Dear Dr. Don,
If a lottery winner has the option of choosing a dream house worth $2.2 million or a cash amount of $1.5 million, which is a better option? I am referring to Special Olympics Southern California Dream House Raffle.
— John Justaskin
The house is beautiful. The drawing closed on the day you wrote in, and by now you should know whether you won the grand prize. The winner has until 5 p.m. Friday, June 18, to elect in writing whether to take the house or the cash.
If it was my winning ticket, and I had to choose between the house and the $1.5 million in cash, I’d take the cash. Flipping the house has its own set of costs and risks as does holding on to it for investment purposes.
Closing costs, property taxes, income taxes, real estate commissions, upkeep and maintenance all are a drag on the realized return from taking the house. With the cash, it’s just the income taxes and needy long-lost relatives.
Yet the reason they call it “personal” finance is that the decisions need to be right for you. If the winner has the desire, ability and finances to move in, or can reasonably expect a positive return on the investment and is willing to take on the risk, picking the house can be the right decision.
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