Paying Cash To Buy A House By Selling Stocks: A Mind Bender

One of the best ways to get a better deal on a home is by paying cash. Sellers prefer all-cash offers because there's less risk the transaction will fall through once in escrow. As a result, some sellers are willing to discount the sales price or take your cash offer over another offer with a mortgage. 

One way to pay cash even if you don't have all cash is to make an offer with no financing contingency. A no financing contingency offer says your bank or your rich aunt has you covered. If you decide to back out due to the inability to get financing for whatever reason, the seller gets to keep your earnest money deposit.

Another way to pay all cash for a house is by selling stocks. I've done so twice before and I'll probably do so again in the future. An asset transfer is one of the most common ways to pay cash since most people don't have enough cash lying around.

In this article, I'll discuss:

  • The process of selling stocks to pay cash for a home.
  • Some considerations before selling stocks to pay cash for a home
  • The psychological mind-bender you might end up going through due to fear and greed

Why I Invest In Stocks: Buying A Home Is A Big Reason

There are three main reasons why I invest in stocks. 

The first reason is for my traditional retirement. When I'm over 65 and potentially have no interest in making any sort of active income again. Every year, I contribute the maximum allowable to my tax-advantaged accounts. 

The second reason is to pay for my children's college education. I contribute the maximum gift tax limit amount to each of their 529 plans each year. If there is money left over after college, part of the funds will be rolled over into a Roth IRA for their retirement.

The final reason is to buy a home. Everything else can be paid for through active and passive income, e.g. food, clothes, trips, gas, electronics. However, given the sheer cost of buying a home, paying for a house with cash flow is impossible for me. I would need to save and invest for years in order to come up with the down payment. 

I believe stocks are types of funny money. There is no utility in stocks. Therefore, it's important to occasionally transform some of your stock gains into real assets or experiences. 

Since 1995, I've made and lost small fortunes in stocks. Over time, I've learned that once I've made enough from stocks to buy what I want, I sell. At the same time, I'm OK with not making as much in the future if I had held, because I will always still hold some stocks. 

The Latest Decision To Sell Stocks To Pay Cash For A Home

In 2022, my public stock holdings declined by about 25%, worse than the S&P 500's decline of 19.6% due to my overweight technology holdings. I regretted not selling more stocks in early 2022 given what a bonanza year 2021 was. 

In May 2022, I experienced a tremendous amount of real estate FOMO when I found a dream home. It was about 50% larger on a 100% larger lot with a view. It was a home I could see myself living until my last days. 

There was just one problem. The house was about 20% out of my price range, so I begrudgingly had to pass.

A Second Chance At Buying The House 

Then in April 2023, something positive happened. My public stock holdings had rebounded by over 20% while the home I wanted came back on the market at a price 7% less. I was intrigued! 

But after about a month of deliberation, I felt the price was still too high for us to comfortably afford, so I passed again. Following my home-buying guide had kept me out of trouble so far. Further, we were still enjoying our existing home we had purchased in mid-2020.

Although I had found my dream home, I was at peace with my decision to be happy with what we had. 

Two months later, however, the agent contacted me and said the seller would be taking the home off the market. She wondered if I had any last interest. I threw out a lowball offer 7.5% below their new asking price, which was already 7% less than last year's asking price. The seller refused. 

The Final Chance To Buy 

About three weeks later, in a last-ditch effort, I decided to write a real estate love letter to explain where I was coming from and make a connection.

To help blunt the blow of my offer price, I convinced the listing agent to be a dual agent and represent me. This way, the seller wouldn't have to pay a 2.5% commission to a buyer's agent that did not exist. 

From the listing agent, I knew that if the house was taken off the market it wouldn't come up for at least two years, until the seller's daughter graduated from high school.

For me, buying the house two years later would have been ideal. However, I also felt that by 2025 home prices would be higher and there would be little chance I'd win a bidding war if the house came back then. 

The seller ultimately accepted my offer with a begrudging but kind letter to me. ” After accepting my offer in July 2023, I began selling more stocks in order to pay cash for the house. I had already been selling some stocks in May and June in anticipation I might buy the house. 

