All Forum Posts by: Ron Gallagher

I did consider that but I would be paying on the loan while I am looking for a property to buy versus with the HELOC I only have to make payments while I am renovating the rental property I buy in cash from the HELOC. Then I get a fixed 30 year loan on the property after I get it rehabbed and rented out and then I pay back the balance of the HELOC and the HELOC goes back to $0 and I don't make payments until I repeat the process when I find a new rental property. So basically I am my own hard money lender but still interest rates going up, the interest rates from an investment property HELOC is at more favorable interest rates than a HML.

This strategy wouldn't work with a fixed cash out refi as I see it. But I am open to the idea... how would I be able to do the BRRRR strategy with a fixed rate cash out refi?

I am going to apply for a HELOC for an investment property I own free and clear and then do the B(A)RRRR strategy. I have learned that TD Bank, Wells Fargo, and PenFed CU all offer HELOCs on rental properties. Is anyone aware of any other banks I should be approaching that offer HELOCs on investment properties?

I love both stocks and real estate but over time my real estate investments have clearly out performed the S&P 500 and Broad Market ETFs I have bought and held. I have invested roughly the same amount of money in real estate and the stock market and over the years and thanks to appreciation my real estate investments have overtaken my stock market holdings and REI now makes up about 75% off my net worth vs. 25% in stocks. Now I do have to work a lot more with REI then with stocks which is pretty much buy a broad market ETF and forget about it but the extra work I have put into earning "passive" income with REI has clearly paid dividends.

It is my understanding that Wells Fargo and TD bank offer HELOCs on investment properties: 

https://www.tdbank.com/personal/home_equity_line_d...

Wells Fargo doesn't have a link to share showing that they do HELOCs on investment properties but when you go here: 

https://www.wellsfargo.com/mortgage/rates/compare-...

and go through the process of getting your loan options there is a dropdown under "Refine Your Search" on the form that let's you select Investment Property.  

I am going to try to take out a HELOC against a rental property I own free and clear in order to do this B(A)RRRR strategy once I get my credit score back up in the 780 range.

I don't know if this is practical for you but I hold open houses and try to schedule everyone to come view the property at that time. I hold one on Sunday afternoon and one on a weekday evening for the people who work on weekends.

There are blogs out there (https://www.gocurrycracker.com/never-pay-taxes-again/) where people stay under the minimum income requirements to stay under the 12% (using 2018 tax brackets) tax bracket where they pay a capital gains tax of 0% when they sell their stocks and pay no taxes for the year and live off of stock dividends and the proceeds from selling stocks, which they paid 0% taxes on. I want to do the same but with real estate income, doing this strategy with stocks means you can't have more than $50,700 in income (38,700 to stay in the 12% tax bracket where capital gains are taxed at 0% + $12,000 standard deduction using 2018 numbers) but is there a way to do this with real estate income? What is the maximum an individual can earn in rental income in a year and still not have to pay taxes?

I am curious what other real estate investor's thresholds are for quitting your W-2 job?  Mine will be when I reach the point where I am making $5000 profit in real estate per month.  I looked at all my spending on mint.com and on average my monthly spend is $2200 a month.  I'll add in $300 for health care premiums since I will have to pay for my own health insurance, so I'm estimating a monthly spend of $2500 or $30,000 a year.  If I make $5000 a month off my rentals then I will be making $60,000 a year which is twice the amount of my annual spend. 

How much money do you feel you need to make in real estate before you feel comfortable quitting your day job?

Keep in mind that while you can loan yourself 50% of your 401k, if you leave your job you have to pay the loan back. I recently changed jobs (from being a contractor for the federal government to becoming an employee directly for the federal government) and if I took out a loan against my previous employers 401k I would not have been able to switch jobs (which included a pay raise and more job security) unless I paid it back. So you better have a lot of faith that you won't get fired or have a desire to leave your current job if you take out a loan against your 401k.

That said, I have been maxing out my 401k every year. In 2017 I tried the strategy of making massive contributions to my 401k in the beginning of the year, so I contributed enough in the beginning of the year so that I would contribute only 3% (the amount of my employer match) for the rest of the year. I researched it and more years than not, the returns were better if the bulk of your 401k was invested in the stock market at the beginning of the year and had the whole year to ride the stock market up vs. dollar cost averaging into the stock market with equal amounts of every pay check. In retrospect that was a good move for 2017, but it will not always be the case (when the stock market has a down year).

I like to use the 401k to bring my taxable income down but with the new tax brackets and the new difference in tax rates I am not sure how 2018 will play out for me so my plan this year is to only contribute up to my employer match for the beginning of the year until the fall so I have extra cash to potentially buy more property in 2018 and then I can evaluate things in November 2018 and then I can contribute the majority of my paycheck to reach the $18,500 max if I see that I will benefit from bringing my taxable income down with more contributions to my 401k. It's like waiting until April 15th to decide whether contributing to a traditional IRA is worth it or not taxwise.

I also use cozy.co and love it

 Got it... thanks a million as always and happy new year!