All Forum Posts by: Derrick Dill

John, regarding you and Franks conversation:

You can withdraw your contribution to your ROTH IRA with no tax penalty at any time. Why? You've already been taxed on your money that you contributed.

The 10% penalty you speak of is for EARNINGS that your CONTRIBUTIONS made. As an example, let's say you contributed 25k of the 30k that is in your ROTH. The 25k that you contributed can be taken out with no penalties at any time. The 5k that your 25k earned, will be penalized and taxed.

Disclaimer: I'm not a tax professional, I've just taken out of my ROTH IRA and consulted a tax professional

6 months is the standard and adequate. Your plan seems sound, you can always say you're moving closer to work if that's the case. Only other concern I can think of is debt to income ratio. Underwriters won't include your full rents until they've been seasoned a bit and on your tax returns. They should include 75% of rents: Ex. rent for 1000$, they'll include 750$ for your debt to income. If you're in the clear for DTI.. Go for it! :)

Yes.

You'll need to owner-occupy again for a year, and have adequate reserves for the first property. Underwriters might question if/why you're moving further from work.

It depends on your income or how willing your parents/friends/investors are willing to work with you. If it's possible, I think the best way to get started is a 3.5% down FHA on a 4-plex that will pay for your mortgage and cash flow.

If acquiring property is out of the question in the near-future. I would work on your credit score, a better credit score will give you better rates for a mortgage and save you thousands. Start looking at areas that you believe in, think will appreciate. Go to open houses and get a feel for the market/areas. Decide on things that you want for your place (garage, washer/dryer, backyard, porch, pool etc.)

I'd get one more duplex for good measure! :)

Don't forget about capital expenditures. The roof of your duplex's will need repair/re-done at some point before you're 60.

As long as you're not currently paying off an FHA loan, you shouldn't have an issue. If you're moving closer to work, even better. You can only have one FHA at a time, if you currently have one, you can refinance to conventional with that one and use FHA to owner-occupy this prospective one.

Nathaniel,

I think your first step should be to talk to a lender. Many will qualify you as long as you're under 45% DTI, and will include 75% of your rental income even before reported on your tax returns.

Good luck

Credit union or Hard money lender.

Not sure about your financial situation, but often peoples' DTI gets better with the more properties they purchase because they're cash flowing. Another solution is to pay off small debts CC, car loan, student loan, etc., will lower your DTI.

One thing that hasn't been mentioned in Real Estate vs Stocks is the tax implications. You put 10k into stocks, get 10% return = 11k. But then you get taxed 15% (if you wait for the more favorable long-term capital gains tax) on you earnings.

Example in real estate for rental property, you get a 10% return, but then you add in mortgage interest deduction, depreciation, any repairs, maintenance, property manager.. etc.

The tax benefits of owning real estate far outweigh any tax benefits from stocks.

1. If your tax return shows you taking income for a full year, they'll take that income into account, if not, it's usually 75% (ex. rent is 1k=750$ is included in DTI)

2. If you're going to live there, they should have no issue where you work. If you're commute is much further away, they may question it.

Like the others have said, talk with a lender.