By July 2023, the S&P 500 had risen another 8% from when the house re-appeared for sale in April 2023. Hence, I felt more emboldened to buy the house with each passing week. To be specific, I sold both stocks and bonds to pay cash for the house.

Let's now talk about all the considerations before selling stocks to buy a house with cash. The percentage of homeowners paying all cash is rising.

Percentage of homebuyers who pay all cash for a home

The Tax Implications Of Selling Stocks To Buy A House

Selling stocks creates a taxable event. Therefore, one of the biggest challenges is selling enough stock to buy a house without having a huge capital gains tax bill. A large capital gains tax bill can easily wipe away the price discount you get from buying a house with cash. 

To minimize your capital gains tax, you need to conduct tax-loss harvesting where you sell your losers to match your winners. For me, I had enough losers from unfortunate stock purchases in 2022 to offset roughly 80% of my winners. 

Here's the short-term and long-term capital gains tax rates for singles. Notice the large difference in tax rates if you hold your stocks for more than one year.

short-term and long-term capital gains tax rates for singles

Deciding Which Stocks To Sell Can Be Hard

If you've held a stock for a long time, you might get attached to it. The more attached to a stock you are, the harder it may be to sell. 

Winning stocks like Apple, Google, and Tesla have been winning for over a decade. Based on the employees who work there and the consistent innovation in technology, there's a decent chance these stocks will be higher 5-10 years from now. 

To sell these stocks, you must convince yourself that these stocks are overvalued. If you feel the stocks are undervalued, then you will find it difficult to sell them. Constantly having to think about valuation decisions is why I publish and regularly update posts such as How I'd Invest $250,000 Today. Conditions are always changing.

Selling losing stocks also reminds you of how much of an idiot you are. I bought some stocks in 2022 that were down 70% from their highs. These stocks then proceeded to decline by another 50%! Check out names such as Affirm and Moderna. 

Latest S&P 500 valuations and historical stock market valuations

You Might Feel Good After Selling Stocks If Stocks Go Down 

One of the conflicting emotions you may experience is happiness after selling stocks that go down soon after. But this happiness may be misguided because a decline in the stock market may portend lower corporate profits, slower GDP growth, and lower demand for housing, which would be bad for your new house purchase.

When my stocks rebounded by 20%+ since the October 2022 low, I felt like I had a second chance to sell. Phew! When the house I wanted to buy came back on market, I became even more motivated to take profits because I had a specific reason to sell. 

When stocks started selling off after July 31, 2023, I felt both good and bad. On the good side, it felt nice to not lose money in the stock market. Stocks ultimately corrected by 10.3%. On the bad side, I worried that a declining stock market forecasted future economic difficulty.

The more stocks go down, the more interest rates tend to go down as well given investors tend to buy Treasury bonds for safety. Hence, you might find yourself rooting for a stock market crash after you sell stocks!

You Might Feel Bad Selling Stocks As Stocks Eventually Rebound

If you hold the S&P 500 index long enough, you will eventually make money. Hence, selling the S&P 500 will eventually start to feel bad after a long enough time passes. This is one of the downsides of paying all cash for a home.

After a 10.3% correction, I felt happy to have protected a lot of my stock gains for the year. However, stocks eventually bottomed on October 27, 2023, and began to rebound after Treasury bond yields began to decline. 

As stocks rebounded, I started feeling bad I wasn't participating as much! Such a mind bender. I know it's almost impossible to sell stocks at the top and then buy at the bottom. But I still longed to want more exposure to stocks in a rising market.

Mentally, I had to tell myself that a rebounding stock market was a good thing. In this market, it meant interest rates have likely peaked and there's optimism about future corporate profits.

Ultimately, higher stock prices should lead to more demand for real estate, especially if there are local economic catalysts in the neighborhood you buy. 

A Simple Asset Shift From Stocks To Real Estate

To feel better about missing out on stock gains, I had to tell myself that with my all-cash house purchase, I simply shifted my net worth composition from a more volatile risk asset (stocks) to a less volatile risk asset (real estate). Both stocks and real estate are risk assets whose prices are highly correlated.

Some people think that paying cash for a house is a low-risk or risk-free investment. However, that's not quite true. The homeowner still has risk exposure to the economy. The cash-paying homeowner simply isn't levered with a mortgage, as is usually the case with most homebuyers. 

