Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Paul Vail

Paul Vail has started 6 posts and replied 189 times.

Post: How to use my 70k cash?!

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Alex Breshears:

Hi Katrina! Like others have mentioned, it is going to really be a matter of how active/passive you want to be, and also what timeline you would like access to the capital again. For example, unless you buy a deal with some equity, your 10% to 25% equity downpayment is likely locked in the property for at least a few years. I personally really enjoy private lending, and it would be easy to get $700 a month of an interest only payment coming in each month. There are markets where that amount could be a 1st position loan.  I have a book that was just published by BiggerPockets about private lending in case you are interested to learn more, but also feel free to send me a message. Always happy to chat about private lending as a strategy. 


Hi Alex,   do you folks have a basic pricing sheet for your loan services?

Post: Advice please. Buy now or wait?

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Account Closed:

@Paul Vail have you ever borrowed from 401k? I dont even know how it works:( I just checked my Roth. I actually lost $2k over 3yrs. It shows my rate of return YTD 2022 is negative 11%. And with Roth, I have only been contributing to it for just 3yrs and I'm not sure if I will be able to continue with my increasing expenses.
 

No, I have never borrowed against my retirement funds, so I have no direct experience to offer.  Any 'paper' investment gains and losses have to be taken into context correctly: what was/were the investments and what are the goals.  You started investing just prior to Covid -- these numbers (and the bubble nature of irresponsible FED/Administration choices in the prior 2 yrs) lead to the market run-up, not fundamental company health conditions.  Anyone can look rich if they are kiting checks all the way.   I am presently pursuing the conversion of some of my Roth into a self-directed for investing/lending purposes.   The power and allure of tax-free investing is VERY interesting.  Roths alone offer that for both paper and RE.

I personally use VTI for several investment vehicles, so I'll use it here as a ROTH yardstick.  In Sept 2019, it was ~152.   VTI is presently ~206.   Annual Returns=(((206/152)-1) *100)/years=11.8%/yr.     If I had the same investment in an active trading account, I could expect 23% cap gains, so 9.1% gains/yr.    The math is simply an example.  As you cannot touch your ROTH contributions for another two years without penalty (unless you are >59-1/2), this is all academic at the moment.  I straddle the 'paper' and RE universes and are very pro for both. I'd suggest you evaluate what are your needs and goals for the money going into the future.   Your circumstances are unique.

Post: All my money tied up in investment accounts

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Carlos Ptriawan:

Oh btw one more disadvantage of any gov. sponsor investment account inc. 401k:

So let's assume we're very smart, okay... so we know the stock market is going to crash starting from let's say tomorrow ; with a regular brokerage account I can sell my whole portfolio to cash (without withdrawal) or hedge the entire portfolio (eg if I'm vulnerable to 100% SPY I can convert to 50% SPY 50% SDS so they're delta neutral).

How do I know if market going to tank ? it's easy. What do you expect will happen if Powell said" we want to destroy the economy? " With 401k I can't even sell/hedge. If I convert to bond, the bond crash as well hahaha... it's a total joke. So I've to wait forever until this bear market recovers.

Some corrections:  401k-type offerings are not government sponsored, with the exception of the TSP.  401ks are between the individual, their private employer, the trustee/custodian, and the elements of the offerings (stocks, bonds, ETFs, mutuals, etc.).  Same with 403b, 457s, traditional SEPIRAs, Roths and similar benefits packages.   The only way in which the government is involves is the set of rules laid out by the IRS. 

Collectively, these programs are all designed to encourage and reinforce long-term savings and investing; day-trading and 'timing the market' are not expected management elements.  While there can be some parallels between overall market performance and government/FED.  Powell never made the comment quoted -- material similar to that is bandied about on alt-right and neo-con media, but it's a purposeful misrepresentation of his comments to stir things up. 

I'm not a fan of Powell -- he was cowed into reversing needed rate maintenance and QE selloff in 2019 that would have softened bubble status that still remains in markets.  However, his commentary about maintaining rate hikes and selloff has been consistent all summer such as this from June, “We anticipate that ongoing rate increases will be appropriate; the pace of those changes will continue to depend on the incoming data and the evolving outlook for the economy.”  Had we been 100% SPY (3818) at the end of June after these 'scary comments' and remained 100% not trying to time the market, we'd be at 4110, 7.6% up in 2.5 months.

