a good way to hedge against inflation. I think it all depends on your comfort level and how often you'll "need" that money. If you're only going to buy and hold a stock for a few months, it's probably not worth it. I'd say 9 ish months is my cut off and I am a pretty aggressive investor. As for the retirement account, the tax advantages can be great. I always max out my Roth IRA bc I love its flexibility and ease. For a employer sponsored 401k, the tax advantages are awesome as well but, while still possible, it's harder to liquidate that money to invest in real estate if that's your goal. However, 401ks usually have great margin loan options, meaning you can borrow against your 401k, like a HELOC for your stocks. This is, again, risky but it's another tool in the tool box for sure. Awesome idea using the VA loan and great to hear you're looking to house hack!

Kole Moore · Answer

@Brandon Rush Hey Brandon, thanks for the response. That sounds like a good plan. I will listen to that episode.

For my first house I was planning on house hacking to save with a single family. I was going to do single family due to where I wanting to live will not cash flow easily. I want to move to Cali or San Diego. I was going to save with my house hack single family, to purchase a duplex in a cheaper state like Arkansas that will cash flow a lot easier. How does that sound?

Any constructive criticism or feedback on my plan is greatly appreciated.

Do you still invest while saving for a house?

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