Quote from @David M.:
@Joseph O'Sullivan
Its a matter of opportunity cost... You realize that if you were in the C fund last year, you'd be up ~27%? Yes, the market goes up and down (and that example is one fantastic year, although we've had a lot of them)... I know this is a real estate forum, but just realize that you'd have missed that AND lost 5% since you have to pay yourself the G fund rate, vs. the G fund paying you.
I'm not anti-real estate, but I don't prefer it when people take extra risks with their retirement. You can still lose money in real estate. Look at any graph youwant, but just realize what really matters is what your "ONE" property is worth.
5yr term isn't bad, but you need to have a solid plan to get that paid back.
brrr is a great strategy, however, its difficult to pull off 100%. We had a long thread about that a while back, before rates shot up. So, it'll be even harder now. Lets face it, a brrr is basically a flip you don't sell. Who really thinks making a profit on a flip isn't risky??
Don't forget that the tsp repayment will be counted against your DTI when looking at conforming loans.
Otherwise, it seems like you understand the risks. Its up to your investing strategy and goals. Depends on how you want to look at it: opportunity cost? diversification? education?
Hope this helps. Happy to chat. Good luck.
Thanks for that great insight David!
I appreciate you sharing some specifics on the risks with a real life example ( I have not been paying attention to that detail, so that is good education for me).
I do get the idea that if it's a good year, I am missing out on good TSP compounding due to a loan for real estate. My thought was more that the real estate may not pay as much immediately, but to start building a portfolio, it might pay out bigger in the long term, if it becomes the stepping stone to start the process of buying multiple properties over time.
Of course, this is all conceptual and I can see the possibility that it might not play out like that due to unforeseen market conditions, etc. Right now I am in the study and evaluation phase and I may not need the TSP loan by the time I get to the first deal, but just trying to soak in the pro and cons of all options.
Your feedback is definitely some strong food for thought on why it might be preferrable to avoid a TSP loan or keep it as a last resort when I am sure I can pay it back quickly.
Thanks again for the thoughtful comment.
Sincerely,
Joe
