Advice neeeded for a newbie Investing in Northern New Jersey

[Donald Gardner]

I recently left my corporate job after 19 years.  I have a pension of $150K that I can move to a solo 401K which I can use to invest in real estate.  I recently started looking at property and can find pretty good deals with good returns on investment.  My concern is around the potential difficulties of being a landlord and the amount of time it takes to be a landlord.  Are the ROIs worth the challenges of being a landlord?  Is there a cap rate that I should target?  

Also, we were trying to determine our strategy on where to find the deals.  What are some tips on where to buy in Northern/Central New Jersey?  We are considering multi-family homes/apartments in low income/section 8 areas but we are also considering "good" neighborhoods with higher home values but are more desirable places to live and may have a better appreciation value in the long run.

I am a newbie and insight is appreciated.

Thank you,

Donald 

Donald

[George Blower]

@Donald Gardner

Welcome to BP!

1. Since you mentioned that you have a Solo 401k, I presume that (i) you are self-employed; and (ii) you do not have any full-time w-2 employees (i.e. working 1000 hours or more per year) working for your self-employed business or otherwise working for you. Given this understanding, you would be eligible to establish a self-directed Solo 401k which allows for investing in real estate.

2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. All of the income and expenses will need to flow in and out of the retirement account.

4. If you will you debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira...

5. You can't live on the property or otherwise use it for personal use.

6. You can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. You must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. You should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).