Everett, WA · Member since 2018 · 8 posts · 0 votes
I’m new to real estate and I’ve been reading a lot on real estate and finance, and I’ve started listening to the bigger pockets money podcast. However, I’m having trouble finding how to allocate my money to build a financial base while making a move towards buying my first investment property.
I'm newly debt free with 10k in savings and able to save 50% of my income. I own a condo which I live in. Im wondering how much to invest in my Roth IRA and SIMPLE, HSA, vanguard index funds, and how much to leave in cash and set aside for buying a rental property.
I’m also considering renting my condo and buying a single family home, or looking into house hacking if I can find a good deal, but I’m not sure if I should sell/rent, save for a down payment on a single family or save for buying an investment property.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
Welcome to BP! You will get a huge variety of answers to this question. Keep in mind that BP is a real estate forum, so most people will tell you to go all in with real estate. If you went to Boggleheads or some other stock market forum, they would tell you to go all in the stock market.
Personally, I like to max out my Roth IRA for the tax advantages and protection that retirement accounts have. I put the money in the Roth into index funds that track the wide market. It is really a set it and forget it strategy. Other cash I would use for real estate. I don't like condos due to the HOA, so I would personally sell the condo and look to purchase a duplex. Live in one side and rent the other.
That is my recommended starting plan, then go from there.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
Welcome to BP! You will get a huge variety of answers to this question. Keep in mind that BP is a real estate forum, so most people will tell you to go all in with real estate. If you went to Boggleheads or some other stock market forum, they would tell you to go all in the stock market.
Personally, I like to max out my Roth IRA for the tax advantages and protection that retirement accounts have. I put the money in the Roth into index funds that track the wide market. It is really a set it and forget it strategy. Other cash I would use for real estate. I don't like condos due to the HOA, so I would personally sell the condo and look to purchase a duplex. Live in one side and rent the other.
That is my recommended starting plan, then go from there.
Investor · Midlothian, VA · Member since 2015 · 980 posts · 823 votes
8y
I pretty much agree with everything @Joe Splitrock said. Taxes are the single greatest expense any of us will have throughout our lives so anything you can do to minimize them should take priority. That is, maximize your contributions to your tax advantaged accounts first. Bear in mind, though, that this is wealth building and you will not be able to fully enjoy the benefits of those investments for some time. So don't put money in there that you think you will want/need anytime soon. Remember also, you can never go back and contribute to these accounts if you pass on the opportunity now.
In terms of the condo, I am not a fan either, but if you already own it I would run the numbers and see if it makes sense as an investment. Many people have made a lot of money with condo's, you just have to understand the headaches that can be associated with them. I would not incur the transaction fees if it is a good investment.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Amy Jo Holweger welcome aboard. I have a Roth IRA, 401k, IRA, HSA and rental properties. All the stocks/bonds are invested in index funds, through vanguard.
This is BP, so most will say real estate. I say do all of the above.
Everett, WA · Member since 2018 · 8 posts · 0 votes
8y
@Caleb Heimsoth Thanks for the reply! What percentages of your income do you invest in each? Mostly referring to earned income at this point, but could include other sources. I’m debating whether to prioritize buying a rental property versus investing in the vehicles you mentioned, or just going in 50/50.
Everett, WA · Member since 2018 · 8 posts · 0 votes
8y
@Caleb Heimsoth I’m in growth mode as well - I’m 29 with a 9-5 currently. It’s just confusing when there are so many opinions on the best way to reach FI!
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
@Amy Jo Holweger that’s because there is no right answer. I know people who did it the traditional way but that took 20 plus years. The upside to that way is they have zero debt but also a pension usually, which will be much harder to have for our generation