All Forum Posts by: Christie Gahan

 Sadly, I'm not saying that this is the correct role of government or that the government will do a good job at it.  We are 6 mos out from an election, housing is a "hot button" issue and we printed $5 Trillion dollars .....  I can see it happening.  

For the sake of clarity, if you are reading this and new to real estate ... this advice is for this state.  In a different state, the advice could be to back out of the deal.  In some states, you inheirit the tenants and are stuck with them.  It could take 6 mos or more to evict.  This could mean 6 mos no rent money coming in.  Demand proof of payment on every unit for the last year.  I would make it clear to the seller that I have to have all of these leases signed by such and such date or the deal does not close.  Or, that the seller gets all the paperwork legally filed to evict by such and such state or the deal does not close.  I'd get an addendum in writing with the seller that states this. 

All paperwork to the tenants should also state that All adults on the premises  have to qualify for the new rents as well as what ever new clauses that you want in there.  Limit the frequency of over night guests.  State how often there will be inspections etc etc.  Explain late fees and charge them. Set your expectations and enforce them. 

 Nathan Gessner: I can't wait to get your book!  Congrats!

Obviously, you need an accountant that loves tax strategy.  

It is possible to convert a 401k to a self directed 401k.  With how your 401k is funded this might he a terrible idea.  

A self directed 401k can own real estate.  Loans must be non recourse. You can't get to any profit until you are the correct age and you meet the IRS rules and regs.  You will have zero tax write offs because you are not paying income tax because it is a 401k.  

Important:  Funds from your 401k must be transferred to a self directed 401k account.  It can''t go thru your personal accounts because you have not paid income tax on this money yet.  Violating this would make this ordinary income and you would owe: state, federal income tax plus a penalty.

If you put less then 20% down you will have to pay PMI. Private Mortgage Insurance this adds hundreds of dollars a month to your payment. If you don't have to pay PMI your mortgage is less and gives you more wiggle room.

 To be fair, the stock market was up about 20% last year.  So, she should research her options with investing in the 401k.

Your mom has research to do.  Check rules on her 401k with her employer ( vested, not vested) and with her accountant.

If she takes the money out and puts it in her personal checking account that will be considered ordinary income and she will owe, state and federal tax, plus penalites and maybe SSI.  So, she is going to lose a  massive chunk of money.  Like half.  So that is not really a plan.

It is possible that she could create a self directed 401k and that could own real estate. But, she could not do any transactions with family members so that doesn't help you out.  Also, much harder to get financing and she still can't take out any money before she is of retirement age.  Also remember that she isn't paying income tax on these accounts so there are no deductions.

She might be able to take a loan against a portion of her 401k and loan some of it to you but you need to research that. Also, not good advice for any one to ever borrow against their retirement. If you both had self directed 401k / IRA accounts you could possibly invest together but you would need to figure out how she gets her money at retirement age when you can't get your money until retirement age.

 Maybe, maybe not.  But, are you comparing apples to apples ?  Is the $500k home in town on city water / sewer ?   Is the 2.5m  home on septic and well water with horse barns and riding arenas?  In that case, yes the $2.5m house takes more knowledge, more inspections, more marketing dollars and a smaller buyer pool.   

  The market is really different now then it was pre internet era.  Now buyers come to sellers with a list of houses that they would like to view.  They can text the buyer a door code so the buyer can go in without the realtor even being there.  I don't think they put in as much time as they used to so they have to make up for it with value.  I think the average salary is about $60k.  A 6% commission on a $500k house is $30k.  Of course people will complain or be upset for being charged the equivalent of 6 mos salary.   If they got up and went to work every day to earn that money it will most likely seem, to them, that the realtor basically drives around, talks on the phone and goofs off.  On the other hand, when the inspection report comes back with stuff to get fixed the experienced realtor has relationships with contrators, painters, handyman etc and can often get those repairs done lightening fast so that a deal closes.  They also know which loan products have a better chance of closing and which title company to choose.  An experienced realtor can forsee and prevent problems too.  

 I was thinking that the banks might cover a first time buyer 3% fee but it makes even more sense that the government would do it too.  The government needs money to keep moving to help stimulate the economy and tax revenue.  

I agree that buyers need help, especially First Time Buyers. A realtor friend shared his interpretation. In our area , if he put up a listing the computerized form did an auto fill of a 3% / 3% split. He was legally required to list on the MLS and the MLS system would not take the inputs any other way. I believe this is where the "monopoly" argument came in. My concern is that the 6% commission will stay and that the buyers and sellers agents will still split it. My concern is that the buyers and sellers may not know which agent is getting more or less. I don't see a scenario where buyers have a down payment, closing costs and another 3% to pay their own realtor. A year from now, will banks just allow buyers to roll this cost in to their loans?