All Forum Posts by: Nick DePrizio

@Stacey Adams

Ah a finance question- I know more about finance than real estate so-

first- there are many factors- generally I would say don't cash in/withdraw. There are some caveats to that statement-see the bottom. The second (first time home buyer) may be viable if you or your spouse can be considered a first time home buyer. Generally I would say the withdrawal penalty is too high otherwise- there are alot of smart people and interesting topics on this site that talk about ways to get RE deals done with little or no $$. I'd take a serious look at those before taking the income tax hit and the extra 10% penalty for early withdrawal. Also- stop investing in the retirement accounts if you'd rather invest in real estate or real assets so you don't have to worry about it. 

(Side note if it's a Roth 401k/Roth IRA you can withdraw contributions tax free after a 5 year holding period)

See the two below (

http://money.usnews.com/money/retirement/articles/...)

Turn age 59 1/2. Once you turn age 59 1/2, you can withdraw any amount from your IRA without having to pay the 10 percent penalty. But regular income tax will still be due on each withdrawal. IRA distributions are not required until after age 70 1/2.

A first home purchase. You can take a penalty-free IRA distribution of up to $10,000 ($20,000 for couples) to buy, build or rebuild your first home or the first home of you or your spouse's child, grandchild or parent. For the purposes of avoiding the IRA early withdrawal penalty, the IRS considers you to be a first-time homeowner if you or your spouse did not own a home during the two-year period leading up to the home sale. If the purchase or construction of your home is canceled or delayed, put the money back in your IRA within 120 days of the distribution to avoid the penalty.

@Eric Schrader, first- many will tell you consult your tax attorney but the gist of what I experienced as my first year owning a rental property is establishing a P&L. It's similar to calculating your NOI. If you work with an property management company typically this is a service they offer you that you can get from them at EOY because they are receiving income paying expenses for you etc. Nothing fancy in my experience.

Hey bp! Been devouring this site for a couple days and love the information. Starting from podcast 1- cant wait to catch up. 

I'm originally from Boston and my wife and I move to SF for tech related work. We own a condo in South Boston which we currently rent out. What really got me into this site was the initial article on valuation I read. Really opened my eyes. South Boston is a hot market, but so with price appreciation right now the 2 year holding period the TR is +100% but the COC and Cap Rate are like 3-5%. I'm a huge numbers guy. Love to learn this stuff and don't want to fall into those similar pitfalls- I'm also really practical so if I saw these numbers in advance (regardless of playing market appreciation I dont know if I would have done the same deal).

We have excess cash and don't want to put it in the stock market and long term want to work for ourselves on something passionate- why not be real estate. We are looking to get another property or two this year while maintaining our full time jobs.

The problem is where!? We don't know what market we want to shop in right now- San Francisco is absurd. Boston isnt that much better so right now going to take a couple months to read/listen to everything here. Participate on the forums, and get some books off amazon- starting with Gallinelli's "What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures"- like I said- love numbers and am methodical.

Also- if you're looking for additional reads I highly recommend "The Compound Effect" by Darren Hardy.

Looking forward to interacting with you all.

New life goal- to be on a BP podcast within 5 years.

@Mike Hurney- Pardon my lack of understanding- havent given much thought relative to the long term taxation costs but what would you mean?- just the tax I'd take on increased cash flow when the debt financing is closed out? 

Right now I am looking at a 30yr refi will save me 75 or so a month on payment and will  recoup the refi costs in less than half a year.

Justin,

Thanks for the response.

So the below represent the financing term scenarios I see for me. The refi options are cheap enough that I recoup the costs of the refi within a year or two. So right now I'm paying an extra 175 in the second column. You're referring to scenario 3, pre-pay another 500 a month, 

Pros-

Decreases Total interest paid 70K, 

Cuts the financing payback period to 17yrs

Allows flexibility to not prepay the extra 675 if there is a different need for that cash.

Cons-

The original $175 that I am prepaying now is the positive CF I have from the property so any additional pre-pay is no longer OPM its out of our pocket. If I am going to pre-pay the principal why not just have that baked into the scheduled payment of a 15year (like the 6th scenario) and save an extra 50k on interest? Is it just a personal preference on flexibility?   

-Paying more interest that the other scenarios that follow. 

Thanks for talking these scenarios out with me. 

My wife and I own a condo Southie and are currently renting it out while we live in San Francisco. It's Cash Flow positive about $175 a month (which we are putting into principal), Loan was for 328k @ 4.25% and are looking at refi options. Cap Rate is about 5%, COC like 2% but Total ROI like 100% due to market appreciation over the two years we've owned. Looking at the refi options I see generally a 30yr %3.88 that would cost about $250 which we'd recoup in about 2 years in payments. Our other options is switching to a 15yr which would the turn it cash flow negative about 500 a month. Albiet this saves 150k or so on interest throughout the life of the loan etc. We are fortunate to where we have the careers where the property doesnt need to be CF+. What is the general heuristics on situations like this? 30years someone else pays back the loan for us, vs 15years we pay back some faster and get it to a point where there is no more financing when we are 45? Does this change if it's not a refi? If we look to buy another investment property is it just different schools of thought? Obviously if you can get a 15yr and be CF+ thats great but a market like south boston I dont think that really exists.

Thanks in advance- looking forward to growing with this community as we explore this new aspect of life.