Rental Property Investor · Charlotte, NC · Member since 2017 · 298 posts · 232 votes
First, some context. I just recently left a good stable job for a job that appeared to be an opportunity for professional growth. I was upfront on my current skill level and abilities and was offered a temp to hire position with the company with a 90 day upfront contract period. Today was two weeks from the end of my contract period and despite feeling like I did everything asked of me they said I wasn‘t working out and terminated my contract.
So to my point, I have a 401k from my previous job worth $80k, $50k after tax, plus about $20k in cash and at least $30k in available credit. I have a couple potential leads on properties I could possibly flip. If I could get one under contract at a price that makes sense would it be worth taking the tax hit, assuming I could make back the loss in taxes of course? Obviously an SDIRA is out of the question for a flip. Go...
Without a job your chances of success is likely very low. Get your career back on track first then consider risking all your saving in real estate investing.
No job means no safety net so when the flip hits the skids you will not recover. You are looking at a extreamly high risk gamble regardless of your past experience.
WorldWide · Member since 2016 · 1k+ posts · 1k+ votes
8y
Why not find another W-2, transfer the 401k there, and have some safety-nets to fall back on? is this going to be your first flip? lookslike you're all in with $100k. I'm not sure what (after-tax) profits you're looking at with that budget. That $30k 401k hit will be hard to overcome, I'd definitely look for ways to use that as your collateral on another loan instead.
Flipper/Rehabber · Sanford, NC · Member since 2016 · 47 posts · 57 votes
8y
@Jeshua Patrick
@Jeshua Patrick
I’m very con servative when it comes to number crunching on a property and property selection. I’m a lot more aggressive and less conservative when it comes to taking action.
It depends on how passionate and convicted you are. I didn’t have the cash to start when I got into real estate investing last year, but I had good credit and an existing business so I got a $200,000 crowdfunding business loan at 17% interest amortized over 5 years with a whopping $4800 a month payment.
That sounds crazy but my idea was if I could acquire two houses a month I could outrun that payment and still make a profit I’d be ok. Most people wouldn’t do that, but we are on house 10 in 9 months (not 2 a month like i had hoped) and we’ve outrun it thus far and profited on every deal.
If you’re passionate and willing to go all in, go for it! You could ask your accountant if taking that hit in taxes would help take care of some potential capital gains taxes. Also another thought would be to not have them withhold taxes and defer that so you can use all that money for the next 8 months.
Rental Property Investor · Charlotte, NC · Member since 2017 · 298 posts · 232 votes
8y
@Victor S. I definitely will not be rolling that 401k into a future W-2 based 401k as I intend to shift those funds into real estate in one way or another. If I opt not to cash out for immediate use I will be learning more about Self Directed retirement accounts so I can redirect those funds into RE. There are several ways of doing this without incurring taxes or leaving your money to the whims of the stock market.
Rental Property Investor · Charlotte, NC · Member since 2017 · 298 posts · 232 votes
8y
@Walter Ciucevich I like your style although I’m sure it wouldn’t work for many. I would definitely love to hear more about what has worked for you and what some of the challenges you have faced are both with actual rehabs as well as locating and acquiring properties.
Rental Property Investor · Baltimore, MD · Member since 2014 · 408 posts · 209 votes
7y
@Jeshua Patrick what ever happened with the rest of your story?
I have considered the idea of liquidating my retirement accounts, as well. If I can build a pool of assets which pay me income today until forever, do I really care if I have extra money sitting in a retirement account that I cannot touch for years? The point of money is to be able to turn it into action - I like saying "money is a means to a means."
Additionally, I'm not certain but I believe that every penny of withdrawal taken out of a (non-Roth) 401k/IRA during retirement is taxed at your ordinary rate, which is likely to be higher than tax preferred treatment of real estate.