Am I Using The Best Approach? - Initial Funding

[Ryan Collins]

Hello Everyone, 

I'm hoping to get perspectives and suggestions on if I'm taking the correct approach to FINALLY beginning my REI journey. Or even someone to play devil's advocate and challenge me on something I may not be thinking about. Talking things through with other knowledgeable folks is always helpful! It's sort of a lot but I'll try to keep it as brief as possible.

Cash has always been an issue so I'm partnering up with a family member to get our fix-n-flip business ambitions off the ground. We've got our plans and agreements in order and are now making the steps towards actual formation and funding. My dilemma is that I want to be sure I am using the best approach to source my initial contributions to the business. I have about $6K in liquid cash available to me and I am planning on liquidating a combination of retirement accounts from my previous employers. The total of those is somewhere in the neighborhood of roughly $12.5K, so after the penalty and additional 10% withholding I'm assuming the actual payout will be approx $10K. So it's not a ton by any means but it's just what we need to get us over the hump to get going. My partner has $7.5K to contribute so we will have just under $25K to put to use. We will be in the Ohio market so with leverage this should be more than enough in some cases to get our first project(s) underway.

The reason I am considering liquidating the retirement accounts is because they have been underperforming. I might make 1-3% a year at best with the current setup, when I'm missing out on opportunities for potential returns of 35%+ in the markets I want to operate in. I believe it's worth taking the tax hit at the end of the year and paying the penalty to jumpstart things. I tried looking into alternatives like self-directed IRA's to avoid the penalty & taxes but it's extremely restricted, and it seems that the only purpose is to make money for the IRA. Which is a great thing by all means, but my ultimate goal is financial freedom NOW and in the future.

To give some other background information. I will not be completely liquidating all of my reserves. I am planning on remaining in my job full time and I actually have one of the better retirement setups I've ever had. My employer matches up tp 6%, and in working there just slightly over a year I've been able to amass just over what my aforementioned retirement accounts combined (approx $15k as of today). 

I know this topic has been brought up numerous times but I've scoured the forum and couldn't find anything similar to my situation. I just feel it's better to take the plunge now than for something else to impede my progress and never do anything. If anyone can offer any insight or opinion it is greatly appreciated.