How to best make my money work for me?

[eaglecap]

I graduated from dental school six months ago. My wife (a physician) and I have almost completely wiped out her student loan dept. We have maxed out all tax deferred accounts and we have an emergency fund.

I have 18 months left on my current contract and then will be ready to buy a practice. We plan to purchase a home after I buy a practice. We own a rental property (without a mortgage) that we would like to sell because it is not in the current city we live in and the real estate market is booming in that city. We need to sell it within two years to avoid capital gains on about $200K (home should be sold for about 475K). I may want to have access to some of the money for working capital for the new practice to be purchased in the fall of 2018.

What should we do with the money from the sale of the rental property, around $475K?

1. Recommendations for low risk short term investments until I get things with the practice purchase as well as residential home purchase figured out? Maybe a CD or a bond fund for 12 months?


2. Should I or should I not utilize it for the purchase of the practice. Could I loan personal money to the practice to pay off part of the bank loan?


3. Would it make sense to purchase our new home outright with the money? If not, what else should I do with the money long term? We are not yet ready to buy a home until I decide on a practice to purchase, so we are currently renting.

FYI: Some may wonder how I own a home without a mortgage as a new dental grad. For those that are curious, dentistry is my second career and I have always been very frugal with my finances.

[StarTrekDoc]

Congrats!  I've always admired 2nd career folk going into the profession.

#3 as soon as possible if you're certain on the location of your HOME, not your career.  Until then, keep the $$$ in real estate working for you since it's an appreciating market.  Don't pull it out until you're ready to buy.

[eaglecap]

StarTrekDoc wrote:

Congrats!  I’ve always admired 2nd career folk going into the profession.

#3 as soon as possible if you’re certain on the location of your HOME, not your career.  Until then, keep the $$$ in real estate working for you since it’s an appreciating market.  Don’t pull it out until you’re ready to buy.

Click to expand...

Thanks for the response.

#I am waiting to buy the home until I am sure of where I want to buy a practice.

#As far as keeping the money in the market the issue is that I will have to pay capital gains taxes if I do not sell in the next two years.  I also do not want to continue to be a landlord in a city where it is difficult to evict someone should they choose to stay longer then the rental agreement, again because I need to sell in a certain window to avoid the capital gain taxes.

 

[StarTrekDoc]

Two years is a long time.

We have two properties out of town and use a property manager.  They will handle all issues, including eviction.  If you don't want to pay the fee with a steady renter, if you have issues, you can engage the local Rental Association to assist with the filing and eviction/lockout if needed.  Usually won't get to that level as most don't want to get an eviction on their credit history.

 

 

[PhysicianOnFIRE]

eaglecap wrote:

Recommendations for low risk short term investments until I get things with the practice purchase as well as residential home purchase figured out? Maybe a CD or a bond fund for 12 months? Should I or should I not utilize it for the purchase of the practice. Could I loan personal money to the practice to pay off part of the bank loan? Would it make sense to purchase our new home outright with the money? If not, what else should I do with the money long term? We are not yet ready to buy a home until I decide on a practice to purchase, so we are currently renting.

Click to expand...

A debt-free dentist and a physician team? Boom goes the dynamite.

Sounds like you're ready to sell the rental, and I'm assuming you lived in it for at least 24 of the last 36 months. I don't think you'll regret letting go, especially if you can profit handsomely.

If you have a chance to put cash towards either a practice or a home, I would put it towards the practice. A home loan (mortgage) will likely have a lower interest rate and the advantage of being tax deductible, which may not be true if you take out a loan to purchase the dental practice.

My father is slowly selling a dental practice (along with my Godfather) to the next generation. It was once my Grandfather's. Perhaps I should take on dentistry as a second career.

Cheers!

-PoF

 

 

[jfoxcpacfp]

1. There is no such thing as a low risk short term investment. An investment is by its very nature meant to provide long-term growth. High volatility (which some refer to as risk) over the short term smooths out to a more predictable growth pattern over the long term. A CD is not an investment, a bond fund is highly risky over the short term. A high quality corporate bond timed to mature at date of need would be perfectly acceptable, but that would be a debt instrument, as opposed an investment. See When Low Interest Rates Are OK.


2. Probably not, but it depends upon your financial plan and your long-term goals. Yes, you can loan personal money to your practice to pay off part of your bank loan.


3. Absolutely not, at least imho, with mortgage rates at historic lows.

Totally agree with selling the rental before you have to pay LTCG taxes.

You have many excellent tools in place, but could probably use an architect.