All Forum Posts by: Gary Parilis

@Timothy Hero 
It's that easy? All you have to do is find a dozen or so turnkey properties that will cash flow at 20% ROI and will appreciate 4% annually for five years? Sign me up! :-)

@Logan Merrick I haven't seen anyone ask the obvious question yet: WHY are you considering buying a house with a foundation issue if you're so new at the game? I get @Syed H.'s point... Such a house can be a great deal. But it seems too risky for someone inexperienced. There are plenty of less risky deals out there, and there will be plenty of houses with foundation issues once you've gained experience.

Got it, @Brian Eastman. Thanks. Another important detail is that the loan can only be from the plan associated with the current employer (related to your comment about the loan becoming due if employment ends). The rate is 6%, and apparently easy to obtain with no paperwork, and takes 2-7 days. Also, it's an amortized loan, 12-48 months. Net: Not such a big amount available, but very convenient and cheap. A decent solution for rehab in a BRRRR. In fact, I might be inclined to use that first, before tapping my home equity line -- slightly lower rate, and I pay the interest to myself (yes, with opportunity cost).

I'm investigating various options for short-term cash for rehabs. A loan for 401k looks like a good option. Any gotchas to worry about? 

Below are the rates charged in one of my accounts (Fidelity). As I understand it, at any moment, the outstanding loan principle is deducted from my investments (I assume proportionally across all funds), so if I borrow $20k, that is no longer earning in my portfolio. But that's OK, because my 401k is earning 9.325% on the loan (more than it would earn on average in a typical stock fund). And for me, the real estate investor, this is cheaper source of capital than a typical private loan or hard money.

Anything wrong with my reasoning? 

@Christopher Ajayi I recommend you talk to @Brian Eastman (above). An excellent resource.

Thanks again,@Annchen Knodt and @Shiloh Lundahl!

@Corby Goade, check out podcast #310. Listen to five minutes starting at exactly 20:00.

@Mike S. I rolled into a SDIRA rather than a solo 401k because I have a FT W2 job. My understanding is that the solo 401k is for self-employed. Correct?

I'm setting one up (almost done) and have learned a ton. I'll summarize here what I know (and what I still don't), but also feel free to message me. In general, it's fantastic because it unlocks funds you wouldn't ordinarily be able to use, and the tax benefits are an additional advantage. I am late in my career, so I'm just rolling funds in from my traditional 401k. If you are early in your career, you should consider a Roth, because then, while you're investing post-tax funds, investment gains are not taxable. Awesome.

There are lots of rules, mainly designed to prevent self-dealing. You do not own the LLC -- the IRA does. You cannot do any work for the LLC. If the tenant has a plumbing problem, you cannot come over with a wrench. You can buy, sell, hire contractors, hire managers, but you cannot DO anything yourself.

I used Safeguard Advisors to set up my accounts. Brian is super patient and helpful, and full of great advice. He can answer all of your questions. I checked them on out BBB and elsewhere and could only find excellent ratings. They'll set you up with a custodian and walk you through the process. 

What I'm struggling with is loans. Any loans must be non-recourse loans (do some googling). Lenders who provide non-recourse mortgages don't offer generous terms. It seems the best you'll do is a 60% loan for 20 years, but that's only for a property that's pretty new. I was just offered a 50% loan for 15 years on a property built in 1940. Also that percentage is not LTV... They will lend a percentage of what you paid (purchase + rehab). If you buy below market and push the equity with rehab, you can't borrow based on the new appraisal. But I probably just haven't found the best lender yet. I can privately direct you to the lenders I've checked with.

Note: I recently posted on BP asking for recommendations for non-recourse lenders, and my post was removed because BP doesn't allow "soliciting". Strange because I see people asking for recommendations all the time and they don't get removed. 

For the record, I still need to find a non-recourse mortgage provider that will give me better terms than above, but I am strictly not asking for that here. However, if someone sends me recommendations privately I guess I can't stop you. :-)

@Eddie Gonnella Sorry the link didn't work for you. I have read in multiple places that when you use the delayed finance exception to get a loan on property B, you must document the source of the funds you used to make the purchase. If the source is equity from property A, you must use the new loan to pay back the property A loan.

See discussion with @Brit F. above. Have I misunderstood something, Brit? 

This is just my opinion; your mileage may vary: I would rather not miss out on opportunities because of a fear of a downturn. A downturn means I'll earn less than I would otherwise but I'm still much better off than not having the property at all. I guess I'd wait if I could be certain when a downturn was coming, but I can't.