We've heard of people getting started in REI in worse shape, is there a way for us? We'll cut to the chase, here's our dirt.
Ages 51/44, Married, w/10 yr. old child
One steady income 45K
One low income & fluctuating (self employed only 2 years but growing slowly)
Living/ renting in NJ (Very expensive market, 2 family units sell over 500K)
Fair amount of debt 37K (Car loan, 2 CC, Medical bills)
Just getting by each month
Combined 401K's = 150K
My 401 (100K) can be transferred with no penalty to a self directed IRA (I had opened up last year in hopes of using some cash to invest in RE)
We are determined to get into REI however we're probably going to need some creative ways to do it with our current situation. We're hoping some of the seasoned REI vets (or any other members here on BP) would be willing to offer up some advice or outline some options we're unaware of. Yes, we're fully aware of the Dave Ramsey method to financial freedom, that's another discussion in another forum. Right now we're looking for different possibilities for entry to REI. I'm sure there are things we may have left out here, please just ask.
Thank you much,
Hey @William Bauman ,
I'd connect with a mortgage lender and an agent/broker in your area. The lender can tell you what loan amount and type you'd qualify for... the agent/broker can show you which properties fall within reach of what you qualify for.
Chances are, you'd be able to lower your monthly living expenses by house-hacking a multi-family property.
Best of luck to you!
Thank you so much for your reply and advice. I was also thinking a MF house hack would probably be a pretty good option to start, however the high cost of our market might make that a real challenge. We've begun working with a lender that I met through a local REI meetup so we're off and running. Thanks again for your input, really appreciate it.
@William Bauman how much of your 37k debt is car debt, and CC debt? I would pay all that off before you buy any real estate.
Let’s say your credit card interest is 16 percent and a balance of 10k. You pay that off your ROI is 16 percent. Could be tough to beat that with real estate, at least with such ease as paying down or off debt
Well, you've got a responsibility to your daughter you have to deal with first. Rollover the $100,000 in the 401K into a regular IRA and cash out. Pay the 10% penalty and the income tax. All the debt goes and you have enough for a large down payment on the cheapest 2-bedroom single-family home in a passable rental area with a decent school district that you can find.
Small mortgage payment, no debt, low taxes for the next eight years, until she finishes high school. You can do a lot with that. The trouble is, you're trading your $100,000 in extra retirement money to do it, so you have to do something.
Hmmm. Great responses. Not sure why I hadn't considered just taking the hit and paying off the debt? I think I love the thought of that. I have to research that now. Although we'll be losing a good chunk of cash in doing that, our "debt to income" ratio will no longer be a factor (negatively) and possibly get us better loan conditions. Am thinking correctly?
No don't take the tax hit and pay off the debt. Just borrow (up to 50% or 50k) against the IRA. Assuming IRA is invested in stocks, the remaining $ in IRA will grow 10-15% for a few years (as long as economy is good). if you are making 45k in NJ, it means you are underemployed. Get the hustle on, learn a trade, get a second/new job. Economy is roaring, means there are ways to increase salary. Start looking. You can also house hunt in parallel but it seems NJ is going to be out of reach. But as first time home buyer, you could get into FHA loan for 5% down - so it means all you need is 20-30k for a 400 to 600k transaction (which you can borrow for 401k) but you still need to improve your income to qualify for the repayment.