Starting out. Looking to leverage 401k. Input?

Question

Good day BP community!

First, I would like to thank you in advance for reading my discussion, and for any words of wisdom you are willing to share.

I am a Southern California homeowner looking to invest out of the state. Thus far, these are some of the issues on my jot pad:

• Capital10k Cash, with the ability to take a loan against my 401K for 15k. This would be at a 4.5% rate back to myself.I only have 20% equity in my home, so I don't believe that would be a viable option just yet.
• 10k Cash, with the ability to take a loan against my 401K for 15k. This would be at a 4.5% rate back to myself.
• I only have 20% equity in my home, so I don't believe that would be a viable option just yet.
• StrategyBRRRR-My concern is if I would have enough capital to support the rehab portion of a purchase.Single Family home
• BRRRR-My concern is if I would have enough capital to support the rehab portion of a purchase.
• Single Family home
• MarketsThinking the 100k range in cities that are situated around small town colleges, or other potential sources of consistent renters. Some places I've researched include:Statesboro Winston SalemTulsaGrand RapidsPortland Sparks
• Thinking the 100k range in cities that are situated around small town colleges, or other potential sources of consistent renters. 
• Some places I've researched include:
• Statesboro 
• Winston Salem
• Tulsa
• Grand Rapids
• Portland 
• Sparks

• 10k Cash, with the ability to take a loan against my 401K for 15k. This would be at a 4.5% rate back to myself.
• I only have 20% equity in my home, so I don't believe that would be a viable option just yet.

• BRRRR-My concern is if I would have enough capital to support the rehab portion of a purchase.
• Single Family home

• Thinking the 100k range in cities that are situated around small town colleges, or other potential sources of consistent renters. 
• Some places I've researched include:
• Statesboro 
• Winston Salem
• Tulsa
• Grand Rapids
• Portland 
• Sparks

• Statesboro 
• Winston Salem
• Tulsa
• Grand Rapids
• Portland 
• Sparks

I would genuinely appreciate any advice, critique, or words of wisdom.

THANKYOU!

Tony

Aaron Beauchamp · Answer

@Anthony O. Yes, taxes can rise roughly by 10% a year max, but at your price point I don't see that being a serious problem. However its a problem in the higher price points where values can shoot up causing an extra $1,000 in taxes. Your price point is relatively safe from drastic changes in your taxes.

Aaron Beauchamp · Answer

@Anthony O. So you have 25K which is enough to get you into a hard money to perm loan on a 100k property provided that the ARV is high enough. Lubbock, TX is one of the best growing markets in Texas at that price range plus its a college town with an increasing number of students looking for student housing. You might wanna check it out! Hope this helps!

Caleb Heimsoth · Answer

@Anthony O. yes and yes.  Be careful with major rehabs long distance

Anthony O. · Answer

Thank you Jim,

Things are starting to point that direction. I did have a question regarding cap rates.. when you calculate your total income are you deducting the cost of your mortgage from that number?

Jim Cummings · Answer

@Anthony O. I would think you need more than $10K working capital before making an Investment Purchase.

Based on your posted comments - I don't perceive you have experience in rehabbing or managing rehabs as part of your background.

And, based on those perceptions, I would suggest you lean more to buying something essentially "ready to rent" rather needing serious work.

A "ready to rent" property will cost you more upfront. But Rehabs, regardless of the quality of your Pre-Purchase Inspection or the Contractor you hire to do the work always seem to need more extensive (costly) work once you start tearing things out.

Anthony O. · Answer

Thanx for the Tip Aaron. Coming from a state with a limit on the amount property tax can be raised, I have a concern about property tax in Texas. I understand that it can rapidly increase. Is this an issue you’ve dealt with?

Anthony O. · Answer

Do you currently own in Cleveland? Any experience with management companies or contractors?

Anthony O. · Answer

Thank you for the reply @Caleb Heimsoth. Would you recommend, or do you know of alternative options that would support my situation? Either a cheaper market, or an alternative strategy?

Starting out. Looking to leverage 401k. Input?

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