In a bull market, it is usually more profitable for the homeowner to have more exposure to stocks than in unlevered real estate. Stocks have historically returned about 10% a year versus only 4.2% a year for real estate. Therefore, in a bear market, it's better to have a greater percentage of one's net worth in an unlevered home with no mortgage. 

The reality is, most homebuyers purchase with a mortgage. So the more common situation is for homebuyers to sell stocks to come up with the downpayment, which is usually 20%. As a result, sellers of stock to buy real estate often make more than if they just held stocks due to leverage.

Net worth composition by levels of wealth

Real Estate Can Offer Diversification To Your Portfolio

Long term, real estate price performance tends to be correlated with stock price performance. But over the short term, prices might move in the opposite direction, partially due to lag effects. 

A good example is when the S&P 500 fell 19.6% in 2022 while the median U.S. home price increased by 10% from $433,000 to $479,000. 

In 2023, as the S&P 500 has increased by more than 14% so far, while the median U.S. home price declined by about 8% so far according to the St. Louis Fed. Hence, buying real estate when prices are down and selling stocks when prices are up can make logical sense. 

U.S. median home price over time

Own More Unlevered Real Estate In A Weak Market

A 10% decline in your home's price hurts. But it doesn't hurt as much if you sold stocks to buy a house with all cash. If you didn't sell stocks to buy your house, your stocks would have likely declined by 10% or more anyway. 

Therefore, if you're going to lose money in stocks and real estate, you may prefer to lose money in real estate because at least you will get to enjoy your wealth. Seeing the value of your stocks evaporate is a disheartening feeling. 

In a strong market, you are happy to own either stocks or real estate. By owning stocks you feel good because you get to buy more things with your gains. With real estate, you feel giddy because not only do you get to live for free in a nicer home, you also get to make money too. 

Own More Stocks And Potentially Borrow In A Strong Market

If you feel stocks are undervalued and have tremendous upside, then you might want to consider a Security Based Line Of Credit (SBLOC) instead of selling stocks. Here's an SBLOC example shared by Financial Samurai reader James:

If you have a $1,000,000 portfolio, a lender will typically let you take up to 70% of the value of your portfolio in cash ($1M*70%=$700,000) for LIBOR+ interest. Essentially you become your own bank in this scenario.

This is particularly effective for real estate acquisitions where you want to come in “all cash”. You can pay interest only for a period of time on your SBLOC until you close, then work out longer-term traditional mortgage financing with a bank on your acquired property (it’s fully paid for in the bank’s eyes) and with then repay fully or partially your SBLOC.

In the meantime, you haven’t sold your stock or mutual funds and haven’t missed potential upside. In other words, you stay invested. You’ve simply taken a loan again them as an asset. Finally, you’ve not paid any capital gains taxes since you didn’t sell the securities in the first place.

An SBLOC makes a ton of sense if the interest rate is reasonable and stocks are undervalued and go up. However, if interest rates are egregious and stocks collapse while you take a loan out on your stocks, you are double losing. Add on the fact that your house may also be losing in value then you may be triple losing!

Hence, always be careful when borrowing from a risk asset to buy another risk asset.

Ultimately, You Want Stocks To Rise Even If You Have Less Exposure

Investing FOMO increases when stocks are going up and you have less exposure. That said, you still want stocks to go up as much as possible because it bodes well for your real estate holdings. 

The real estate percentage of your net worth will most likely lag the stock market's returns. However, this lag in returns should be made up by the joy you experience living in your mortgage-free home.

Remember, the reason why you sold stocks was to have a better lifestyle in a nicer home. If you never sell stocks, then you never capitalize on the reasons why you invest.

S&P 500 stock market performance over various durations of time

The Main Goal After Paying All Cash For Your Home 

After you sell stocks to pay all cash for your home, your net worth composition will have a greater percentage in real estate. Therefore, your main goal, if you want to feel better, is to aggressively save and invest more in stocks to return to your old net worth composition. 

