Rental property beginner

5 Replies

I’m wanting to diversify a little and start investing in real estate. My goal now is cash flow. I did start an LLC, to somewhat protect my current assets which are nearing one million dollars. I have another LLC for my anesthesia practice. My wife works part time, and I would like for her to help me manage rental property and quit her job, and she is on board with this. I am in my early 40’s and I have about $500,000 in an IRA. I max out my 401k at work. I recently changed jobs, and I have $187,000 in my 401k at my previous employer. If I cashed this out, I would pay $56,000 in taxes and penalties, though it may be less since it is a Roth 401k. Leaving me with about $131,000, plus. Would it be a good idea to cash this money out and buy, say, 4 or 5 $100,000 houses or apartments? I have about $16,000 in cash right now. By March, I will have around $23,000 in cash. Being a novice, would you suggest starting slow with a single-family and adding to that over the years? Or, cashing out the 401k and jumping in with a multi-family or several single-family units?

Partial advice...have you considered rolling the Roth 401 over to a Roth self-directed IRA and then use those funds to invest in 2-3 syndications with experienced and trustworthy operators? This would get you some exposure to bigger deals and it would be passive and save you a chunk in taxes.

Aside from that. I started small with houses and duplexes and then picked up 12 and 16 unit complexes in the past few years. Those 28 units provide way more cash flow than my other 35 units. So I’d go as possible as soon as possible if you’re truly investing for cash flow.

I meant I’d go as big as possible as soon as possible.

(It would be so nice if you edit from the app)

I would not cash out any 401k or ira.

You mention the instant loss of 56k in taxes and penalties.

Take old 401k rollover to traditional ira. So you have more control what to invest.

You other ira. Roth? You know Roth you can pull cash out you have made over the years. You can not put money back this helps with taxes and penalties. 

Take cash put down on one property and get the feel before jumping in with both feet.

Just my opinion no expert on real estate. I'm just starting to research my first rental property purchase. But i have invested in my 401k and Roth ira for 13 years. I know there is no good way I would pay any penalty or tax so that i can invest in another venture.

Good luck.

Do the math. Roi on property. Interest if borrowing. Vs cash and taxes and penalties. 

I like the 4 square method I found bigger pocket you tube video.

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