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

Question

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?

$105K Heloc @ 8.5% variable

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

What would you do with these resources?

Travis Timmons · Answer

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.

V.G Jason · Answer

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

Jarrod Ochsenbein · Answer

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.

Jarrod Ochsenbein · Answer

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.

Chris Watkins · Answer

$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!

Jarrod Ochsenbein · Answer

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. :)

Jarrod Ochsenbein · Answer

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

Jarrod Ochsenbein · Answer

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

Gavin Smith · Answer

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

V.G Jason · Answer

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.

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

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