Initially, you may want to replenish your cash balance. After you have accumulated a comfortable amount of liquidity, then you may want to aggressively invest your free cash flow into stocks. With a much lower exposure to stocks, you may find investing in stocks much easier than in the past.

Personally, once I reached a certain amount of exposure in stocks, I had a hard time investing more. The swings were too big for my comfort as a semi-retiree and a non-working spouse. Understanding your risk tolerance in terms of time lost is paramount! 

For example, let's say I have $3 million invested in stocks and live off $200,000 a year after tax. A 10% historical return in stocks would generate $300,000 in gross profits, enough to cover my $200,000 annual expenses. However, losing 20% of $3 million would mean losing more than three years of living expenses. That's too painful for this jobless old man.

But each time after selling stocks to buy a house, I found it easier to buy stock again simply because I had less exposure. For me, funny money stocks are simply a means to an end, that is to live a better life.

Overcome The Mind Bender To Sell One Asset To Buy Another

After reading this post, I think you will appreciate how much psychology is involved in investing. The first hurdle to overcome is the fear of financial loss. The next hurdle to overcome is the fear of not making as much as you could!

Make sure you invest for specific purposes. If you do, you will feel much more motivated to invest. In addition, you will be more diligent in staying on top of your finances to make sure you're on track.

The one thing I will never regret about selling stocks to buy a house is enjoying life today. If purchaed responsibly, owning real estate is actually a hedge against many bad things in your life.

Reader Questions And Suggestions

After you have old stocks to pay all-cash or for a down payment for a house? If you did, how did you feel after and what were some emotions or circumstances you dealt with after? After paying cash for a house have you ever done a cash-out refinance to get liquidity out? 

If you want to dollar-cost average into a weak real estate market, take a look at Fundrise. Fundrise primarily invests in residential and industrial properties in the Sunbelt, where valuations are lower and yields are higher. 

In addition, take a look at the Innovation Fund that invests in private growth companies. Roughly 35% of its fund is in artificial intelligence companies, which I'm very excited about over the next couple of decades. You can review the fund's holdings before you decide to invest, unlike traditional venture capital funds where you commit capital and hope the partners invest wisely.

For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. Fundrise is a Financial Samurai affiliate partner.

About The Author

41 thoughts on “Paying Cash To Buy A House By Selling Stocks: A Mind Bender”

  1. Fantastic insights as always Sam! And wow, you did great with timing the market this year!! I certainly appreciate having a fair bit of my net worth in real estate, because it’s a nice cushion against the volatility of the stock market. However, we are starting to be over-leveraged so I have to take a step back at growing the portfolio (I also am having some trouble with water leaks at my rental unit, and I don’t have time to handle more cases!). Hence, I have to find new ways to invest.

    We barely have 10% of our net worth in the stock market, because it just feels a lot easier plonking a large sum down to buy property than picking a stock or ETF…. DCA-ing into stocks/ETFs has been a really slow game. I am targeting around 30% of net worth in the stock market eventually, and trying to convince myself that lump-sum-ing is the way to go, as research has shown. I will need to scout around your page if you have written about this before! How do we mentally gear up to make a huge investment in the stock market, especially with all the noise of recession in the news?

    As for individual stocks, my husband and I recently attended a stocks trading course to learn how to apply stop-loss strategies and risk management strategies. If only I had learnt this a few years ago, I would not be sitting on some poor choice of stocks with only 10-20% left to their value! Luckily these make up only a very tiny amount of my net worth as I was too chicken to spend on something I didn’t know much about.

    Finally, I really appreciate your post on bonds as well because I have been considering whether it’s worthwhile adding this to the portfolio (since most advocate for 60-40 ratio). I have not found bond funds to be appealing, apart from the potential to rise once interest rates start to drop. Real estate seems to me a far better option with a lot more upside potential, and seeing how volatile bond funds have been recently, probably less risky too.

    Enjoy your new house!!

  2. Financial considerations aside, the enjoyment of a more ideal home is a significant benefit. Especially if the kids benefit as well. Taken to the extreme, you could live in a smaller home in a poorer neighborhood and save more, but to what end? There are way too many over-funded retirees who still can bring themselves to spend or give their money away. Really sad to think of all the family experiences they could have enjoyed. I have a friend who plans family trips, paying full fare for family members who are not as well off. Has great times making memories and brings great joy to all. As an added benefit his children enjoy more time with out of town family than they otherwise would.

