All Forum Posts by: Aaron Cox

As someone who works in the 401(k) industry, I would advise against the 401(k) withdrawal as others have mentioned about the tax implications as well as those monies are then lost.   If your 401(k) allows for loans that may be an option as that money is not taxed (per say) unless the loan is not paid back.   The one caveat to this is that your loan repayments are made with after tax money that will be taxed again when the funds are withdrawn from your 401(k) at some point in the future.   

I am considering using outside funds to purchase my first property, but then possibly use the 401(k) loan as a way to renovate the property. Typically the maximum loan is the lesser of $50,000 minus your highest out standing balance in the last 12 months or 50% of your vested account balance. If you took out a $50K loan today for example and paid it off in 9 months, you would not be eligible for another loan until 12 months had past if you were looking for another $50K loan. While you can usually take out a loan for 5 years you could always repay that loan early if you were able to refinance and get your money back out (BRRR method).

I would like to get out of the W-2 world as well, but I think I may stick with it and use my W-2 income as long as possible to be able to build the real estate portfolio.   Yes it may take a little longer, but there would be the steady income to help get you off the ground.

Just my 0.02 as I am considering this journey myself.

Trying to pick a market and build a team to help the out of town investor

Thanks for the replies.  This makes me much more comfortable as I am evaluating these potential properties and the numbers seem to work.   It was that 1% test that was throwing me for a loop.

I am extremely new to this world and trying to figure out how to analyze potential properties.  I keep hearing and reading that your monthly rent should be 1% of the purchase price to ensure that the property cash flows.   In theory I understand this, but have run into an interesting question.  In looking at turnkey properties the rents are routinely less than 1%.   Does this mean that these properties are not suitable cash flowing investments?  Is there another calculation that I should be looking at to ensure that the property cash flows?  I understand that you have to look at total monthly costs, including cap ex, mortgage pmts, insurance, vacancies, taxes, etc.  Seems like there is something I am missing if the rent payments for these properties are less than 1% of the purchase price.  All of their marketing materials say that these properties cash flow.