All Forum Posts by: Joseph Hammel

Deals are out there now you just got to look under all the rocks. I'm so busy killing it I don't even have time to go on here much. It kind of just turned into real estate Facebook anyway. 😂

Quote from @Paul Camuto:

Quote from @Eric Braxton:

I am thinking about using a 401(k) loan to fund a property. I’ve read up on some of the risks involved. Looking for anyone with some real world experience to share some advice on what to do/not to do that you think would be helpful for others to know.

I haven’t spoken to my plan admin yet but want to come prepared with some additional knowledge if possible.

Thanks.

 Why do you need a 401K loan? No other savings? Lower your 401K contributions and save toward getting a home. Keep retirement assets and real estate rentals separate.

If that's what you got to get you in the game why not? I bought my first investment property a duplex 10 years ago for 30k.
14k came from refinance on my house 6K was on credit card checks and the balance was a 401k loan that got me in the door and I haven't looked back. At that time I immediately refinanced the 30k property on a first position HELOC and took 80k out of it. 10 years later I just closed on a handful of units and went over the 100 unit mark at 105. I'm going on 5 years since I've had a W-2 job real estate has been good.

Will the rate hike be worth the claim on insurance? I have a lot of property and carry 2500 to 5000 deductible. Self insure except for major items. Fire, Storms, ect.

Make sure you know the rules if you leave the company. Some will let you keep the same payback plan. Some require it to be paid back in full or you take it as a taxable distribution. So if you had a job change in the future or who knows what else could happen you would want a backup plan for the second option.

Quote from @Michael Plaks:

@Joseph Hammel

In theory, it's possible. In practice, it is all case by case.

One of the first hurdles is the economic substance of the setup. Management fee is typically around 10% of the gross rent. To generate $20k in management fees, you need $200k in rents. Are you there? 

Next, you cannot redirect 100% of your income to a retirement account, so your numbers need to be a lot higher. And so on...

 800k plus 

secondly with a solo 401k you can set it up so it's 100% match up to $20,500

Here is the ss from the 200k refi I just did on 2 properties (blanket loan) $1600 total cc. 2.875 for 5yrs 25 am

Sounds like BS. If you have documentation let them sue you.

I make all the showings at the same time then the 50% no shows don't waste my time. If the add says no pets and they ask if they can then the message gets deleted.

Quote from @Stephen Dougherty:

Talk to a CPA (which I am not)... you could do a 401(k), but 401(k)'s have a lot of rules and are fairly expensive to set-up and administer unless you already have one set-up for your business. If I had to guess a 401(k) would be more expensive and onerous than the taxes you would save. I suggest SIMPLE IRA for a small business. The rules are less complex, there aren't any fees (at least at Schwab), and more tailored for small businesses; however it doesn't allow for quite as much in contributions ($14k in 2022).

There are third-party admin people that can help you set up and administer your solo 401k for a relatively inexpensive fee it's about $300 a year I currently use one company to do the same for my self-directed Roth IRA.
I'm looking to go with the 401 option because I can do a 100% contribution up to $20,500 now.
that's just a little over my net in one month on my rentals. I'm also looking to convert all the funds to Roth when they come in the only part that I haven't quite figured out 100% yet is my initial question. 

Quote from @Dmitriy Fomichenko:

@Joseph Hammel,

It is your rental business so it is up to you who manages your properties and how much you pay, but I would suggest that you discuss this strategy with your CPA to ensure that you are fully understand all the numbers. 

 Hey I've asked my CPA and I've even called a couple of CPAs and I can't find a good answer to this question. I know there are some experts in this particular type of scenario funding a 401k. I'll wait for them to jump in.