    1. Yes, money is meant to be spent.

      The best time to own the nicest house you can afford is when you have kids. It’s not like you’re going to upgrade to an even bigger house once they are gone.

      This belief is the main reason why I decided to go for this latest house. I can easily see ourselves living in it for the next 15 years until our daughter goes to college. Sniff.

      I hope the time doesn’t go by too quickly.

  3. I actually support the idea of cashing out from stocks/bonds and buying a home with cash in this high interest rate environment. Since you don’t have a mortgage, I wonder if you choose to skip home owner insurance as it’s no longer required.

  4. Long Time Real Estate Pro

    Your analysis of which stocks to sell in order to pay cash for a home is nauseating in this article. You’ve missed so many aspects of leveraging into the appreciating asset class of real estate (and therefore misled so many in the process). First, there is risk to real estate. Share this risk with the bank – only for the worst case scenarios: flood, hurricane, and other acts of “god” that you will have to fight with the insurance companies to receive a claim. Screw that. Split your risk with the bank. If there is colossal loss and insurance does not step up, then sign the deed over to the financiers and let them take the major loss. It’s all fair game if you’re doing this all in an LLC, which everyone should be doing anyway.
    Secondly, if you put cash into real estate (except for the short term to collapse on good opportunity), you are diluting your investment. A property increases in value based on two things: with residential real estate it’s usually based on what other properties similar are selling for in the neighborhood, or in the case that a property would appeal more to investors, it’s value would be based on income less expenses performance. I have run numbers 1000 times. If you don’t leverage your way into real estate (as an investor or as a homeowner) you’re leaving lots of money on the table. The increase in value of your asset has zero to do with whether you have 100% equity or 0% equity in the property. I will run the numbers with you if you want.
    There are more reasons to use Other People’s Money (OPM) instead of selling off stocks that – if you just played S&P 500 Index funds – you get 10% annualized ROI.
    Now… I know this comment will be reviewed by you before it’s accepted to be at the bottom of your blog article. Therefore, I don’t expect it will end up being published to your followers. That’s fine. But if you want to go down this rabbit hole and provide top level advice to your followers (and probably increase your followers), we can do a question and answer session (interview style) where I can share more.
    Up to you.
    Michael C.
    20+ year finance and real estate investment advisor.

    1. Thanks Michael. This isn’t a post debating buying real estate with cash or with a mortgage. This is a post about buying real estate with stock or bond holdings.

      Between 18% – 33% of the homebuying population pays cash every year, depending on location. This is an article for them and others considering.

      The key to reading a Financial Samurai article is keeping an open mind and understanding that everybody has different financial goals, risk tolerance, and are at different stages in their lives.

      If you would like to write a guest post about the topic of buying with cash or debt, I welcome it. It’s great you’re so fired up about the topic.

      1. The original commenter is an example of someone who doesn’t read and sees what he wants to see.

        Pretty fascinating. I think this is why people fight and constantly talk past each other. They don’t listen to the other’s perspective.

  5. How about doing the opposite? With my investing FOMO difficult to overcome we sold a couple of houses in 2022 and invested that into the declining stock market. After some small losses thanks to DCA in 2022 (-3.5%) I have solid gains (over 30%) so far in 2023. Our monthly cash flow from interest and dividends by far exceeds what we got from rent with much less hassle. If we ever want to buy a bigger house (real estate FOMO not likely since we are both retired with 2 properties and a vacation home) we should be able to do using money market funds without selling a single share of stock.

  6. Sam— great article, but what are you going to do with your current house? That will impact cash flow / stock allocation too, right?

    1. I’ll probably rent it out. If not, I’ll sell it went demand gets better. I’m not in a rush. I’d ideally like to keep my old house in my portfolio forever. It is a wonderful house with panoramic views on all three levels.

  7. Hi Sam – the SBLOC is an interesting alternative to selling stock or even taking out a traditional mortgage, but it seems like it wouldn’t be as tax-advantaged as a traditional mortgage.

