All Forum Posts by: Account Closed

You might reach out to my friend @Rachel De Faut. She is a RE agent/broker and also a property manager in Wilmington. She might be able to use a motivated part-time employee interested in Real Estate. You can get some real world experience cleaning, painting, maintaining rental properties. See if it's really what you want to do. She's also very experienced in selecting the best of inexpensive rental properties in that market. If you have any skills, it would probably quickly pay better than what you're doing now. 

As to advice on how to proceed, I'm in the house-hack camp if your job is stable. Buy a house with a mortgage you're interested in living in. Then get roommates. After a year, you can move out, either leaving the roommates or bringing them with you to the next place.

Some suggest an FHA mortgage with low down payment, but I think the higher monthly payment would make qualifying difficult with your low income. I'd go in with 20% down and go for a mortgage you'd hold long-term. I like the PenFed 5/5 ARM if you can qualify for it. Low monthly payment, and last I checked even in the worst case scenario it was cheaper than a 30-year fixed for the first ~13 years out. Quickly bankroll an emergency fund in case something unexpected comes up.

Alternately, you could also instead focus on a proper career job in your field. Work full-time on finding that job and you will find it. 

Good luck!

Joe

@Bernard Chouinard, if you withdraw the funds from your 401-k, you'll be hit with 10% penalties in addition to paying the deferred taxes. Simply borrowing $ would be a lot more cost effective. 

I would simply roll the 401-k funds over into a rollover IRA and into a low-cost mutual fund and forget about it. Think of it as diversification. Personally, I like Vanguard Wellington for a situation like this. Or you can invest it in a REIT if you feel it must be invested in RE.

Although, you wouldn't be able to spend that IRA $ directly to buy property, it will benefit you in mortgage applications. It counts towards your cash reserves. I hope that helps. Good luck!

I can recommend @Rachel De Faut of Sea River Realty. I've worked with her numerous times.

Hi @Isaiah Lopez,

Congratulations on your first home purchase.

A couple of quick questions & thoughts:

Do you expect to return to the San Diego / Temecula area?  If so, that would be a big incentive to keep the CA property. 

How confident are you in appreciation of the property? If you're very confident, that would be another incentive to keep it. Keep in mind, in addition to property management fees, you'll have repairs and maintenance costs. Hopefully the $1950 figure you quote includes insurance and property taxes, otherwise add those in.  On the other hand, part of your monthly payment is paying down principle each month, and you'll have a nice tax deductions with a negative cash-flow rental. If you consider cash-flow, expected appreciation, equity, and tax impact, that may help in your decision-making.

Are you able to get another VA loan in NC? If so, no disincentive to selling the CA property. If not, or if the CA property compromises your ability to get a mortgage generally in NC, that would be an incentive to sell.

It sound like you wouldn't see much in capital gains, so that doesn't influence your decision making.

Personally, I think N.C. is a better market for cash-flow properties. If I was in your position I'd jump at the opportunity to buy a NC property with a nice low interest mortgage. I'd select with it being a long-term holding in mind. Sure it might or might not appreciate, but map out the cash-flow in a spreadsheet for years ahead and see how it performs...

I hope that helps. I'm sure other will weigh in as well.
Thanks for your service.
Semper Fi...

Joe

@Rachel De Faut manages VRs in the area. She may have some suggestions...

As stated above, no general tax advantage to placing in an LLC. Something to consider though are borrowing costs are higher in an LLC. You'll get the best loan terms in Fannie Mae / Freddie Mac backed loans - properties in LLCs won't qualify.

To address tax strategy, I'd plan on maximizing 401-k or IRA contributions. A cash-out refi will help if you can trace the use of the cash-out to the property, or a subsequent property. Your CPA or tax professional can guide you.

I hope that helps.

@Henry F.:

My recommendation is that you simply do not try to use that $ you have in the traditional IRA for Real Estate. Leave it with Vanguard in an IRA, invest it in whatever of Vanguard's mutual funds you like. Think of it as diversification, retirement $, emergency funds, etc. It will benefit you down the line as you apply for mortgages since it will be considered liquid assets.

Trying to extract it to use in Real Estate is too costly in my opinion to make sense. If you try to go the SDIRA route the overheard costs & strings attached don't make sense to me. If you withdrawal the funds you'l have to pay taxes and get hit with a 10% penalty. That's steep - borrowed money would be cheaper.

You'd be better off just working and saving, or borrowing $ for Real Estate investment. If you're employed, buy a light fixer with a mortgage and move into it. Or you can get roommates and "house hack". Mortgages are available with as little as 3.5% down, USDA loans in some areas I think $0 down.

Myself, I used 0% teaser rate credit cards to get started. It's not a strategy for the risk adverse, it hammers your credit scores in the short term, but I made it work...

My $0.02:

Leave the tax-defered IRA with Vanguard, invest it in any combination of their many mutual funds, ETFs, or buy stock through their brokerage account.
Use pre-tax money for RE investment. 

Personally, I don't like the complexity, strict rules, & overhead costs of sdira... I like simple & stream-lined costs...

I second the vinyl plank "hardwood" choice. I used it in a rental - It looks damn good, I'm happy with the results. There are some nice looking vinyl-based products out there. I used the TrafficMASTER product from Home Depot.

To answer your original question, I used both a vapor barrier & an inexpensive underlayment the one time I put a wood product over concrete. I didn't want to lose sleep worrying about moisture related failure. That was a few years back, there have been no problems with it.

@Kelly Magreevy: any update on your request to have the solar system removed? I have a friend burdened with a similar situation...

Thanks,

Joe