Rental Property Investor · Thousand Oaks, CA · Member since 2017 · 147 posts · 48 votes
Greetings!
I am currently maxing out my Roth IRA, which is phenomenal and gives me a great sense of security, but now that I am very intrigued in the RE investing community should I cut back on doing $458 a month towards the IRA or no?
Between my USAA Roth IRA, TSP Roth (which I will rollover once out of military), and everyday investing/saving I am putting roughly $1,039/month.
Which would you cut back/add to, if any, in order to build a bank roll for RE investing. My first investment property I am hoping to get a 2-4plex with FHA/VA loan, live in one unit, and rent the others out. Not exactly sure where at the moment because the Ventura County market is expensive and that is where I am going to live once I'm out of the military for at least a few years.
You could transfer the Roth IRA to a self-directed Roth IRA and then invest the Roth IRA in real estate. All the gains would flow back to the ROTH IRA and grow tax free.
My advice is to not reduce your retirement savings and instead find other ways to scrape together funds for investing in RE. You are still young thus every dollar you put into your IRA and TSP will have a lot of time to grow. Try instead to find a couple areas in your budget that can be tightened or find another source of income and save 100% of that. One of the bonuses you have being in the military is the fact that you can use a VA loan which requires very little cash to get started. I just used a VA loan to get a property for a live in flip, the property is a SFR worth $270k it needs about $10k of work and it will be worth around $310k. I bought it for $250k and my total costs at closing were $2,700. Keep that in mind.
You could transfer the Roth IRA to a self-directed Roth IRA and then invest the Roth IRA in real estate. All the gains would flow back to the ROTH IRA and grow tax free.
I am currently maxing out my Roth IRA, which is phenomenal and gives me a great sense of security, but now that I am very intrigued in the RE investing community should I cut back on doing $458 a month towards the IRA or no?
Between my USAA Roth IRA, TSP Roth (which I will rollover once out of military), and everyday investing/saving I am putting roughly $1,039/month.
Which would you cut back/add to, if any, in order to build a bank roll for RE investing. My first investment property I am hoping to get a 2-4plex with FHA/VA loan, live in one unit, and rent the others out. Not exactly sure where at the moment because the Ventura County market is expensive and that is where I am going to live once I'm out of the military for at least a few years.
Very Respectfully,
Jonathan Velarde
I personally would put every spare penny toward real estate investing and running my business.
Banks will say that you need so much emergency reserves for all of the properties that you own. Rather than keeping that money in a savings account, I keep mine in a Roth IRA. That allows me to passively invest that money into the stock market. It also allows penalty free withdraws of your contributions. Finally any gains that you make can be withdrawn tax free when you hit 59.5.
This is a good way to make Roth IRA funds useful without having to wait 20-30 years.
As for the Roth TSP, I am not a fan of it at all. I did quite a bit of reading on it and I quickly realized that it was not a good deal and could actually screw me over since I am 6C/12D and have mandatory retirement at 57.
Jonathan Jaime Velarde investing money into IRA or real estate is a good decision regardless.
Personally I do not have much faith in paper assets/Wall Street. It's hard to "invest" in things that are little to complicated for me. So I would reduce contributions and save big for real estate!
Good luck!
@Jonathan Jaime Velarde A self-directed IRA may enable you to achieve many, if not all your goals. You could keep putting money into the IRAs and invest in RE. RE within IRA has some additional tax rules that you must be aware of. For example, buying a property with IRA money and residing there yourself would be a