All Forum Posts by: Curtis H.

@Dave Foster

Thanks for the clarification. You are right, it ain't so...sort of :-)

"If you want to take cash out or buy less than what you sell you can but you'll pay tax on the difference."

How much tax?

@Minna Nah

I was only kidding about the fundraiser or lemonade stand :-)

I'm just being overly dramatic about how hard it seems to fund this plan in the beginning. But my real question was about wholesaling/assigning a couple deals to make $5K-$10K or so to fund the plan. Is that allowed? It seems unless you are licensed as an agent who can get commissions on listings (whom is not employed by anyone), there literally aren't many ways to initially fund this plan. If you are an investor you buy and sell houses and/or notes for the most part. How in the world do you buy your FIRST house and/or note if you can't fund the plan? I guess that's what I haven't wrapped my head around. 

@Mark Nolan mentioned a non recourse loan to fund the first one, but how how common does that happen? If it's fairly common then that seems like the way to go. You said earlier in the post to partner with someone else. That seems like a great idea as long as someone else can mean pretty much any other investor that is not tied to my plan. Is that the case? If it simply means partnering with someone on my first deal, and take my half of the profit and fund the plan, perfect. Sounds like a winner.

@Dave Foster

I just read in another post that when doing a 1031 exchange you have 45 days to purchase the second property with proceeds from the 1st. Please say it aint so...

Also, does the amount of the second purchase must at least be the same amount of the profit you gained from the 1st?

Ok well there is the achilles heel in my opinion, which is what I was trying to get to all along. All these plans have one. I still think this is the best plan long term and it beats the snot out of an IRA, but if you don't already have an account with decent funds to rollover, this is a little tough in my opinion.

@Minna Nah

Can I wholesale a couple deals and put the proceeds into the plan? I don't want to wholesale but if that's the only way to get money in this this thing maybe I can do a couple. I am assuming I can't get private funding for a deal I want to put the proceeds into this plan either right? Fundraiser? Lemonade stand? Stand in front of the grocery store with a clipboard and coffee can? 

:-)

@Minna Nah

@Justin Windham

Thanks for the clarification, but now I need more clarification!

Employer 401K thing I totally get. I'll just contribute, let them match my 6% with 3% and ride it till the wheels fall off (meaning they fire me or I quit). At that point roll it over and use it. Fine if I'm there 12 years or shorter, not so fine if I'm there longer than that. I don't plan to be since I'm retiring my day job in 12 years.

What isn't so clear is how people who start these plans to fund real estate investments do their initial contributions? Do they purchase the first piece of property using outside funds, then eventually the proceeds from the sale go into the account? This is what is not adding up to me. Seems the beginning is the hardest part, but once it's rolling it's fantastic.

Thanks!

@Jay Hinrichs

I simply think your real estate knowledge is superhuman, and therefore you simply can't understand how another person can't see what you deem is obvious. Reminds me of all the great hall of fame basketball players that tried to be a head coach and struggled. Larry Bird, Isiah Thomas, Magic Johnson, etc. They all said it was hard for them to understand how when they would give the players what THEY DEEMED a simple set of instructions, the players couldn't execute. Of course they couldn't, they aren't a team full of greats. However, the greatest coaches of all time were benchwarmers when they were in the NBA. Phil Jackson, Pat Riley, etc. They can identify with the common players, and understand why the players are struggling and correct them. Not throw up their hands and say these guys should know better. 

"All buyers with any modicum of knowledge"

There you have it. I don't even know what modicum means. I've never heard the word in my life. Honestly. Not once. And when I bought this home at 21 years old (with no help from mom or dad), I spoke on a technology panel of experts and taught men in their 50s by the hundreds about my field. So yes, I had a "modicum" of knowledge. Whatever the next word up is, I had that. There you go :-)

"Any real estate agent and closing escrow officer etc will explain this to the buyer borrower."

Oh you mean the bubbly 25 year old real estate lady who is under immense pressure to sell all these homes in the subdivision or be replaced? Yeah she sat me and my wife down with the rest of the subdivision and told us our mortgage payment on a $150K home would be going up by $500 a month with no warning on a 30 year fixed conventional loan. I happily signed. Come on now.  

@Mindy Jensen

Very well put. I totally agree about the education on finances we get today. Or education period for that matter. We are taught about checks so we can keep writing them. I did not have an agent, because the only reason the average person would get an agent is to help them FIND a home. I had found it already so what's the point right? I walked into a model home, picked the plan I liked, and moved forward. I said earlier in the post that I admit the mistake I made in this scenario was going with the in house lender. I truly believe that was my fault. I didn't get a quote from two other lenders, as they would have told me the reason the payment is so low is because they are doing shady business. That's on me. I wouldn't make that mistake as a 35 year old, but at 21 of course I did.

Ron Gosling We are on the same page there. I'll be tinkering with this plan but absolutely the end game is an apartment building, and if God willing, multiple of them. Classic Monopoly strategy. The green houses are a good start, but it's the buildings that make you wealthy, and your children wealthy. That's what I'm after.

Timing couldn't be better for me as I am about 3 months away from starting my 12 year plan to retirement. I essentially will be doing buy and hold investing with maybe a fix an flip thrown in. 

@Dave Foster has given me some awesome advice on 1031 strategies that I do really like. 

@Minna Nah 

@Dmitriy Fomichenko

I do however really like the benefits a QRP/Solo 401K offers in terms of allowing you to fund your real estate purchases, as long as you aren't using them for personal gain (rentals that you never lived in or used on vacations). It seems to me like 1031 exchanges and this can both be utilized to some degree. Question I have is if my employer has a matching 401K plan (which they do) can I fund my Solo 401K account with those pre tax dollars or does the employer typically make you use whomever they already have set up to do it (in my case Fidelity)?

@Wayne Brooks

Yep, high school sweethearts and still going strong!

@Steven Hamilton II

Right, the only reason not to hold on to it is if you think there will be a downturn and suddenly that $500K equity turns into $225K equity. If we expect appreciation, like we do, no need to sell. I have heard that when banks expect a downturn, they start freezing HELOCs, so that is one potential risk. 

@Steven Hamilton II

Ok this is where me and my wife went back and forth trying to figure out which scenario is best. I said after renting our current residence for 3 years (assuming we move to another home) then we probably will have closer to $500k in equity that we can cash out on if we sell it without paying capital gains tax. 

Her argument is, well you know California, and particularly this area is only going to be more in demand since the Hollywood industry execs are running out of places to live and they are driving prices up by overbidding. She's right, the appreciation isn't stopping anytime soon, and feels we would be selling too early. In 15 years our house could be worth $1.5m with a simple 500 sqft addition. So I see her point. We struck gold with this neighborhood, why sell in 3 years for $500K profit when you can sell in 12 years for $1.1m profit? If we moved back into the home two years before we want to cash out like @Dave Foster suggested in another thread, we could still benefit from a prorated portion of capital gains exclusion. Meanwhile we can STILL be using a HELOC on the home to fund our rental portfolio. So her question is, if you can tap into the equity using a HELOC, why do you need to cash out? Just keep it as long as you can. I didn't have an answer ready, but said I would research it.