Using your Retirement Fund to Invest in Real Estate

I was right there at 19 and a half out of 25 years. You’re supposed to retire at 25. I calculated before I left what my retirement was worth to me. At 25 years, you only get 50% of what you make. For 25 years of your life, out of 50,000, I would have gotten 25,000 a year in retirement. The first building I bought pays me $40,000 net every year. That’s after all the expenses. We own an office building in a nice office park in north Jackson.

There’s a story behind this building, it’s another one of those gems in the rough. When I first left the state, I started doing insurance for a little while, I don’t know why I did insurance, it’s one of those things that if you have no skills it’s comfortable instead of going into what you really know how to do. I looked at the loop net of all places which is where properties usually go to die. This building was a bank-owned property that had been in foreclosure for three years before I bought it. I bought it basically on price alone. They wanted $250,000 for it which I thought about and I said, “I could probably come together with $250,000, I could borrow that”. It had one tenant in it that was literally making all of the debt services. This tenant had been in this property for 10 years. They were a long term tenant, had a long term lease and everything.

At the time I quit, I didn’t have any money in cash. I didn’t have the 30% down payment. I looked around and something told me, “your retirement is where your money is”. Who wants to leave a job and then take the retirement out too? Because that is one way you can guarantee that you can’t go back, it’s one of those burn the ship moments. When I got the money out, all of the money, I got $60,000 for that $250,000 building. When I came in looking at the building, as a contractor, long story short, we managed to negotiate the building down to 107,000. Needless to say, I was called a lot of things by the bank that was selling the property. They were not happy that they had lost half of their value.

Even at 107,000 with debt service being paid by this tenant, no bank in town would touch me. I actually went to one bank and I won’t name them but I deposited $60,000 in cash into a checking account in hopes that they would finance a loan for 107. They told me no and the reason they told me no was because I didn’t have a job and I was thinking, “Well, being a real estate investor is my job and I’ve got almost 60% of the payment for the building, and you can keep my money and lock it up”, and they still told me no. My lawyer at the time told me that if they won’t give me the money for this property he would because this is a slam dunk.

Now I can say I have owned this building for eight years. We owe roughly about $50,000 on it, it’s almost paid off.  It is generating 40 something thousand dollars a year in net income and I get to keep one office. It would have been fully rented if it wasn’t for my own personal office for my construction company. So this really was one was a slam dunk.

Click the link to listen to the full podcast: https://lifebridgecapital.com/2019/11/ws382-commercial-real-estate-done-right-with-anthony-griffin/