How can I reach financial goals with real estate

Question

Anthony Dooley · Answer

@Tabitha Johnson hindsight being 20/20, If I could go back 20 years, I would not have put money into a 401K or IRA. It was a good idea at the time, but now that I invest in real estate, I wish I could just cash them out and buy property. Real estate provides monthly cash flow that you can use before you are 60, provides a better return if you buy it right, and has tax advantages that my IRA doesn't. Focus on increasing your income, stacking up money for a down payment, and learning about RE investing in your market. Buy cash flowing rentals that cause your income to increase. This will allow you to pay off your debt much faster.

Andrew Postell · Answer

@Tabitha Johnson I am not a financial planner but I will give some pointers based on some of the extremely successful financial planners out there:

•  Have 3-6 months of savings in your bank account at all times.  One of the leading causes why people go into debt is because something "unexpected" occurs so they charge that "unexpected bill" to their credit cards.  And since the unexpected always happens, their debts accumulate.  Saving 3-6 months means that when something occurs it can be paid without going into debt.
• Maximize your 401(k) match at work.  Even if your employer only matches 25% and your 401(k) earns 0% that's a 25% return. That's better than any stocks, any real estate, anything.  If your employer offers it, then maximize that match.

Now, the reason why these are predominately the first two rules is because the financial experts assume you are working a job that is successful.  If you have a successful job, then we want your career to continue and not get side tracked (aka financial catastrophe).

The most successful real estate investors I work with use real estate to compliment their income.  Now, once they have 15+ properties it's a little different of a decision.  But I know many investors that have 20+ properties that still work their jobs.  Meaning, they don't leave their jobs while they invest in real estate.  I would encourage you to focus on the two points above and consider keeping your job for a while longer.  Hope this helps!

Jerry Thompson · Answer

Hey @Tabitha Johnson!

I think you have some great goals and I think you'd be best served by setting some broader objectives like, "what do you what your lifestyle to be like, and by when?" With that lined up, the "hows" will line themselves up more quickly, people could make some more tailored suggestions, and you can work backwards to get there.

Say you pay off your debt and leave your full time job.. then what? Do you want real estate to supplement your income or just handle your loans? Do you want to be able to live abroad for a few years then go back to working, or be fully retired.. etc.

I was recently in a very similar situation, saved a bunch in my 401k/Roth accounts, and went on a mini-retirement overseas. I then learned that my plan was not suitable because saving my way to financial independence will take forever!... hence my interest in real estate to speed that process up so I have a shot at retiring much sooner.

Hope that helps!

Todd Dexheimer · Answer

Flipping will be a hard way to financial freedom. Flipping is creating a job for yourself. Take it from someone that has done over 100 of them. If you do flip, then use that money to buy a rental. Buy 1 rental for every flip or 2 that you do and you will set yourself up for financial freedom.

Wil Reichard · Answer

Some are suggesting maxing your 401k's... I have to disagree. There are a LOT of hidden fees, and yes it is pre taxed when you invest into the 401k, but it is taxed at one of the highest percentages when its finally time to pull it out. Robert Kiyosaki has a lot to say about them. I chose not to invest in mine at all. Save that couple hundred dollars and use it for controlled assets you can manage.

Anthony Dooley · Answer

@justin windam SDIRA is like a trust. You own it, but it is held by another entity. This complicates every transaction. I prefer to own and control my property without worrying about breaking someone else's rules.

Justin Windham · Answer

@Anthony Dooley

Did you have to interact a lot with the IRS when you had your custodial IRAs? I'm not sure why that would be the case outside of an audit. Just curious.

Anthony Dooley · Answer

@Gail Greenberg It's just not for me. I would rather minimize my interaction with the IRS.

Gail Greenberg · Answer

Oh goodness @Anthony Dooley, I have two checkbook IRAs - a traditional and a Roth. And I just had a windfall in my Roth when I bought a note on a house, it burned down and I got a full payoff from the insurance. I know it sounds terrible but my borrower also got a big payout and was thrilled with the fresh start so it was a win-win!  I wish I could do ALL my investing in my IRAs!!!

Dmitriy Fomichenko · Answer

There is a way to avoid the transaction fees charged by a custodian by using what is known as Checkbook IRA. This structure allows you to have checkbook control over your retirement funds and eliminates transaction fees normally charged by a custodian since all investments are held inside of an IRA owned LLC, not in a custodial account.

And for those who are self-employed even better option available: truly self-directed Solo 401k plan. With this structure custodian is completely eliminated, plus it serves as great tax-shelter allowing you to contribute up to $60K/yr for each spouse, is exempt from UBIT tax on leveraged real estate (unlike with an IRA), greater protection from creditors, ability to access your retirement funds tax free before retirement and more!

How can I reach financial goals with real estate

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