$80K liquid, $105K Heloc and $430K SDIRA - What to do with it?

Glendale, Arizona
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$80K liquid, $105K Heloc and $430K SDIRA - What to do with it?

Jarrod Ochsenbein
Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes

Hello all you savvy real estate investors.  I am new and started focusing on Co-living.  I am house hacking in Oregon and just bought my first investment property in Glendale Arizona.  Construction is almost done turning it from a 4 bed to an 8 bed. I have $80k in the bank and wondering should I buy another house for co-living with it or should I leverage for a down payment?  FYI I don't have a W2. I just left Intel Aug 15th after 23 years to pursue real estate. :)

$105K Heloc @ 8.5% variable

$430K 401k that I am going to roll into a SDIRA.  

What would you do with these resources?

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Travis TimmonsPro Member
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y

If I were in your spot, I'd try to find some sort of W2 income and resist the urge to try to live off of cash flow from real estate. That is far easier said than done. To put it in simpler terms, $10k per month in cash flow is $1.2M invested at a 10% cash on cash return. That's gonna take a while. Of course, short term, mid term, and rent by the room strategies will or should increase returns a bit. It's still likely going to take more than 5 properties unless they are paid off.

Real estate investing is best when you don't need the money, are insulated a bit more from risk, and can start to get the snowball rolling downhill. If you have to pull money out to pay your bills, it's going to kill your momentum.

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  • Chris Watkins
    Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes
    3y
    Quote from @Jarrod Ochsenbein:

    Hello all you savvy real estate investors.  I am new and started focusing on Co-living.  I am house hacking in Oregon and just bought my first investment property in Glendale Arizona.  Construction is almost done turning it from a 4 bed to an 8 bed. I have $80k in the bank and wondering should I buy another house for co-living with it or should I leverage for a down payment?  FYI I don't have a W2. I just left Intel Aug 15th after 23 years to pursue real estate. :)

    $105K Heloc @ 8.5% variable

    $430K 401k that I am going to roll into a SDIRA.  

    What would you do with these resources?


     Hey Jarrod! Congrats on the the co-living conversion.

    Next steps would depend on your goals. Are you going to manage the Glendale property? If so, you'll probably learn a lot about that market in the next year. I'd almost wait to see how that first property performs to jump in with both feet. The HELOC is best used for short-term capital (reno costs or bridge funding), but not great for down payments or other long-term needs. Hard money wil be useful for you without a W2. Are you hoping to replace your W2 income with cash flow? Or looking for appreciation primarily?

    0Reply
  • Julien J.
    Investor · CO · Member since 2016 · 757 posts · 1k+ votes
    3y

    House hack or buy a multi 2-4unit.

    0Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @Chris Watkins:

    My Goals are to get to $10k a month, so I need 5 properties at least. I currently am managing myself, but looking for a long term prop manager. I used the HELOC to do the down, but paid it off with funds that finally came back from a loan I had out. I am hoping to replace my W2 income. I don't have a W2, so I have to get things going to survive! :) LOL

    0Reply
  • Chris Watkins
    Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes
    3y
    Quote from @Jarrod Ochsenbein:
    Quote from @Chris Watkins:

    My Goals are to get to $10k a month, so I need 5 properties at least. I currently am managing myself, but looking for a long term prop manager. I used the HELOC to do the down, but paid it off with funds that finally came back from a loan I had out. I am hoping to replace my W2 income. I don't have a W2, so I have to get things going to survive! :) LOL


     $10k is going to take a while to build unless you are buying a larger building. Co-living should help, though. If you are a true believer in co-living, you're going to make the most if you dive into that and get good at what you do and know your niche (operations and property types). If you aren't a co-living true believer, I would aim for a multi-family property, the largest you can in an appreciation market. The best long-term deal will be value-add, which it seems that you are comfortable with, so keep your eyes out for those properties that not everyone else can see the potential in, like larger houses that could be turned into co-living spaces! 

    SDIRA for down payment, HELOC for rehab, then cash out refi and look for the next one!

    1Reply
  • Travis TimmonsPro Member
    Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
    3y

    If I were in your spot, I'd try to find some sort of W2 income and resist the urge to try to live off of cash flow from real estate. That is far easier said than done. To put it in simpler terms, $10k per month in cash flow is $1.2M invested at a 10% cash on cash return. That's gonna take a while. Of course, short term, mid term, and rent by the room strategies will or should increase returns a bit. It's still likely going to take more than 5 properties unless they are paid off.

    Real estate investing is best when you don't need the money, are insulated a bit more from risk, and can start to get the snowball rolling downhill. If you have to pull money out to pay your bills, it's going to kill your momentum.

    4Reply
  • Chris Watkins
    Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes
    3y

    👆👆👆

    0Reply
  • Cory CarlsonBusiness Member
    Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes
    3y

    With that amount of capital I think an owner-occupied situation fits your criteria or some sort of value-add scenario where you can gather more capital. I like your goals to amass a portfolio but as mentioned before, to truly make After-tax cash flow of $10,000 a month would require one-few million dollars and a carefully balanced capital/equity position to reap the benefits of leverage and risk tolerance, especially if you are using your SDIRA. The SDIRA will have but no choice to be passive. IRA Advantage (*I have no affiliation) is based out of Portland and a great resource (website and youtube) on the limitations and mechanics behind using the IRA. There are situations where you can partner with it but there is a bit of red tape.

