All Forum Posts by: Gary Kane

As someone who just went out looking at new construction for primary residence (and rent out my 12 year old condo), I can tell you, I can't believe how expensive/over-priced houses are! I looked at a 1650 sq. ft. home in a new development in St. John's, Fl....$304,000!  Unbelievable!  Almost $185 sq ft....crazy!  We're definitely heading into a bubble!

You should maybe start with a Single Family Home (SFH) as your first investment. SFH's are more flexible in the long run. With $16K available, that limits you to an $80K house (which typically requires 20% down for an investment property mortgage). You're going to need additional funds to run your business of course, for the unknowns.

Sounds like you're looking for a multi unit to live in and rent out the other units?  Good plan, and maybe a duplex would be best to start.

Look in your area for a turn-key real estate investment company that may have some inventory in the less than 100K price range in good/decent neighborhoods with good schools (if any).  A website that pretty cool at researching this in RoofStock.com.   You may also consider a property out-of-state.

The one positive you have is you're young and have the investing savvy and bug...good for you.  Remember, this is a marathon, not a sprint...Good Luck, and have fun!

Make sure you get a good inspection, including termite inspection!  Good Luck...love the Riverside area!

@Dmitriy Fomichenko

So NO depreciation when using SDIRA or SOLOK?  In all cases?

@Mike McDermott

How are you claiming Depreciation if you used a SOLOK?

@Jasmine Benford

It may be worth it, but here's the ugly truth relative to "cashing out" a 401K...versus rolling it over to a SD IRA.

Any withdraw (or cash out) from a former 401K, will typically require a 20% tax withhold, so right away you are only going to receive $9600.  This in addition to the 10% penalty.

Then comes time to file your taxes for that year...that $12000 is considered additional income, so you are possibly entering into a higher bracket. That 20% that was withheld will help with the tax liability, as it will be included with 'taxes paid' for the year.  Then comes the 10% penalty ($1200), which is tacked onto the end of your tax bill.  So effectively you're coming away with only $8400 of your $12K.  It cost you $3600 to get access to $8400...which sucks!

I would consider rolling that 401 into a Self Directed IRA, which will be the entire $12000. Then think about adding to it for investing purposes, if that meets your ideas and plans.

But I understand your thinking...take the hit and get the 8 grand to invest, in which I would pursue something 'outside' of a SD IRA. You will typically need about 20% for down payment on investment property, you can do the math and realize $8K will be a little shy for a decent property. So these are my thoughts, and they come from experience in withdrawing from tax deferred accounts, which leaves a bad taste!

Good Luck!

@Shawn Ackerman

Shawn, thanks!  I had the html version, which is full of links...opened the pdf version, which helps for sure!

@George Blower

Can you point me to the exact spot in 560?

@David Beard

@Mike McDermott

@Doreen Chaisson

OK, help me out here...something seems a little shady here!

You're saying that I can create a "SOLO-K", even as a sole proprietor (which currently I am not. I have no 1099 income).

But let's say I start going to flea markets and buy used golf clubs and sell on e-bay...as a sole proprietor. And let's say I make an extra $3000 a year with this e-bay venture.

Now what happens as far as the SOLO-K...what do I have at my disposal? (Note: I have substantial IRA assets!).

I am a little bit leery as to the advice that is being given here on BP!!!

--Gary

I would just cash out the 401K...ear-mark the remainder for your down payment...how much down you need depends on price of the rental of course.

Remember, you have to claim that $10-11k as income on the current years taxes. And you will have  10%!penalty (if under 59 yrs old) to boot.

@Erik Stewart

You can't borrow from a SD IRA, you can "withdrawal" from one with potential penalties.