All Forum Posts by: Chris C.

Do you want to be a tradesmen or a real estate investor?  Spend your time finding more properties, more funding, and learning to manage people.  If the deal is so tight you have to do the work then you paid to much.  

You don't have to know how to do the work to manage the people. There are doctors offices that are not owned by doctors.

@Mark Welp Great advice.  Thank you

@John Hovanec I have not used that brokerage link.  Honestly didn't know about it.  But I also play it conservative in the markets and spend enough time being a real estate professional. Don't think I am qualified to pick individual stocks.  I currently use Equity Trust for my SDIRA but I do not recommend them.  There is one in Asheville called american something that has been recommended highly.  Also someone in this thread mentioned one they work for but I don't have any personal experience with them yet. 

@Randy Bloch I just checked my rates and I am at 5.5%.  Less than I thought but it may be because I did a cash out instead of purchasing with financing.  Due to the condition of the properties I purchased with cash, rehabbed with cash, then cashed out.

@Anthony Gayden Very good advice and I had already considered I would need to do cash outs depending on my yearly income for that year to avoid this situation.  I would not do it all in one year unless I calculated it would not push me to the next tax bracket.

@Randy Bloch I had researched the 72t and that is definitely something to consider.  I did not realize that existed.  I have already cashed out my non mobile home properties and have been using that to payoff on the other units.  I have also sold a few rentals for debt reduction.  I am not trying to get fully debt free but I have built my portfolio out of my best properties and am now stream lining it.

@Anthony Wick The scenario you are presenting would be very stupid and no where near what I am considering.  The reason I am considering it is that debt savings would surpass the penalty in less than 2 years and increase my cashflow by $1800 per month.  Matter of fact in 2 years, after paying the tax penalty, I would save an additional $4400 in debt service.  So in 2 years I would be $47,600 cash positive.  Of course you would have to deduct what my investment would of made in the stock market to determine if I would be plus or minus net worth.

@Aaron Arnold just downloaded it to the kindle.  Thanks

Not sure if it is best to quote everyone and have multiple post that blows up everyone's email or just @ mention with replies.  This is definitely harder to read but more email friendly. Suggestions?

 See my comments above about my interest rate. I have done the calculations for leveraging many times and have always tried to balance leveraging with security. Many people lost everything in 2008 by over utilizing leverage. Your last paragraph is exactly all the reasons to balance leverage utilization. I would not say I am a conservative investor but I am very experienced in real estate. When I start supporting my family with real estate I will be taking a more conservative approach to investing than I have utilized the last 10 years.

 Thanks again for chiming in. I really appreciate the info and you are showing the holes that I was hoping someone would. The only thing that I have not shared is that the loans I would pay off are 8% loans. I specialize in Manufactured homes and there is very limited financing available for this investment type. Most of my financing for these are private money. That said even the bank financing I have on my conventional properties(not mobiles) is about 6.5%. Where is anyone getting 5% or below investment loans? I have excellent credit but those are the best rates I could find.

 Good information thanks. I had considered the tax hit of doing the entire balance at once and will have to spread the disbursements out over a couple of years to keep my tax rate reasonable.

My company is freezing the pension so I have no option but to roll it over or cash it out. If I leave it in the pension it will stop increasing in value so of course that would be the worst thing to do. I will be able to remove the full value.

@Carl Fischer thank you for the information. I actually already have a self directed IRA and if I do not cash out I will probably move these funds there. I just didn't want to get things to complicated by bringing that up. I will be looking for a new SDIRA facilitator so I may be reaching out.

@Randy Bloch Thank you for your reply and very valid points.  I will address then with my rationale for each.

The pension will be frozen so I have to do something with it.  I can roll it directly into my 401k so for our discussion we will assume it and the 401k are equivalent.  I can also cash it out and pay the taxes and 10% penalty if I choose on the pension and/or the 401k account.

My real estate to retirement account balance is about 75% real estate and 25% retirement accounts.

1. Diversification is something I am concerned about also.  However for reasons that I could turn into a lengthy rant I am very risk averse to the stock market.  If I had more control of the 401k and could choose investment options not tied to the stock market then I may have a different opinion. Either way very valid point and something to consider.
2. It is growing at the pretax amount however whats the value of the $1700 per month cash flow compared to the earnings on just the pretax amount?  Not sure that I am smart enough to put a value to this.  I am definitely saving my interest payments so is the stock market going to average a higher rate of return than my interest rate?  
3. Very valid point that is more personal preference then numbers related.  I could make no argument to your opinion of this.  The only thing I would address is how much would my net worth increase without the burden of these loans and the additional cash flow?  Would the increase in net worth equal or exceed the gains in the 401k?  Could I make more with the interest savings and additional income than the 401k would earn in the same time frame?
4. I will still have some leverage however I would like to get my cashflow up before I do semi-retire.  In the short term I am more worried about cash flow than return since I will be reliant on this cash flow in about a year.

I have not made up my mind as to which way I am going to go on this.  I just want to make sure I fully hash out and understand every angle before making such a possibly risky decision.