    503-222-0282
    Constant Commercial Real Estate Inc543 Reviews
    WebsiteView Page
    0Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @Travis Timmons:

    If I were in your spot, I'd try to find some sort of W2 income and resist the urge to try to live off of cash flow from real estate. That is far easier said than done. To put it in simpler terms, $10k per month in cash flow is $1.2M invested at a 10% cash on cash return. That's gonna take a while. Of course, short term, mid term, and rent by the room strategies will or should increase returns a bit. It's still likely going to take more than 5 properties unless they are paid off.

    Real estate investing is best when you don't need the money, are insulated a bit more from risk, and can start to get the snowball rolling downhill. If you have to pull money out to pay your bills, it's going to kill your momentum.


     I will most likely pick up a W2 in 6mo or so to fill in the gaps, but I want to stabilize this property and another before I jump back to a W2.

    1Reply
  • Chris Watkins
    Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes
    3y
    Quote from @Jarrod Ochsenbein:
    Quote from @Travis Timmons:

    If I were in your spot, I'd try to find some sort of W2 income and resist the urge to try to live off of cash flow from real estate. That is far easier said than done. To put it in simpler terms, $10k per month in cash flow is $1.2M invested at a 10% cash on cash return. That's gonna take a while. Of course, short term, mid term, and rent by the room strategies will or should increase returns a bit. It's still likely going to take more than 5 properties unless they are paid off.

    Real estate investing is best when you don't need the money, are insulated a bit more from risk, and can start to get the snowball rolling downhill. If you have to pull money out to pay your bills, it's going to kill your momentum.


     I will most likely pick up a W2 in 6mo or so to fill in the gaps, but I want to stabilize this property and another before I jump back to a W2.


    I think that is real important. Focus on stabilizing this property. Learn all that you can from the experience and be a more informed investor for the next buy.

    0Reply
  • Nick Bolding
    Realtor · Memphis, TN · Member since 2018 · 19 posts · 9 votes
    3y

    @Jarrod Ochsenbein invest in a martlet that is sustainable, cheaper and scalable with an agent who can give good advice and guidance based off of market conditions!

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y

    Just the $80k is true capital. The other stuff is just leverage, get your **** together before you jump into this. Anyone suggesting otherwise is predatory. 

    1Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @V.G Jason:

    Just the $80k is true capital. The other stuff is just leverage, get your **** together before you jump into this. Anyone suggesting otherwise is predatory. 


     I have my first co-living property I have already learned a bunch on.  Once I get that stable I will be looking for another one, but wanted to use the capital wisely.

    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    3y
    Quote from @Jarrod Ochsenbein:
    Quote from @V.G Jason:

    Just the $80k is true capital. The other stuff is just leverage, get your **** together before you jump into this. Anyone suggesting otherwise is predatory. 


     I have my first co-living property I have already learned a bunch on.  Once I get that stable I will be looking for another one, but wanted to use the capital wisely.


     Using it vs using it wisely is the right thinking it. I'd make sure you're just going off what you have liquid and can budget with net after reserves for what you want to invest in. No heloc and other stuff. That's not real.

    0Reply
  • Gavin Smith
    Member since 2023 · 6 posts · 2 votes
    3y

    I'd keep your 80K in the bank and use someone else's money for a deal. 

    0Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @Chris Watkins:
    Quote from @Jarrod Ochsenbein:
    Quote from @Chris Watkins:

    My Goals are to get to $10k a month, so I need 5 properties at least. I currently am managing myself, but looking for a long term prop manager. I used the HELOC to do the down, but paid it off with funds that finally came back from a loan I had out. I am hoping to replace my W2 income. I don't have a W2, so I have to get things going to survive! :) LOL


     $10k is going to take a while to build unless you are buying a larger building. Co-living should help, though. If you are a true believer in co-living, you're going to make the most if you dive into that and get good at what you do and know your niche (operations and property types). If you aren't a co-living true believer, I would aim for a multi-family property, the largest you can in an appreciation market. The best long-term deal will be value-add, which it seems that you are comfortable with, so keep your eyes out for those properties that not everyone else can see the potential in, like larger houses that could be turned into co-living spaces! 

    SDIRA for down payment, HELOC for rehab, then cash out refi and look for the next one!


     If I use the SDIRA for down wouldn't any funds made on the property have to go back into the SDIRA?  

    0Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @Gavin Smith:

    I'd keep your 80K in the bank and use someone else's money for a deal. 


     Gavin - I am networking on that front for private money.  If I can I will.  Thank You

    0Reply
  • Jarrod Ochsenbein
    OP
    Rental Property Investor · Oregon/Arizona · Member since 2023 · 124 posts · 79 votes
    3y
    Quote from @Travis Timmons:

    If I were in your spot, I'd try to find some sort of W2 income and resist the urge to try to live off of cash flow from real estate. That is far easier said than done. To put it in simpler terms, $10k per month in cash flow is $1.2M invested at a 10% cash on cash return. That's gonna take a while. Of course, short term, mid term, and rent by the room strategies will or should increase returns a bit. It's still likely going to take more than 5 properties unless they are paid off.

    Real estate investing is best when you don't need the money, are insulated a bit more from risk, and can start to get the snowball rolling downhill. If you have to pull money out to pay your bills, it's going to kill your momentum.


     Travis, 

    I agree and under no illusion that I may have to get a W2 in the near future. I am using this time off to build up on knowledge and acquire as many properties as possible. I am trying to network and acquire funds for purchases since a DSCR loan is 25% for me as a novice investor. I was recently on several podcasts of folks who have over 1000 subscribers, so that may help the cause. I realize that is not a lot of people, but every little bit has a potential. :)

    0Reply
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