Brand new, need direction

10 Replies

I've been thinking about jumping into real estate for the past year and I've come to the conclusion that it's my time to jump. My problem is there's so many angles of entry that I don't know where to start.

Here's the details: I currently do not have a job (so I think that puts traditional financing out of reach),, but I have 100k in a 401k from a previous employer that I thought about moving to a self directed IRA to get started. I live in Los Angeles right now and can't afford this market so I'm unsure where I should go out of state. I thought about the Detroit market because property is so cheap that it seems like it's in my price range.

Any advice is appreciated. Thanks 😊

Georgia and Ohio are great markets because the entry point is low and the market is hot in both locations. As hard money is concerned, you can use your 100k investment account as backing but you will still need 15%-20% down payment plus closing costs in cash in order to close on a deal. But honestly if you land in one of these smaller markets it's really not that much. You also could wholesale some deals to get you some start up cash, that way you wouldn't ever have to touch your nest egg. 

If you currently own a home you can rent by the room or open a room up to airbnb or vrbo or the whole home for the weekend. It could be a way to get that down payment cash as well as getting some experience in land lording. And I would look into houshacking as well for a first investment. 

Hope that helps!

@Cary Miller , that's great that you want to make the jump and start investing, but I would strongly suggest you take care of your own financial house first before buying other properties. That's great you have $100k in a 401k, but even if you convert that to a self-directed IRA, you can't touch any of that money without severe penalties. Obviously we don't know your personal financial situation, but I would find another source of income (job, sales, etc) to live on first before putting your nest egg at risk investing in property across the country. Have you read David Greene's book Long Distance Real Estate Investing? Do your research at length and really narrow down what market you feel comfortable investing in. That's going to involve finding your Core 4, starting with your Realtor and Property Manager. They can help you find your lender and contractors. Good luck with everything!

Everyone here as provided great points! Just one thing I think would also be helpful to consider further...Dave brought it up: location. In addition to potential risk, how important is it to you to be able to monitor the property? If you are in Los Angeles, it will be much harder for you to drive by and look at any property you own (whether personal or in your SDIRA) if it is in a far off location. In the event there is an issue, how quickly will you be able to attend to that? Sometimes closer is better in that retrospect. I find most investors do best in markets they are familiar with! In regards to using your IRA funds, you do have the option to use that 100k to invest in private assets like real estate or notes, but just be very careful that you understand what is allowed when investing with a SDIRA (and which account can give you the best tax advantages!). There are custodians that offer free education about how to properly invest your SDIRA funds, and I'd say watching some videos or reading a couple blog articles would be a great place to get started.

Originally posted by @Cary Miller :

I've been thinking about jumping into real estate for the past year and I've come to the conclusion that it's my time to jump. My problem is there's so many angles of entry that I don't know where to start.

Here's the details: I currently do not have a job (so I think that puts traditional financing out of reach),, but I have 100k in a 401k from a previous employer that I thought about moving to a self directed IRA to get started. I live in Los Angeles right now and can't afford this market so I'm unsure where I should go out of state. I thought about the Detroit market because property is so cheap that it seems like it's in my price range.

Any advice is appreciated. Thanks 😊

 Hi Cary, I think your best bet would be to house-hack a property. The best loan programs for this are offered by traditional lenders, who require employment. So if that's a possibility, I would try to get all of that in order and then house-hack a duplex here in Columbus, OH. Unless you can successfully house-hack in your local market but from what I've heard, LA is a tough market to invest in.  

Hi Cary, you're in the right place for advice! So many helpful and passionate people here.

I think house hacking is a great idea, but is difficult in LA. If you're willing to move - I agree with Sarah. You have an advantage investing in Ohio since you are from there. 

As for SDIRA, I've thought about this as well. I came to the conclusion that I will not be going that route because of the limitations. Like Dave mentioned, you can't touch any of that money without severe penalties, and it's much harder to leverage money you make from using SDIRA. I ran into this resource while on the BP site: https://www.theentrustgroup.co... (Note: it's a paid sponsorship on BP) but I think this sounds like a great way to find more information. 

I've started reading David Greene's Out of State REI, and so far so good.

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