All Forum Posts by: Paul Novak

 I agree with you, I have only been at this for a little over 3 years and I love doing this.  I own 5 properties two of them being multi family properties so 7 doors.  I am following the small and mighty approach and also have loved connecting with people.  If you have any specific questions you are looking to connect on let me know and I would be happy to share what I have learned up to this point.

 Mathematically this normally makes sense but I get nervous giving people advice to do this.  I say it depends on what your plan is to pay it off and how long you anticipating it taking to pay it off.  Many times I tell my friends to just keep the debt, bite the bullet, and pay it off.  I have seen many consolidate their debt using a lower interest loan only to rack the credit card right back up and still have the loan.

Emmy,

For me I would put money like that in a high yield savings account because when I start saving for a shorter term goal I want to be able to use the growth to help me save.  The other thing I use for savings is my cash position in my taxable brokerage account which right now is getting 4.5% interest.  For me doing this gives me the flexibility that if something comes up I could use this savings in two ways for emergencies and for my savings goal.

I have in the past taken more risk and put the money in low cost index funds within my taxable brokerage account like VOO but there is risk here.  Your money could grow at 20% for the year and they could go down in value 20% for the year.  This year the market is up 21.09%, last year the market was down 13.04%, 2021 the market was up 39.44%.  My wife and I have two reliable vehicles but I decided when they were paid off to start saving right away for the next one by making car payments to myself.  I have put all that money in VOO over the past 3 years and the results have been great but there is risk.

I think this is all about risk tolerance.  If you have more specific questions let me know.

 Drago,

Thanks for your perspective and taking the time to reach out.

 I know it's not specific software for mileage or book keeping but I have 4 properties, have been doing this for 3 years, and just made a simple google sheet to track everything.  Below show some screen shots of what we give to our accountant and this works for him.  We also save paper copies of all of our receipts.  The only thing he told us to do is track expenses and income per property vs. on one large sheet.  Hopefully this helps.

 Thanks for the feedback, this is something I may have to look into.  I know about the strategy but have never yet put it to use.

 Very cool Daniel!!!!  I am excited for you and hope all goes well.  As I stated this strategy has worked great for us I hope the same for you.

 I have been working at my budget for years.  How I have found my middle ground is with time.  My budget in the beginning was really tight because it was based on the money we made at the time and debt payments.  There wasn't much left over.  With time we paid off debt and lowered our expenses.  At the same time our income grew.  This allowed us to increase our savings and increase our spending.  Every time that happened we increased our savings by 75% of the difference and our spending by 25% until our spending hit a level that we were comfortable with.  At which point we diverted 100% of future increase into savings.  We now budget for vacations, home improvements, car savings, medical savings, Christmas fund, etc... 

 I have used retirement funds for real estate to allow me to continue growing, specifically my 401K.  I wouldn't recommend this for most people but my real estate portfolio is going to be used for my retirement anyways so I see it as shifting funds from one retirement account to another.  I wouldn't do this to fund personal expenses or growing my lifestyle.  I didn't want to pay penalties or excess taxes so I took a loan out against my 401K.  I am not sure how much money you have in the account but the rules with my employer was that I could borrow 50% of the account value or $50K, which ever amount was smaller.  Because my account value is at $280K I could pull out the $50K.  The cost of me to do this was a one time fee of $75.  The terms were a 5 year loan at 8.25% but the interest gets paid back to my 401K so I keep the interest.  I paid it back by payroll deduction of $489 per paycheck coming off my check going to pay back the loan.  My wife and I have a solid income and good saving habits so we paid the loan back in 10 months.  Then I did it again for my next property.  We continue to alternate between doing this with my wife's account, pay it back, then do my account to continue scaling.  I am 39 with 4 properties.  This option has been working good for us and avoids penalties and taxes.  The opportunity costs are the reduction in cashflow from your paycheck while you payback the loan, and your 401K having stunted growth while the money is borrowed against it.  Not sure if this is an option that would work for you but it's something to consider.  If you have more questions feel free to reach back out to me.

I am looking for some advice based on what others in the community have done with their 401K’s. My first investment ever made was my 401K. At one point my wife and I were putting 15% into our 401K’s. The more I learned about personal finance and investing the more I knew how important this account was and continued to focus on growing my contributions. That was before I got into real estate. I now see real estate as my way to retirement. My strategy best aligns with the small and mighty real estate investors. My portfolio is currently 4 properties 6 doors. My ultimate goal is to generate $11K per month in passive income and I believe I can do that by purchasing 3 more single family homes in my area and paying off the entire portfolio. Based on our current income levels I should be able to accomplish this goal in the next 10 years and I am 39 now.

My question to the group is what to do with my 401K. To increase my capital for investing I have already scaled our 401K contributions back to 6% to take advantage of the company match and aren’t doing any more than that. We have also started using our 401K’s to take loans out to purchase properties. I have decided that I would rather borrow from myself and pay myself back interest vs. the bank. The next step I am considering is stopping contributing all together and putting that capital into our real estate investments. This would give us about an extra $14K a year today to invest and as our income grows so will that number. Today we invest 100% into Roth contributions so there is no tax benefits to diverting the funds I would just be giving up the $7K a year employer match. Today my wife and I have around $500K in our accounts combined. By my calculations and I, correct me if I am wrong, but if those accounts grow by 7% per year on average and we stop contributing that $500K will turn into about $1.9M in 20 years when I can start pulling it out. If our rental portfolio is already sustaining our living, why do I even need that extra $1.9M. Even if it’s only $1M I think I would be okay in stopping our contributions. Am I missing something?