BP Podcast 211: Investing in Out-of-State Rentals and Notes with Bob Malecki

by | BiggerPockets.com

What’s the best way to invest in real estate when the numbers don’t make sense in your backyard? Today on the BiggerPockets Podcast, we sit down with Bob Malecki, a real estate investor who started by purchasing local rental properties but quickly shifted gears into two other niches: out of state rentals and mortgage notes. In this episode, Bob explains why he chose to make the switch and walks listeners through the step-by-step process for getting started investing outside your backyard!

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We just waRealtySharesnted to give a shout out to our podcast sponsor on today’s show: RealtyShares. RealtyShares is a crowdfunding platform that allows you to invest in professionally managed properties without leaving your living room!

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patchoflandWe just wanted to give a shout out to our podcast sponsor on today’s show: Patch of Land. Patch of Land is a Peer-to-Real-Estate (“P2RE”) lending marketplace that matches accredited and institutional investors seeking high-yield, short-term, asset-collateralized investments to borrowers seeking more timely and consistent sources of funding for rehabbing properties across America.

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In This Episode We Cover:

  • How Bob got started in real estate
  • What a ROTH IRA is
  • What to do when you’ve got a chunk of money to invest
  • How to choose the right turnkey company
  • Thoughts on using leverage to acquire properties
  • Why he decided to transition to notes
  • What exactly non-performing notes are
  • A discussion on notes vs. rentals
  • The risks of investing in notes
  • What you should know about due diligence
  • Where to find notes to invest in
  • The value of building relationships
  • What the future looks like for Bob
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “Nothing in the world is guaranteed.” (Tweet This!)
  • “Assume nothing and document everything.” (Tweet This!)
  • “If you don’t take actions, you can’t take a risk and you won’t make mistakes. Mistakes are necessary.” (Tweet This!)

Connect with Bob

Show Preview

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

16 Comments

  1. Elizabeth Blazina

    Hi Bob , Brandon and Josh,

    Great podcast! Two questions.
    How are you able to turn your Note profits in your Roth ira into passive income? Essentially you are taking income but paying taxes on the withdrawals. Just clarifying.
    Second is there a limit to how many notes you can hold in a Roth Ira?

    Bob always learn so much form you.. Thank you !

  2. Elizabeth Blazina

    Hi Bob , Brandon and Josh,

    Great podcast! Two questions.
    How are you able to turn your Note profits in your Roth ira into passive income? Essentially you are taking income but paying taxes on the withdrawals. Just clarifying?
    Second is there a limit to how many notes you can hold in a Roth Ira?

    Bob always learn so much form you.. Thank you !

  3. Ben Vandorn

    Hi Bob,

    Great interview about notes!

    Outside of IRAs, I understand income generated from notes is taxable as ordinary income. Are there any ways of sheltering this income, or are you stuck paying whatever your marginal tax rate is on it?

    Thanks,
    Ben

  4. Andy H.

    Excellent podcast!
    What are the pros/cons of buying notes through a SDIRA vs buying them outside of one? Why not just buy the note with regular capital instead of using the capital to fund the IRA and then buying through the IRA? Or perhaps your IRA was leftover from a previous employer and already funded and you were trying to get a better return on that money without paying a penalty for taking it out early…

    • Zach Lemaster

      Andy, connect with me to discuss this. I believe in just using regular capital to purchase investment properties as your income should be tax free if you have the right CPA & you can ultimately avoid capital gains through 1031 exchange. Plus you can use the income as you wish immediately…ideally to reinvest in more property. I think where the benefit of using an IRA/401k to buy (as in Bob’s case) would be when you already have funds in those accounts and you would like to roll them into another investment class vs being penalized by taking them out of the retirement account. Connect with me if you want to chat more. Zach RentToRetirement.com

  5. Sonny Ruckstuhl

    Bob,
    Thanks for taking the time for the podcast. I appreciate all of the perspectives across the podcasts and always enjoy hearing of yet another direction for RE investing. Your explanations were very well done and I look forward into digging more into notes with my SD401k.

    Josh and Brandon,
    You guys are great interviewers.

  6. Ben Huisman

    Bob,

    Great show. I found it to be very relate-able, and you did a great job of explaining everything. I am currently looking to invest in rentals with my self directed 401k, and I am looking at turnkey providers. Memphis Invest is one of the companies that I am interested in. You mentioned another turnkey provider in the Memphis area that you ultimately ended up investing with. Can you tell me who that company is? What was your deciding factor? Was it the price point?

    Thank you for taking the time to take us through your journey.

    Ben

  7. Zach Lemaster

    Also, I don’t know if one of Josh’s first questions was fully answered. What is the benefit of using a self-directed IRA to invest in RE? Also, did you look into rolling over your funds into a Solo 401(k) where there is no UFDI?

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