All Forum Posts by: Ken Badziak

Philip Mullinax At 18 days in, you're only 15 days behind schedule. File the papers yesterday. If she pays up in the meanwhile, you can halt the process. But in the meantime, let the process do its thing; it takes time. Also, hire a PM next time so you're not put in this position again.

I'm assuming you're looking in Doral and the surrounding areas. Like most of South Florida, Doral is stupid expensive. Not saying don't invest there, but if you're ready to drop $400k on a down payment, you would be wise to check out other markets where you can get a (significantly) better return. If you want to stay in Florida, some cities to consider would be Jacksonville, areas around Orlando or Port St Lucie, just to scratch the surface. Outside Florida, the possibilities are endless. $2m goes a LOT farther in Birmingham, Nashville, Indianapolis or Dayton. If you want to stay in South Florida, there are deals out there. I saw a 12 unit property a few months back over in Little Haiti (I think) that was going for $800k. Every unit was vacant and it needed work, but again, with $200k at your disposal you can buy something like that, rehab units and rent them out. But if I was to drop 20% on a $2m loan, I'd be looking in more linear markets, ones that don't go up and down like a roller coaster. I like boring markets.

Braxton Harrison purchasing a property using LEVERAGE is a PITA within an IRA. But if you can purchase the property outright (I.e., pay cash for it) then it can make sense, especially if it's in a Roth. Assuming you have $50k in each account, you can go to one of the many turn-key providers around and purchase from them. Because everything has to be done at "arms length" this could be your best bet, and an opportunity to invest outside your area. Do some research on turn-key providers, the markets that make sense, and if the entire strategy works for you. Consult with your CPA; in guessing it would be far easier to keep your accounts separate, and each one holds an entire property within (not splitting properties, in other words.) If the $50k homes aren't to your liking, you can always make more contributions until you've got enough for an $80k home... Or look into note investing perhaps.

Mike Reynolds again, I'm not a CPA, but here's how I understand it... After you get laid off, you can roll your company sponsored 401k into your existing IRA, in effect combining the two. Your Roth IRA will remain separate, unless you decide to re-characterize your traditional IRA. You'll take a tax hit when you do that, but it's like pulling off the band-aid. It's over quick. Now you'll have one big pool of Roth IRA money. If the pool is big enough to buy a property outright, that seems to be the best way. So you'll need $80-120k for a good SFR or duplex in a market like Indy, Little Rock... Maybe even in Nagodoches (I think I partied there 20 years ago when I was in the Marines... Sounds familiar, if not a bit blurry the next morning!!!) but that was 20 years ago and the market may have changed, I don't know. But here's something else to consider; you said you're losing your job. If you need the income produced by these properties then you cannot buy them in an IRA; that money stays locked up until you hit retirement age. And any property you purchase with an IRA you have to keep at "arms length", meaning you can't change a freaking light bulb if one burns out; EVERYthing needs to be done by 3rd parties. So maybe the Dayton OH idea is suddenly sounding better... But I digress. (It's 2am and I'm into my 2nd bottle of red, so... yeah...) If you're going to need to live off your investments, then keeping them in an IRA is the wrong way to do it. Simply put, you won't be able to.

Mike Reynolds I'm not a CPA, so I can't offer actual advice. But what I can tell you is that after researching this issue with my $50k SDIRA, I found that owning actual RE with it wasn't worth the hassle. There are many many more hoops to jump through, and paperwork needing to be filed, and custodian fees (and fees and fees) not to mention having to deal with "non-recourse loan" lenders AND the complications of the taxes... I came to the conclusion that unless you can buy the property outright in the IRA it just wasn't worth the hassles, red tape, paperwork etc etc etc. Plus, RE has many great tax advantages that you would be giving up when buying in a tax advantages account. If I had $150-200k in the account, that would make things different. Then it would possibly make sense to re-characterize into a Roth and buy the property (for tax free cashflow)... Or buy non-performing notes... But for my $50k? It boiled down to two choices; cash out, take the penalty and use it, or roll it into my 401k and take a loan against it. As it happened I had about $40k in my 401k already, so rolling my $50k into it gave me $90k to work with, of which I was able to pull $40k out (not 100% vested yet) and use that for RE any way I want.

With amounts that small, you miiiiight just be better off cashing out of the IRA/401k and just take the penalty now. It won't be that big. Then you can use the money as a down payment on a property; factor 20% for a SFR and 25% down for a multi family (duplex and more) I had $50k in a SDIRA, but found that the hassles of working with lenders in an account like that just wasn't worth it; I rolled it into my current 401k and took a loan against it. But with the amounts you're talking about, you might just be better off taking the hit now but freeing up the capital to work unencumbered with the limitations found in a SDIRA. Just a thought.

Daria B. That's normally the case, but I was recently informed that that doesn't apply to FHA loans with less than a 5% down payment. I didn't use the FHA loan, so in the end I'm not 100% certain, but that's certainly something that needs to be asked your mortgage provider.

Assuming a 5% down payment for the FHA loan (one can go as low as 3.5% down, but my understanding is you can never get rid of PMI, even once your equity hits 20%, without refinancing) that's still going to leave you with a monthly mortgage payment of nearly $2500 (PITI). Your tenant would barely be covering half. I'd personally be looking for a unit where the tenant covers as close to 100% of the expenses, but no less than 75%. But that's just my personal preference. And that's before you start adding in repairs and vacancies and whatnot...

I'd start talking to local small banks and credit unions. Try to get a portfolio loan to cover all four at once. Save a bundle on closing costs, for certain. I believe I was just reading a different thread last week about B2R Finance offering a loan for situations like this. Maybe check them out?

I get what he's saying, and it makes lots of sense, to a certain degree. Same thing many other personal finance gurus are saying. YOUR PERSONAL HOME makes for a terrible investment, and it anchors you down to a specific locale, limiting mobility. As for his personal home? He rents. Something to the tune of $30k a month I'm told. The views are ah-MAZing.