All Forum Posts by: Kyle J. Cooper

It's been a long time coming. All the time spent day dreaming over getting out of debt, building up savings for a down payment, and investing in that first property. Ahhh 2020 was that year! Then this thing called COVID-19 came around(Socialism for some of you conspiracy theorists), and wrecked many people's plans. I was one of those people, but I haven't given up hope, just yet!

The last few years have been productive to say the least. Personally I've gone from broke and in 90K in student loan debt(but still with a Bachelor's Degree), to increasing income 5X and being completely out of debt in my early 30s. My overall desire has been to enter REI from a position of strength, and once this pandemic hit and so many people lost their income(myself included) it seems to have put my plans on temporary hold.

Personally I have 6 months worth of expenses in an emergency fund, as well as enough for a down payment on a house hack, excellent credit, and before this pandemic had a fantastic DTI (I was hoping to use this to my advantage with lending). What are my options here? Do I need to find other creative ways for financing or should I just find another W-2 in order to qualify for more traditional lending? Partner with someone who would qualify for a mortgage and just bring the down payment?

Any suggestions would be great! Thanks BP and keep spreading Love

@Wade G.

It makes sense. All things being equal, you decrease the mortgage therefore increasing the Cashflow.

BUT!

Why even pay off your personal home? You'll never fully 'own' that property. I promise you if you pay off the mortgage but stop paying the taxes, you'll find out very quickly who actually 'owns' that property.

With that being said, if debt bothers you so much that you lose sleep over it, pay down those loans and carry on!

Cheers!

Thanks for clarifying! Since that 10k premium seems to be wrapped inside of the FHA loan then I would go with that, even though you'll pay more over time. To your point, having that money available now for reserves, vacancies, capex, miscellaneous, allows you to come from a position of strength as you enter into this house hack.

Are you using these loans to purchase a personal residence or an investment property? I find myself in a similar situation looking at lending for my first owner-occupied property. 

I would consider which option makes your monthly payment the lowest and give that some thought(this is contrary to the A-typical 'Dave Ramsey' thought process, buying property with a 15 yr fixed mortgage to save on interest). Assuming you're using this for investment purposes, the lower monthly payment would allow for higher cashflow over time, especially when you move and have it fully rented. 

If this is your personal residence then I would also go with the option that allows you to keep more of your money(less money in the deal). Money, especially liquid cash, will never be more valuable than right now(we can thank inflation for that). The more money you have tied up in equity, the longer you will be confined to a job/location to pay the bills, that fund the investment accounts. Again, this is all advice that's contrary to popular belief, but that's also what Bigger Pockets is all about. We're all a bunch of rebels!

Also, what about just selling the car and downsizing into something more moderate for cash? I drive a Honda Accord that I paid cash for. Looks great and will drive literally forever! This could solve your problem of the 9k left on a car note, which I assume is making your DTI outside of the Home Possible standards to qualify. Hope this helps!

Best of Luck!

Hi Hannah I appreciate you starting the conversation, as I find myself in a similar position with house hacking in Dallas, TX!

Considering you're in a very expensive market, making greater barriers of entry, I would continue to educate, network, and save save save(in order to invest). If there truly aren't many deals, and the funds needed for a down payment aren't feasible at this time, or your income isn't high enough to qualify for financing on a property, then you're going to have to get creative! And honestly that's what makes REI so attractive, taking a simple concept like house hacking, and turning it into a creative investment.

Consider living with roommates(as many as you can), in order to lower your cost of living, and therefore increasing your potential to stack some cash. Do this and over time you'll see a reasonably large nest egg that can be used as a down payment to invest in real estate. Take that same concept of having roommates and move it into a property of your own as your first house hack. Do this 2-3 times as Craig Curelop would suggest and you're well on your way to Financial Freedom through Real Estate!

I'm considering the same things at the moment. Thinking of house hacking a SFR with people that I know(3br-4br) in a desirable are, basically living for free or almost for free. It seems that many of us overanalyze and overthink our first deal, but it's really not that complicated!

Best of Luck and Stay Safe!

I would ask how much would be left in your IRA after withdrawing 20k? Is Investing in Real Estate the end goal or just a tool to get you to FI more quickly?

Consider your priorities, assess your risk tolerance according to your decision making, and move forward. 

Would taking money out of your IRA in order to pay down a debt, in order to improve your DTI, be a wise move? Would minimizing your personal debt, therefore lowering your monthly payments, therefore increasing your saving potential, be the right move for your overall position, before moving into real estate?

That process, in my opinion, of improving your overall financial position, is far more important than an extra few thousand sitting in an IRA(you can get that back quickly with a little planning). Or you could just leave it there, go military on that debt over the next few months, cut your lifestyle in half, no spending, no entertainment, no luxuries, just paying down debt and eating peanut butter and jelly sandwiches, and improve your position that way. (99% of people won't do this, and I can't blame them)

I currently moved funds from a Rollover IRA into a much more liquid position, for any opportunities in the near future. Whatever you decide will be the right decision, I would just know your "why"!

Best of luck!

@Mike Paisley

First, congrats on overcoming such a large hurdle! So many people leave school with massive amounts of student loan debt, often earning less than desirable incomes while attempting to pay those down. To say you're debt free or basically back to zero while still in your 20s is not something many people can say!

Reading this post I literally thought someone had been following my financial journey almost down to the exact number, so I find myself in the same position just a few years ahead at 32 years young.

With all that being said, I'm personally doing a few of the very things that others have mentioned in the comments. Proceed as planned, continue to save as much as you can in order to invest, and probably most importantly, continue to educate yourself on investing/personal finance/real estate. Many markets are already showing signs of opportunities among REI throughout this year and into 2021, and sitting on a large liquid position will prove to be beneficial in the coming months.

There will be plenty of opportunities in the markets as well, but which story will you tell your grandkids? The one about getting a great deal on more shares of a Total Market Index Fund, or purchasing your first House Hack for a fraction of the cost?

Oh, and treat yourself to a nice meal, literally the most expensive steak you can buy(within the confines of your city's quarantine ordinance) you've earned it!

Thanks for all the information @Brian Eastman I will definitely do some more research on this topic!

So I'm sure I'm not the only one here that is curious about this topic, but here goes nothing! I'll make it short and (relatively)sweet!

Coronavirus hit the world, no one was prepared.

Companies started closing down.

Pay starts to get cut, and then the layoffs happen.

This happened to me recently and I'm curious what to do with this 401(k). The way I see it, I have a few options.

1.) Keep the funds with my past employer continuing to enjoy the unfortunately less than exciting gains from an actively managed fund(not likely I'll take this option)

2.) Rollover this account into an IRA where I can control where that money is invested moving forward

3.) Cash out, take the early withdrawal fee, tax hit, etc etc and go buy more Bitcoin(highly unlikely to choose this option, but I'm sure plenty of people have done this ha ha).

-Is there any way I could access these funds to use toward a down payment for an investment property, without all the negative side-effects of early withdrawal and heavy taxation?

Anyone else in a similar situation now or in recent history? 

Side thought---I've followed the F.I.R.E. community(Financial Independence Retire Early) for some time now, and so I've thought of using that money to fund my Roth IRA and invest in low cost index funds. Even with this option I'd be taking pre-tax funds and moving them to an after tax account(Roth IRA), and not quite sure about the ins and outs of doing that myself.

***Crummy situation but I hope this brings up a topic that others are going through as well so we can All Get Through This Together(that's the phrase of 2020, right?)