All Forum Posts by: Lee Krasulja

P & I is 1385.52 and it is a fixed rate mortgage. I'm confident that I can bring in around ~1500 in rent. I have verified other rentals in the area - they range from 13-15.

Thanks everyone for the input. I had a feeling that most of you would feel that tapping the retirement account is not a wise decision but I wanted to share with you my thoughts on why I am considering to withdraw from retirement.

First off, I want to consider my current home which I want to convert to a rental, as an alternative retirement investment. I have paid into this house for 6 years. If I were to withdraw say 15,000 from my retirement which would allow me to purchase a new primary, I can then rent out my current home. Now let's assume that at the end of the 30 years my current house does not appreciate in value (not likely but lets be ultra conservative) that would be ~250K based on current market value. If we were to compound that 15K for 30 years (which is the term on my existing home since I refi'd this year), I would have to average a Rate of Return of close to 10% (9.83%). Given the market these days and historically, that's pretty unlikely. So obviously this is not a traditional approach to retirement savings but it's certainly a viable alternative. No? Having renters pay my mortgage and ultimately pay off this asset which I can either sell for a profit (when the market returns) or keep for an additional income stream. I should also point out that I am not depending on this income to live on now. I work full time and am doing quite well in that regard.

I do realize that there is a very large risk in thinking that I can keep it rented and perhaps I am being a little too optimistic in that regard but I do know that the area I live in is highly desireable for young professionals and I have a few friends who have been very successful in keeping their properties rented in this area. Again, that's no guarantee but at least I have some real life success stories that I can strive for.

What am I overlooking here in this approach. The only thing I can see is not having the reserves to cover for unrented periods. Anything else?

I'm sure there are flaws in my thinking which is why I am hoping you all could point them out.

Look forward to hearing from you.

Thanks again.

Hey guys,

I'm trying to compile a list of things I need to consider/review with my accountant, financial planner and attorney. My wife and I have outgrown our home and feel that the time has come to find a bigger house. Unfortunately, our current home's value is less than what we paid and so we are deciding to purchase a new primary and convert our existing into a rental. Some of the questions I have or want input on are:

1. Don't have a lot of seasoned money for downpayment on new primary. Was thinking FHA for the low DP %. Anything major I should worry about with FHA? Looking at ~400K home. My frontend/backend ratios are reasonable. (nice way to say I have debt) :)

2. As mentioned above - don't have a lot for DP. Most likely will tap 401K. On a 400K home, that's ~15K withdrawal. Looking for ways to avoid the penalty. I read something about rolling into an IRA can get me out of the 10% penalty?

3. Current home switch to rental - to LLC or to not LLC? What about insurance? How much coverage, etc.?

Any advice or input is greatly appreciated.

Thanks.

-Lee