All Forum Posts by: Patrick Bunn

@Brian Eastman Awesome! Thanks for the info!

@Brian Eastman Thank you for your response! This might be a silly question, but are all Solo 401k plan self-directing? I do see how a self-directed Solo 401k would serve both functions. Would you have a recommendation as to where I could get a self-directing Solo 401k?

I just read The Book on Tax Strategies for the Savvy Real Estate Investor. It is a great book. And based on something I read in there I asked myself “how can I use my 401k to invest in real estate?”

Setup:

Toward the end of last year, I changed jobs. I had a 401k with my previous employer. I’m not eligible for 401k through my current employer until January 2021. Although the plan I had with my previous employer allowed me to take out loans and pay myself back with interest, that’s not accessible to me because I’m no longer an employee. Unfortunately, the 401k with my current employer does not offer the ability to take out loans.

Objective:

1) I’d like to have the ability to borrow money again this 401k for something like a down payment on my first property. I’d rather pay myself the interest than the bank.

2) I’d also like to be able to choose how to invest the money in my retirement account into something like notes or REITs.

I’m thinking for #1 I’d need a solo 401k. Is that correct?

And I'm thinking for #2 I'd need a self-directing IRA. Is that correct?

If I were to roll over my 401k, I have to do all of it, so I'm trying to determine the how. Like initially roll it over into an IRA, then split it into a solo 401k and a self-directing IRA. Does that sound like a sound strategy?

I know a lot of people advise not borrowing money from a retirement account, but from how I see it, I'd basically be investing money I already have into something with a higher ROI than I'd get in stocks, while paying myself back with interest, which is its own ROI.

@Mark Ainley Awesome! Thank you!

@Johnny Wolff Thanks for your response! That is exactly what I was looking for! I knew creating a plan would show that I've taken the initiative to get to that point at least, and presenting it to others and opening it for criticism shows I am open to learn. I knew the plan would need, and will experience over time, modification. But it has to start somewhere. 

I do think flipping will probably be too ambitious for me at this point. Honestly, I'm glad more than one person said that. 

I was thinking a turnkey property might be a good first move, not for ROI or cash flow necessarily, but experience.

I do realize this is a long game. I figured it would be 7-10 years before I get to my goal, maybe longer, but I'll never get there if I don't start. Another reason I wanted to wait until next year is to give myself plenty of time to learn. I've read several books in the past 2 months, and just ordered 2 more. I am determined to do this and learn what I can. One of my main objectives with presenting this and asking for feedback was to narrow down on the path so I know specifically what to focus on.

I would LOVE to partner with someone and learn!

You are not a Debbie Downner; I appreciate real feedback. Thank you.  

@Andrea Weule Thanks for the advice! 

I guess i was thinking paying back the initial down payment and rehab cost loan might be expedient depending on the interest rate and terms. I asked if I could borrow against an IRA and I was told that I could, but it needed to be paid back in full in 90 days. That's where I was coming from on the quick pay-back part. I have a 401k from my previous employer that I can pick the why the funds are allocated, but I can't take out loans against it or anything. I can roll it into another 401k or into an IRA. My current employer won't offer me access to their 401k until January 2021 and I'm not sure if they offer loans, and if so, if there is a stipulation on what its used for.

A budget is definitely necessary! We got on a budget and once we got all of our high-interest debt (and really all debt that isn't mortgage and student loan) we finally had money to save. I realize quickly simply "saving" money probably wasn't the best idea, but investing would be better. That got me searching different ways of investment and that's what brought me to REI.

@Michael Porche Thanks for your feedback! Although I don't have a problem having a second job (I actually had one but got laid off because of the effects of covid), I'm really trying to see if it would be beneficial to flip first just to build capital. I don't really have a passion for flipping and it's only factor into the equation would be capital building. It may not be necessary for my specific situation. That's kind of what I was trying to see what people thought about it. It would also be a whole other path I'd have to learn and study and develop. 

Full disclosure, I may not be pulling the trigger on this until next year unfortunately. Something Brandon Turner said hit home; "If your spouse is not on board with REI, don't start until they are." There is something specific we are saving for and once that is paid for she might be more agreeable to REI. I'm trying to develop a goal, a plan, and a specific pathway to get there so I can present it to her to get her buy-in. I have to convince her I know what I'm doing before she'll be on board.

Is there a recommendation on the amount of capital one should have before venturing into rentals? I guess I kind of thought I would secure enough in the initial loan to cover down payment and rehab and a little more for incidentals, but maybe that isn't realistic or maybe I won't get a loan big enough to cover all that. Is there like a percentage recommended to have available for maintenance and CapEx going into your first rental property?

Hello BiggerPockets family!

My name is Patrick and I'm in Birmingham, Alabama. 

I am new to all of this so any input would be appreciated. I figure just asking for help as a newbie isn't sufficient; so I developed a plan and ask for ways to improve it so the questions are specific, not general. "Is this plan crap?" vs. "How do I get started in REI?"

Goal:

To create enough passive income to cover all my expenses. 

I currently work as an Automation Engineer. Its a good job, with good benefits, I like what I do, and I'm good at it. But I'm making someone else money, and I have to remain there because it pays the most. I'm more passionate about teaching, so I'd rather take a position where I use my experience and teach it to the next generation, whether at a school/college/university, or if I start my own business teaching.  There are positions I've been offered to teach but I can't take that much of a pay cut right now. Creating passive income would relieve me of the need to remain at the highest paying job and let me pursue a doing I'd prefer. I state this to show I understand this is no a get rich quick scheme and that I'm not trying to just stop working, but rather to get to a place where I work when, where, and how I choose.

At this point, I'm not necessarily interested in making real estate investing my primary business, but rather a side business for investment. Once I get into it, that may change, and I realize that. 

Plan:

To me, it seems the best way to generate passive income is through rental properties, and perhaps in the future note investing and owner financing. To get there, I thought of two different paths, and that is where I'd welcome some feedback. 

Path 1:

Flip a couple houses, using the profit to build up enough money for a down payment and rehab costs for my first rental property, then start implementing the BRRRR strategy until I reach the passive income goal I've set. To accomplish this, I figured financing for the first flip (down payment and rehab costs) would come from either creating an LLC and obtaining a small business loan through it, or I can take a loan out against my 401K, and use a traditional loan for the rest of the amount. I have a great credit score but I just bought a house as my primary residence a couple months ago and don't have enough equity to pull money out of it.

Path 2:

Similar to above, but not flipping houses first, just going right into rental properties. My concern with this is that I wouldn't get the money back quick enough to pay back the initial down payment and rehab loan, depending on the termed required for payback. Also, I think it might be good to have a little bit available if expenses surface in the first several months before I've built anything up for maintenance or CapEx.

I realize an LLC isn't necessarily required for flipping houses but is highly recommended for rental properties. I figured a small business loan might be better going through an LLC rather than just taking out a personal loan. Feedback here is welcome too.

The other question I would have is if turnkey would be a viable option. In any case I don't see myself having the time or adequate knowledge to do my own property management so I would hire a property manager, if that has a contributing factor in the advice. 

Thanks in advance for your input. 

Yeah, let’s do it! I’m thinking about multi family as well! 

Hello! I'm new to the world of real estate investing and the BiggerPockets community. I have been doing a lot of reading and listening and I'm interested in networking with fellow BiggerPockets people here in the Birmingham area. I went to the events pages and there hasn't been a lot of activity recently. That may be due to the virus, IDK. Either way, I'd love to get together and chat with some people and get to know the people of here locally associated with this awesome world of real estate!

@Pete Tallerico

I’m curious about this too. I was hoping someone would have responded.