All Forum Posts by: Scott Jensen

@Patrick Bunn Depending on your circumstances you may be able to create a management company that manages your rentals. The income would be regular business income on Schedule C and should qualify you to open a Solo 401(k). Talk to your CPA if you have one. Really, there are pros and cons of each the Self Directed IRA and Solo 401(k). Make sure you understand all of the rules around prohibited transactions and disqualified persons.

Typically, I encourage people not to use retirement funds for their FIRST real estate deal. Try your hand at RE with non-retirement money to see how it goes and whether or not you want to continue pursuing real estate investing.  If your first deal goes well, and you're producing great investment returns, then go ahead and use retirement funds.

I think @Heath M.'s advice of getting on the Dave Ramsey plan is a good place to start.  It is going to be much harder to invest in real estate eventually if you still have the student loan debt (as your debt to income ratio is important for securing loans).  

However, if investing in real estate is not a high priority for you, then I would consider investing in your Roth IRA (not a 401k if there is no match), as your student loan interest rates are fairly low. You can open a Roth IRA at Fidelity as they don't have a minimum requirement.

@Arsalan Augend I don't know anyone in Chicago. I would recommend using XYPN or NAPFA's Find an Advisor tool to try to find someone local. Make sure to go with someone who is fee only, a CFP, and a fiduciary (legally has to put your best interests first), and has a client base that includes real estate investors. Honestly, the majority of advisors aren't well versed in RE; even the good ones. I would interview several.

@Sam C. There's been a lot of good advise in this thread so far. Transitioning into retirement is much more complicated than saving for retirement. And there's way too many details to get into in an online post. 

With the Single Family Rentals, you're really going to want to know the multi-year tax consequences for selling them. If you were to sell them all at once in the wrong year you could bump yourself into a higher tax bracket. Depending on your age when you eventually sell, you could increase your and your spouse's medicare costs by thousands of dollars per year, or subject more of your social security to taxation. There's probably a good case for trying to defer the gains as long as possible (and hopefully forever). @Dave Foster gave a good explanation.  You could also hire out property management and keep the properties.

Really, retirement income planning gets pretty complex and it sounds like you would benefit from having a Fee Only Financial Advisor take a look at your situation.  I would recommend using NAPFA and/or XYPN's find an advisor tool. Interview several advisors and find someone who is competent and understands your situation. There are some Financial Advisors who understand real estate, but we're pretty rare.

I do know a good advisor in PA if you're interested in someone local.

@Lauren C. I would recommend going slow.  I have seen individuals in your same situation go through the majority of their inheritance much quicker than they anticipated and with little to show for it. 

Since you're new to RE, If you were a client of mine I would probably recommend investing the money relatively conservatively in the stock market and then using a collateral line of credit in order to dip your toes into real estate. 

@Benjamin A Ersing I would recommend using NAPFA of XYPN's Find an Advisor searches. Look for an advisor that is fee only or fee based, rather than commission based. Make sure they are able to legally act as a fiduciary 100% of the time. The CFP credentials and NAPFA membership are good spots to start.

Let me know if you have any questions. 

@Lance Lvovsky Who would you recommend?  I know of a prospective client that was looking for a good financial advisor local to Florida.

@Erik W. Not to split hairs...but the market dropped about 33%, not 40-50%. No need to exaggerate...the real numbers were bad enough to make your point. ;-)

@Eric Bette $50k cash sounds reasonable. I had an investor tell me they get nervous if they're holding less than $100k cash...so yes, some investors hold a lot of cash to be able to move fast. I would just park it in a high yield savings. I like Discover personally, but there are other good ones as well. 

With interest rates so low you could look at using your stock accounts as collateral for a line of credit. I am setting one up for a client right now and the rate is between 1.6% and 4% depending on the amount of the line.  That is a way you could reduce the amount of cash you have on hand and maybe avoid that 401(k) loan.  Just be careful lot to go overboard and take the maximum out or a stock market downturn could get your loan called.  Disclosure: I don't know your specific situation so this isn't actual financial advice specific to you.

@Jason Bouck If you're worried about inflation, and some inflation is a reasonable possibility, invest in stocks and real estate and leverage the real estate with the longest term mortgages you can find.  I am not a huge fan of precious metals.

@Shane Short  I know a good advisor in Portland. DM me if you want his information.