All Forum Posts by: David Fals

 Thank you! NJ is looking like it won't be the ideal place for me to purchase a property. I've heard it isn't landlord friendly

Usually people saying there are no deals are just browsing Zillow instead of networking, bidding on auctions, working with wholesalers, etc. 

@David Fals I'm in the same boat! I purchased a condo in 2020 in NJ and now I'm looking to grow my portfolio with out of state investments for the same reasons outlined on this thread. 

@Sino U. My research is leading me to PA or OH for my next property because I can get more bang for my buck. Moreso PA because I want to be driving distance since this will strictly be an investment property. I'm happy to share PA contacts that have helped me on my journey.

It have done both types of investing over the last 15 years and this is where we're at. 

$100k into 401k type funds that are worth about $150k now.  

$30k down on our first house that's now a rental.  We have about $250k equity in it now (conservative estimate).  Our next house will need 20% down which will take twice as much cash but should still have a better cash on cash return than a 401k.  And that doesn't take into account the tax benefits of the rental. 

We only contribute to the 401k up to the employer match, just to diversify.  And the rest goes toward our next down payment on a rental.

Just my .02

You’re ignoring the effects of leverage. Most people finance investment properties instead of paying cash and that magnifies the return. So instead of $100k worth of real estate earning x% return, you’ve got $400k earning that return. Yes, there is a cost (interest) you have to pay but it is tax deductible. In 50 years, your $400k in real estate will be paid off and will be worth WAY more than a stock portfolio. That’s the magic of real estate, the ability to leverage it. 

On the topic of traditional 401k/IRA vs Roth, it is just a question of the tax rate. If you think your tax rate will be higher in the future, you should do the Roth and pay the lower rate today, if tax rate is lower in the future, traditional and pay the lower rate in the future. If same tax rate, it doesn't matter which way you go.

The list toward the beginning of this thread listing the pros and cons of 401k’s left out the biggest con: high fees. I would put money in the 401k to get the match but not a penny more. 

One last thing, it’s interesting to hear people’s biases. When I was a financial advisor, other financial people were against real estate as being “too risky.”  Among real estate investors, many are against the stock market claiming 1: Wall Street is rigged 2: Wall Street is a casino and/or 3: houses don’t go to zero. 

There is a group of very high net worth individuals called Tiger 21 and they put out a summary report of their members asset allocations from time to time. About 80-90% of these investors assets are about evenly split between stocks, real estate, and holdings of private companies with a little bit in other assets like hedge funds, currencies, commodities, etc. 

For us regular folks a 50/50 split between stocks and real estate makes sense. They each have pros and cons but having both gives you flexibility. 

Hi BP Community,

I’m excited to join and start my journey in real estate investing. I’ve been reading Brandon Turner’s book on the subject and am nearing the end. Eager to begin, I have a few questions and would appreciate your insights and advice.

I currently live in Monmouth County, NJ, and bought our home last summer. Considering the high property taxes unfriendly laws towards landlords , inventory, and prices here, I’m pondering out-of-state investments for potentially better cash flow. I’m attracted to markets with:

• Lower property costs

• Landlord-friendly laws

• Lower property taxes

However, I’m unsure about the best market for a beginner like me, aiming to invest in multi-family properties with a budget of $50K. Is this feasible in the current market?

Another concern is financing. I'm considering using a HELOC from my residence. From what I've read, this seems more suited to a BRRRR strategy. Would it still be a wise choice for a straightforward investment?

Lastly, I’m curious about starting with Section 8 housing. As a novice in real estate, is this advisable, or should I gain more experience with other properties first?

Thank you! 

Where are you seeing 40-50% down? That is not accurate. Typically its 20-25% down.

@Jack Nazarian As I tell a lot of the new investors on the forums here you can, and probably will make a fair number of mistakes with your first property. That’s why I always recommend starting small with a 1-4 unit property and then taking as much time as you need to work out the bugs and figure out your systems and build a solid team before buying your second property.

If you are in any market that’s not most of California, certain places in New York and New Jersey, and Utah then it’s likely the purchase price of your first property hopefully did not break the bank and the costs associated with the mistakes you make starting out will not be so very large that you have a problem affording them.

In a lot of areas an eviction costs between $5-8,000. If you’re in certain tenant friendly states it can cost much more and take up to or over a year to finalize an eviction. That gets costly.

As you learned having a bad contractor can cost lots of money and sometimes having to redo some of the work on a project if you find a bad contractor did shoddy work.

These are the learning curves that hopefully you will work out by the time you buy your second property.

With a traditional 401k yes you do pay taxes when you eventually take the money in retirement, BUT that is a SWEET DEAL! Your contributions this year come out BEFORE tax. So, you aren't paying income tax on the money your putting in now. So, all the money you would have paid tax on this year will GROW GROW GROW for many years until you eventually need it in retirement.

In addition, people generally plan to have modestly lower income in retirement and pay a bit less taxes.

PLUS, if you pass away your heirs inherit that tax advantaged account which has benefits.

So, ALWAYS put enough money in to get the company match because that is FREE money beyond that make choices about how you want to invest whether thats in your 401k or real estate.

Also check with your 401k plan to see if they offer a Roth option. That is where you pay the tax on your contributions NOW instead of paying it later when you withdrawl money.