best way to sell investments to buy home

[alloykat]

If I want to buy a home all cash when the market goes down and I need the assets in my portfolio of stocks/bonds/mutual funds for the for payment, any ideas on how to best maneuver this from a tax/financial perspective? I assume if I sell now and transfer funds to my personal checking account, I will pay a lot in capital gains obviously, but I don't want to find myself in a situation where the value of my portfolio has decreased so much that I can't afford as much home as I would like. Thoughts on what specifically I should ask my accountant/FA or does anyone have any experience with this?

[PhysicianOnFIRE]

I've done this. I suppose the best case scenario is one in which you have no capital gains. Unfortunately, you don't have any control over the value of your portfolio. But you do have control over which lots you sell. Since 2011, brokers are required to keep track of your initial cost basis. For investments purchased earlier, it's up to you to track it.

I would decide how much house you want, and if you can do it in cash, try to estimate your capital gains taxes you would incur and decide if it's worthwhile. If you're not satisfied with the tax burden, sell the lots / funds with the smallest gains and finance the rest of the home. I wouldn't let your cost basis or tax avoidance strategy choose the house for you. Choose your budget, find your house, and figure out how to make it work.

I took a capital gains hit when I sold a substantial chunk of my taxable account a few years ago. I donated another chunk that year to my donor advised fund to avoid the top federal income tax bracket and 20% (+3.8%) long-term capital gains bracket.

Best,

-PoF

[alloykat]

Thanks!

 

[jz]

@alloycat,

"buy a home when the market goes down"   .  The premise  assumes that your desired real estate locale  will EVER  drop to suit your price.  Don't presume this   unless it's in a bubble.  Any assets stored in a checking or savings account awaiting a real estate drop could dwindle there for decades.  You can not predict the future of your desired market, and that is too much cash-equivalent to let dwindle.

I agree with PhysicianOnFIRE strategy , but I quibble with his spelling of the word "incure".  

 

[alloykat]

Hi Physician on Fire,

Which financial advisor/planner do you use (DFA funds)?

 

[alloykat]

PoF,

Dumb question before, I just noticed your website.

[PhysicianOnFIRE]

alloykat wrote:

PoF,

Dumb question before, I just noticed your website.

Click to expand...

There are no dumb questions. Only dumb people.

Neither you or the question was dumb, though. If everyone knew I had a website, it would see infinitely more traffic than it does. Here is my self-designed  portfolio, all Vanguard index funds, with a bit of tilting, slicing, and dicing.

[alloykat]

PoF,

I have been reading your blogs. Nice!