All Forum Posts by: Alan Mackenthun

I love buying properties and taking real estate messes and making homes. My wife loves depositing the monthly rent checks :)

Good question and some real good answers. We heard all the hype through the early 2000's and were interested, but simply weren't interested buying real estate and managing property simply for appreciation. For us, there has to be some reasonable cash flow to make the property management worthwhile. There was no way we were going to buy property with rent not even making the payment on the property. Besides, it was obvious that a bubble was inflating. Prices can't rise the way they were long term. Long term real estate rises at about 4% annually. Loan terms were unreasonably generous. It simply couldn't last. Long term metrics like the affordability index are great to look at, but you simply run the numbers trying to take into account all expenses, make conservative estimates for maintenance and appreciation and see if the projected result is worth your while. For us, we love it. We bought our 1st 2 rental properties in 2008 and now have 10. We'll keep buying as quickly as we can raise down payments and long as we can continue to find deals that makes sense for us.

You're correct that gains on a Roth are tax exempt which to me seems a huge advantage, but that's not what we've been talking about. A financial planner would be great, but I've had a hard time getting comprehensive, unbiased advice.

My issue is that I've spent years piling money into 401ks etc and there's a decent size pile of cash there now that is difficult to invest in real estate and has really not grown other than through my contributions as the stock market has seriously underperformed for most of my investing life. Now that I'm trying to break away from the corporate run around, I won't have reasonable access to those funds for another 15 years. I really can't complain, but I'd rather have access to the cash without dependence on account trustees and worries about what I can or can't do with investments made with these funds.

I think you misunderstood me. My point, was that it's not a given that tax rates will be lower in the future than they are now. Therefore, why not pay the potentially lower tax rates now and keep the flexibility to do whatever you want with the money (even spend it)? If you pay the taxes now, you don't have to pay again later. Of course you would have to pay capital gains taxes on any gain, but that's going to be required either way. Also, you call it a tax break, but it's really only a tax deferral. I'm just saying it's not nirvanna.

With any tax deferred investment, you're betting that your tax rate in the future will be lower than it is if taxed now. I don't know what your tax rate is now, but I don't see income tax rates dropping unless the whole income tax scheme is thrown out. Add this uncertainty to the relative inaccessibility of the investment $s and restrictions on those $s and I'm less a fan of socking pre-tax $s into a 401k/IRA. On the other hand, the penalties do tend to keep you from raiding your savings targeted for retirement. If this is a help, it could be percieved as a benefit.