  8. The other Bill

    I feel your pain on Moderna. I originally bought it at $92 and sold it at $430 for the largest dollar amount gain I’ve ever had in a single stock. Seeing how brilliant I was, I then bought it back at $350 and sold it at $100 for the largest dollar amount loss I’ve ever had in a individual stock.

    I get what you’re saying about real estate. It’s much more stable than stocks. It’s not as fun though!

  9. Sold some stocks to purchse a condo cash when the market recovered a few months back in the summer. Got a good price on the Condo due to the cash offer and the fact that 2 other buyers had already failed in acquiring a mortage due to astronomical rates. Had an eager seller happy to have a cash buyer in such an enviornment. Purchased condo below market value, whereas as similiar condos in same building were going under contract for asking price within a few days of listing before the mortage rate hikes. You would be lucky to purchase for asking price if at all. Feel like I made a great decision. I also sold some my losers ( TLH) to offset the gains. Stocks dropped after I sold, and I have been “restocking ” my portfolio for the last few months. It feels like a win/ win. Everything you say in this article is on point with my personal experience.

  10. Been considering the same thing. As an early retiree, do you think this also has the benefit of reducing sequence of returns risk? Not having a mortgage or rent, seems like a godsend if the markets start correcting downward. It seems much easier to reduce discretionary spending if the markets go down vs. being on the hook for a mortgage/rent month after month. Curious what your thoughts are on that.

    1. Yes, eliminating the mortgage/rent increases your chance of staying retired, especially if you sell stocks before stock prices tumble.

      But if you already don’t have a mortgage or having cheap living costs, then the difference may not be that impactful.

      What you may feel more of is FOMO that you don’t have enough cash to invest in stocks that have gotten pummeled.

  11. i have a somewhat parallel story about selling stocks and fomo. early in 2023 i sold 20k worth of nvdia stock i had held since 2016 for an enormous gain. given our income level that sale from a taxable account will still cost us 0% in federal income tax for the long term capital gains (which were about 95% or more!). here’s the rub: i sold around $220/share and today the stock is about $480. doh!

    y’know what though? if i had not made the transaction we would not have had that money to enjoy our lives which still happen in real time. i have no regrets, much like your house purchase. we have enjoyed that gain much like your family will enjoy that house.

    1. What did you end up buying with the Nvidia stock sale? Because this article, if you bought a home to enjoy, the regret of selling might not have been as bad. But, of course, it would surely still sting.

      Tough to get the timing right!

  12. Hi Sam, great article on the emotional stages one will go through. I have experienced all these myself! I would be interested in your thoughts on using a self directed IRA for real estate estate acquisition.

  13. My wife and I have done this multiple times- but more so for down payments on rentals and most recently a partner buyout. (One time fully cash for a condo purchase, the other times to get 25% down for investment property purchases).

    Most recently we sold low 6 figures of stock earlier this year to purchase out a partner on one of our rental properties. Did we time it perfect? No. Did we come out ahead? Yes. We were 50/50 on it, and he needed to cash out, luckily it was one only financed under my name, so we just had to change title, and at a 3.36% rate on a 30 year fixed and a great cash flowing property, it was a no brainer.

    Here is where our dilemma is now, where to invest cash flow? We have rebuilt our savings account (200k between cash and treasuries, yes some say this is high but we live in SoCal, have our house + 4 rentals, so we like to keep extra liquidity), and have $0 in an after tax investment portfolio at the moment. No student loan debt, one car paid for, the other one on a company lease that is essentially free to drive (electric and we have solar). DINKS, HENRYS, 36 y/o, $350k in 401k, 36% LTV (Jumbo locked in at 2.75 on a 30 year fixed that we refi’d with First Republic RIP) on a primary residence worth ~2m, which could be our forever home, and about $500k in equity in our 4 rentals in total.

    Our next goal would be to save for a Airbnb/Vacation home in the mountains, (I’ve done the math, not a money maker but a break even with a place to live your life and enjoy holidays with family and friends, as our parents age we want to do this sooner than later).

    What is the asset class recommendation and diversification for investing with that in mind? Buy the S&P dips? Index funds? Not sure what the play is, we have been loving the HYSA and Treasuries the past year. Felt like we got lucky on some of the stocks we sold to buy out our partner although we missed the peaks.

