I am contemplating the unthinkable. I am thinking about selling the stocks in my Dividend Portfolio to buy a condo. What’s more, is that I might just be crazy enough to do it.

I’m keeping all options on the table. These include: waiting longer to save for a down payment, liquidate my dividend Portfolio, or buy less of a condo. This is an important decision, so let’s explore.

The Problem

If you’ve paid any attention to any of my recent posts, you’d realize that I want to buy a house. In case you missed it, here are two of my recent posts on the subject:

a. Should I Buy A Vacation Rental?
b. Panama City Beach Vacation Rental

So, I want to buy a beach condo as a vacation rental in Florida. To do this, I’m even contemplating starting a business.

A few weeks ago, I saw a condo that was near perfect. It had great views and the asking price was $420,000. The maximum that I am willing to spend on this adventure is $400,000. I also qualify for that amount with the bank.

For purposes of this post, I will assume that I will purchase a condo for $400,000.

Because this would be an investment property, I would be required to put down 20%. At a $400,000 purchase price, I would need to come up with $80,000 down payment.

Funding The Down Payment

Unfortunately, I don’t have $80,000 lying around. By the time I’m ready to buy the condo, I will have $40,000 in cash. But that still leaves me trying to find another $40,000.

One possibility that I quickly rejected was to tap into my retirement accounts to fund the down payment. Specifically, I have an old 401k that I hadn’t rolled over yet to my IRA (just lazy). This is an account I keep forgetting about and I don’t even factor it into my retirement plan. But withdrawing funds would subject me to taxes and penalties and that’s not a good thing.

I was even considering withdrawing funds from my Roth IRA, but I figure I would leave that in place for now. I have no plans to tap into my Roth 401k account. So, that leaves my dividend portfolio which is outside my retirement accounts.

Alternate Solutions

The obvious thing to do is simply wait longer before I purchase a condo. If I know that I’m short $40,000, then why not spend the next year or two trying to save that amount of money? Indeed, as one of my close friends asked, “what’s the rush?”

Truth be told, there really is no rush, so to speak. But there is a plan. That is, my goal of retiring in about 15 years. As I work towards that goal, it’s important to figure out what my life is going to be like then. Presumably, I won’t have an income coming in, because I would no longer be working. Again, I think in terms of worst case scenarios. So, in 15 years, I want to be financially independent without the need to rely on my investment accounts, social security and the like. Those are all plan-A.

My plan-B is to rely on rental income from real estate. So, my goal is to buy income-producing properties and have them paid off (or mostly paid off) in 15 years. That way, the properties are going to be free and clear and I just live off the rental income that comes in.

So, the sooner I start buying properties, the sooner I can start to pay them off early. It is, for this reason, I decided to pay off my mortgage early on my current house. Therefore, I’m choosing not to wait longer.

What About Dividend Portfolio?

I love blogging, and I will continue to blog. I plan to maintain at least one share in each of the stocks in my portfolio. And, if this model works, then the purpose of building my dividend stocks might very well be to use the money as a cash outlay for future real estate purchases in the future.

I realize, given my age, that I don’t have a lot of time to build a huge dividend portfolio where I can solely live off the dividends. To that extent, the dividends were always meant to supplement my income at retirement.

Because I like blogging, there is the possibility that if I do indeed start a real estate investment business, I might start blogging as part of the business. So that would either be in addition to dividend portfolio or instead of it (doubtful). Or, perhaps even more likely is that I will keep blogging about dividends, and ignore blogging about my business. It’s all under considerations right now.

Regardless, I don’t think Dividend Portfolio is going anywhere anytime soon – even if I liquidate 98% or so of my portfolio.

When Will This Happen?

The soonest this will happen is in August of 2019. I still have to come up with $40,000 cash, and that hasn’t happened yet. Another thought is that I might just save up a lot of money over the course of the next year and purchase a condo sometime in August of 2020.

$80,000 is a lot of money and I want to ensure that my investment is a good one, no matter when I mkae the purchase.

I’ll make one final point. I keep hearing that the real estate market is high and may likely drop within two years. Honestly, I have no idea what the market is going to do and I suspect no one else knows for sure. The good news is that I intend on investing for the long haul and will try to ensure that I can weather the storm of a down market.

What About Closing Costs?

That’s a great question. According to a local realtor I spoke to, closing costs in my market can run about 4% of the purchase price. So, that’s an additional $16,000 I would have to come up with. So, my plan is to roll the closing costs into the mortgage. If that doesn’t work, then I would potentially spend the year saving up for the closing costs.

Why $400,000?

I’m only using $400,000 as the maximum. Clearly, if I get a condo for $200,000 then I won’t need as much for the down payment, and the numbers would work greatly in my favor. While I could qualify for more money, $400,000 is the maximum I’m willing to spend at this time.

What About Cash For Repairs or Emergency?

This is a fair point! After all, if I use all my cash in my bank account and all my cash in my taxable stock account to purchase a condo, then how am I going to deal with repairs, vacancies, or an emergency if it arises.

Here is my thought process. I still have a stable job. So, as soon as I buy the condo, I would immediately begin to replenish my emergency fund and house fund.

Also, if I’m super unlucky and experience these expenses the day after I purchase the property, then I also still have my credit cards that I can use. It would take some time to repay the cards, but I believe that I would eventually come out ahead.

In addition, I currently live my lifestyle by maxing out my Roth 401k and Roth IRA accounts by contributing a set amount on a monthly basis. I could simply put those on pause thereby increasing the discretionary amount of income I have coming in.

There are friends and family that I hope won’t abandon me and if all else fails, I guess there’s always bankruptcy! Wow, all this for one condo? Yup.

Conclusion

I have a very big decision to make in the next couple of months. That is, do I liquidate my dividend portfolio to fund the down payment to buy a condo?

While I fantasize about the idea of having my own beach condo (thanks HGTV), this decision is strictly for investment purposes. However, it’s also investing in a strategy that I have no experience in, using a lot of money to start.

Eager to hear your thoughts on this one. Let me know by commenting below.

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