All Forum Posts by: Jim Goebel

@Darren Elliott

I have found that it's best, if you can, to make these decisions under the auspices of uncertainty - that is, if you are getting the HELOC going during a period before it's rented, and you are genuinely still 'considering' whether to live there, or not, then that's frankly the gold standard in your intent. Meaning, bankers, just as everyone, understands that certain things in life cannot be controlled. If you take another job somewhere after getting the HELOC, well - at least you were considering living in your house when you got the HELOC. Of course, now that the cat is out of the bag, and you've disclosed your intentions for this to NOT be your primary, it's hard to defend taking the HELOC route.

It may simply be a lesson for future reference, because if you're going down the RE road, you'll have the same opportunity later.  The key is to embrace uncertainty - and to get more comfortable with its consequences.

Of course, if you had the HELOC, the ethical dilemma of whether to proactively disclose that something changed in your living arrangement (and have to repay the HELOC balance) would be another thing to wrestle with.

Hi everyone, We've been thinking through the best way to save for kids college. We have two kids and have been maxing out our state's 529 plan. Quinn is a 3 year old boy and has about $18,000 in a 529 account already, and Sarah is 6 months and has $3,500 roughly. I just became aware of what's called a Coverdale account, which lets you bundle or partner separate accounts with an existing IRA account. This sounds appealing as our bread and butter and success has come from RE, but of course to buy the best upside deals, one has to have a minimum level of capital - so this creates challenges with growing something rapidly in a Coverdale, because the annual contribution limit(s) are $2k/child. As I understand it, that's total, so you don't get to contribute that on a per parent basis.

In a 529, we are kind of forced to invest in standard offerings (much like a 401k) through our state's program, so we do not have the option of taking advantage of the returns being achieved in our RE, which have been substantial and far better than the stock market.

Although I do have desire to diversify especially for the kids, I'm also wanting to rapidly grow an asset base for them that will create income, going back into the account.  The sooner we do this, the sooner we can justify not socking money away which takes money out of our cash flow and household.

My Self Directed IRA owns a roughly $150,000 asset free and clear and produces about $1,100 / mo in free and clear income, which is great. There's also about $25,000 in cash in that account to work with. The issue as I understand it, is that my Traditional Self Directed IRA, and only a ROTH IRA has the tax free benefits of a withdrawal for qualified educational expenses. I was just informed over the phone by our self directed IRA custodian Strata Trust that there is a way to transfer balances (including RE assets) from a traditional into a ROTH IRA, which sounds great.

The other avenue that I was exploring was going down the Coverdale, and partnering with the Self Directed IRA funds, to continue doing real estate. This was suggested by a representative at a custodian called Equity Trust. She seems knowledgable and it got me thinking about ways to use RE to more rapidly increase funds in these accounts for the kids.

Now, if I'm understanding correctly, especially given that we already have nice base within the self directed IRA - it seems that if there's the same tax advantages (no penalty upon withdrawal for college, mainly) - at this point I'm seeing pretty much NO advantage to the 529 or Coverdale accounts, beyond, perhaps, if we wanted to go beyond our contribution limits for one - and if we didn't want to use the Self Directed IRA account for those college savings purposes.

If this is the case, I am leaning towards advocating in our family to wean the 529 contributions significantly (but not entirely) and keep aggressively working to grow the Self Directed IRA balance, and acquire additional income producing assets. And, transferring over to a ROTH Self Directed IRA, vs. the traditional that's in place now. I'm wondering what I'm missing in terms of any downsides/disadvantages. Advice welcome, thanks in advance!!!

@Jameson P. Gagne

Well, we just recently changed a 2/1 to a 3/2.  We look for those outliers with square footage.  If you see enough of them then there's high 'value add' projects where you substantially add value by getting an extra bedroom, or bathroom, etc.

This kind of work, though - I don't think really is tailored to hire out, certainly not turnkey.  When you have to get an A/E firm involved, costs start spiraling very quickly.

@Kyle Lorenzana

Hi Kyle,

Getting that sought after and stable, upwardly mobile experience is tough without that education that opens up the door for you.  Some folks/families kind of 'short circuit' this prerequisite by engaging in various forms of nepotism.  This nepotism is not limited to the trades, as there's plenty of white collar behavior as well - however it's one way to stack the deck for one's family.  However, although maybe the intentions are good, I don't think the family businesses in the trades and labor stuff is positive, generally.  It's hard to put that observation/experience into words, but it's been one bad data point after another.

I'd wonder if you're in the right situation with your family business given that you're not able to work towards getting verifiable income.  If other family members are really caring about you this doesn't really add up to me.

As someone without a dog in the fight, I'm a big proponent of taking the long view and investing in your education.  Is that a possibility?  I'd hope/assume that you have some college credits under your belt if you have a little debt.  Finishing out a degree, even an AS, especially in a quantitative field may open up doors.

@Benjamin McGuire

Some banks will cater more to investors than others.

Some lenders (ie: loan originators) will be more outward facing 'beat the bushes' types, whereas others will get more inbound referrals from their retail operations.  

I think whether you'd meet lots of investors would depend on these two things.

Also, I'd be careful about conflicts of interests there.  I'm not saying this is the case but I could see certain trappings in catering to the same person on both ends.

@Mikael Winkler

What's worked well for us is to get another INVESTOR (not contractor) that you trust and like, and bring them in for a 'go / no go' kind of inspection prior to closing (after under contract).  They will have a better view / perspective on costs to make that decision.  Past that point, once you're working on it, yes, just bring in your contractors.  Break down your scope of work/ project in to tons of sub projects and take a nibble of that contractor apple before eating the whole (often rotten) thing.

We paid our guy $100 for that informal inspection and it was a wonderful arrangement and it's a good friendship, as well.

@Mike Mullins

Well, I'm not putting everything into the calculator but at that low of rents, intuition would tell me there's not enough meat in the deal.  That's just me though.  If there's some more room upward through value add and some negotiating room then maybe it's worth looking at the numbers a lot closer. 

@Kalei Poteat

So what are you after?  What's the question?  Do you have useful experience to maybe walk through with them and suggest which things might add the most value?  Do you know someone that does?  That's what I'd do.

@Robert Hernandez

OK nearly undoubtedly a joist system, then.  I'd pull up the vinyl.  Once you have the vinyl up, look at the sub floor and see if you have issues.

If the sub floor is wavy, then you'll have options but may have to do a little more investigative.  Would prefer not to tell you all the possible forks in the road there at this juncture, as we shouldn't assume anything at this point.

High level options from crappiest to easiest would be:

Sub floor issue: caused by substantial settling /foundational issues 

Sub floor issue: caused by certain joist settling but not systemic to 1st floor

Sub floor issue: just slight uneven but not worth a systemic fix

Just a vinyl issue: Would just prep sub floor for new flooring and install at that point

@Kalei Poteat

What's the issue with them just finding a realtor and listing the house on MLS, hopefully getting that 150k or higher?

Maybe they could use a little perspective on high value adds before listing the place.  I guess I'm not really following what you're after on the post.  They can just sell it if they want to move on, right?