    As my wife has faced some medical challenges the last few years (healthy now thankfully) we realize the value of current day a lot more than we use to. Unfortunately kids may not be an option for us, which is OK, but also why our mindset has shifted to living more in the present day within reason. Our goal would be in 2-5 years to be able to have $250-400k (this is the down payment amount we need to break even with light rental use at a 8% rate) to be able to invest in our Airbnb/Mountain vacation home. Ultimately we would like to be able to spend summers there someday with an early retirement goal in mind, plus the monthly Ski trips. (After maxing out my wife’s 401k, we can save/invest 10-15k/mo after taxes, including our rental cash flow depending on my monthly commissions)

    Where would you put 10k a month right now? Often times scared of our own shadows we run to save havens too often.

          1. I’m in the process of doing an all cash purchase and trying to decide if I want to sell any stock to do it. I don’t need to though.

  14. May I suggest another alternative to selling stocks, booking a capital gain and paying taxes to purchase a home (what’s the friction, say ~15% minimum in taxes and potentially much more+ the opportunity cost of additional gains)?

    Why not get a security based line of credit (SBLOC) on your portfolio instead of selling your securities? You can do this with taxable securities not with your retirement portfolio.

    For example, if you have a $1,000,000 portfolio, a lender will typically let you take up to 70% of the value of your portfolio in cash ($1M*70%=$700,000) for LIBOR+ interest. Essentially you become your own bank in this scenario. This is particularly effective for real estate acquisitions where you want to come in “all cash”. You can pay interest only for a period of time on your SBLOC until you close, then work out longer term traditional mortgage financing with a bank on your acquired property (it’s fully paid for in the bank’s eyes) and with then repay fully or partially your SBLOC. In the meantime, you haven’t sold your stock or mutual funds and haven’t missed potential upside. In other words, you stay invested. You’ve simply taken a loan again them as an asset. Finally, you’ve not paid any taxes since you didn’t sell the securities in the first place.

    1. It’s a good solution, especially if you think stocks are undervalued, you can’t tax-loss harvest, and stocks end up going up further.

      It may be a suboptimal solution if the reverse is true, hence the mind bending decision to make.

  15. This might make sense with a small house – but with a multi million dollar asset it’s likely impractical without taking a huge hit on taxes. My suggestion in these cases is to get a loan against your shares. You might pay a higher interest rate that isn’t fixed but you can also look at interest only loan and pay it down over time in chunks using the strategy that you outline here.

  16. Casey Campbell

    Sam, I’m a long-time reader but first-time poster. This is truly one of your very best articles because it presents so many insights on a rarely discussed topic. Thank you. One question: what are you thoughts on selling bonds or a blend of stocks and bonds to pay for the house? You mentioned selling stocks, but is there a reason why selling bonds may not be as beneficial?

    1. Thank you. Less risk selling bonds to buy real estate. I view real estate more like a bond plus investment. The difference isn’t as great as between stocks and real estate.

      I can write a post about this topic too.

      1. One post I would love you to write about is equities vs. real estate. It feels like a timeless one that no one is ever objective about! Please break it down!

  17. Having enough cash to buy a home is definitely advantageous, especially in competitive buying situations. I remember going to many open houses before the pandemic and so many of them were mad houses. I remember agents asking “can you pay all cash?” when I was trying to find out how feasible my chances were of getting a winning bid.

    I didn’t have enough cash at the time but maybe I will in the future for a different home. Very helpful thoughts in this post. I will keep it bookmarked for when that time comes for me!

    1. One of the things I didn’t anticipate is actually NOT needing to pay cash when I got in contract because the escrow period took more than 2 months. I could have easily gotten a mortgage in that time frame.

      But getting a mortgage is painful. It was estimated to cost me $10,000 in fees, and the rate wasn’t particular attractive. So I said nah. Sell some stocks I felt were fairly valued and turn it into a real asset to enjoy.

  18. Ironically just last week I walked an in-law through selling stocks to buy a home. It’s a real emotional hurdle and can be complicated. Things like remembering capital losses can only offset income up to 3k a year are not common knowledge.

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