A real investor now?

8 Replies

I heard a while back on a podcast (I think Kathy Fettke), that you aren't a true real estate investor until you don't have any money to invest.  I guess I should be excited, because I've gotten to a place where I have 4 properties all with pretty good equity (one is my primary residence).  However, now most of my cash is tied up and I'm probably a year out from being able to refinance anything.  Somehow, now I feel like I'm just scratching the surface!

Here are some of the things I've considered after much reading/listening:

1) HELOC on primary residence to implement BRRR on another property. This always worries me to put my primary residence on the line and my goal is to own my primary residence free and clear.

2) Partner with someone on a commercial office space (house hack) and use part of the commercial space for another business.  I know very little about commercial space but have a good commercial property resource.

3) Use private money and leverage my flexible schedule to manage deals.

4) Go into saving mode until I have enough money saved to continue deals.

Anything I'm missing here or any recommendations from someone who has made this transition?

@Phillip Denny

You may be able to find a lender that will give you a HELOC on the three investment properties.

Even if you got a HELOC off your primary I'd only look for BRRR investments that way you're paying that credit back quickly.

    Being forced to get creative is definietly a fun and frustrating experience. Good luck!

 - Mike

@Phillip Denny Congrats on the steps you've taken so far!

In terms of the funding options for your next deal:

1) if you have IRA (Roth or Rollover) consider SDIRA.

2) if you have your own business, consider solo401k. you might be able to move Rollover IRA funds into it. also, a better option than #1 above from a taxes perspective

3) partner up with money partner

4) look into leveraging your personal life insurance policy as a loan (if you don't have one, go get it)

5) you can borrow against your 401k at work up to $50k. you pay interest and all back to yourself

Originally posted by @Alina Trigub :

@Phillip Denny Congrats on the steps you've taken so far!

In terms of the funding options for your next deal:

1) if you have IRA (Roth or Rollover) consider SDIRA.

2) if you have your own business, consider solo401k. you might be able to move Rollover IRA funds into it. also, a better option than #1 above from a taxes perspective

3) partner up with money partner

4) look into leveraging your personal life insurance policy as a loan (if you don't have one, go get it)

5) you can borrow against your 401k at work up to $50k. you pay interest and all back to yourself

 @Alina Trigub - You do not "borrow against" a 401(k). You "borrow from" a 401(k) plan. That is a huge difference. When you "borrow against", the borrower maintains control over the underlying collateral for the loan. If the collateral is an appreciating asset, as in the case of a HELOC or Cash Value Life Insurance, the borrower still benefits from that appreciation. That is not the case when you "borrow from). The depleted 401(k) earns nothing but the interest on the loan.

Originally posted by @Phillip Denny :

@Alina Trigub @Thomas Rutkowski Thanks for the replies. I didn't think I could borrow from an IRA, but it sounds like I can borrow against it? What type institutions originate these type loans?

You cannot borrow from or against an IRA. The previous discussion specifically mentioned 401(k).

@Thomas Rutkowski Thanks for the clarification on the 401k borrowing.

@Phillip Denny When it comes to IRA, you can convert an IRA into self-directed IRA account or open SDIRA if you're qualified, or in some cases into solo 401k if you're qualified. And then use these funds to invest in real estate.