There's no doubt the bubbly paper investment markets will fluctuate -- but not necessarily because of FED action.  This is hardly a disadvantage for using 'retirement' investment tools if one is diversified and using long-term horizons.  Precisely the same can be said of this bubbly real estate environment.  There is a tremendous difference between speculating/timing the market and investing.

Post: Advice please. Buy now or wait?

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Account Closed:My goal is to one day have enough properties that will give me cash flow without me having to work a 9-5 job. Normally with investment properties, its long term wealth, not that much income in the short term.


My ideas:
-Pay off my existing investment property as soon as I can with the money from my roth and using any future savings.

You'll never be able to replace the Roth principal you pull out -- so if that Roth is earning at least as much as you are paying in investment property interest AND the investment property is cash-flow positive, the money is best left in the Roth (we need to keep in mind the tax-free aspect of that Roth growth.

-Use half the money in my roth and my other savings (excluding my emergency fund) for a 20% down payment to buy another property now and put it on rent.

This is different than the property in Cleveland?   (BTW -- do you have someone known and trusted on the ground in Cleveland that can keep an eye on your investment?)  Or is this a different opportunity?  Regardless -- unless the cashflow % - the debt % exceeds the Roth/401k gains, then the math should suggest your path  UNLESS you are also banking on appreciation*.   *Appreciation is never a sure thing.

-Wait until next year to save enough for a 20% down payment and not touch my Roth, then buy a property.

@Kevin McGuire's idea about taking a loan out against the 401k?  What do your normal lenders say you need to come up with for them to jump on board?

-Take a private/hard money loan now because it has less requirements and buy a property now. I'm not sure if I can only put 5% down if I use a private loan.   

What's the math?  Only take private money if the numbers work in your favor.  Private money is pricey, but could you work the deal via cash flow with the high private loan rates?  Everything is predicated on cash flow.  

Post: Finding the right tax accountant

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Richard Boyd:

Hey All, 

One of my real estate clients was in a similar boat as you. His tax accountant recently retired abruptly and he needed someone to do his 2021 taxes before the extension deadline. I was able to guide him through his real estate accounting and gather the info he needed to complete his tax return and save as much as possible. 

Some of the things he asked me was if I was familiar with real estate accounting, how I could optimize his tax return to save him the most money, how much I charge per return...  

If you are interested in talking shoot me a DM. I would be happy to chat. 


Hi Richard, are you a tax accountant?   If so, I totally respect you wanting to DM and perhaps develop a client relationship in time.    If you're not, and a super knowledgeable RE guy, would you mind elaborating on the questions you were asked?   I'm sure I can learn a ton, and maybe others who view these posts in the future.

Post: SD-IRA or Roth cost and features comparison

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Has anyone worked up a cost and features comparison of the common / well-known custodians?  

Post: Finding the right tax accountant

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Great topic!   I'll be looking for one before the end of the year.  One of my first questions would be: how do you want me to run my books?   Spreadsheet per investment with line items for income and expense elements?   (I use LibreOffice for most SS needs).

At what point does the complexity of a project warrant moving to Xero or Quickbooks?  

One checkbook per LLC or one checkbook with appropriate notations/documentation?  

Tax planning gotchas -- how not to run afoul of the IRS?

What are your questions?

Post: SDIRA or withdraw cash

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117

What's the cost analysis between the two? I imagine for something really simple like a SD-Roth with LLC/checkbook would be far less initially and annual payments vs more complex structures where x transactions/yr occur.


Post: All my money tied up in investment accounts

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @John Morgan:
Quote from @Paul Vail:
Quote from @John Morgan:

@Alex Ballesteros

I would pull out some money you have put in your Roth IRA and use towards buying properties. It's tax free and is a great way to start. That's what I did. I pulled out 92k from our Roth IRAs when I was new to RE. Best decision I've ever made. Just don't take out more than you put in. You can't touch the earnings in it tax free until 59 1/2. Also, if you have a 401k I would take out a 50k loan. I've done this a few times to buy RE or find rehabs with it. Good luck!

John, the Roth is the most tax-advantaged account @Alex Ballesteros has.   Earnings in a Roth has the advantage of automatic gains equal to one's tax bracket.  E.g., if the OP is in a 23% tax bracket, the Roth is earning 23% AT A MINIMUM plus whatever the Roth assets actually earn (say, 7%/yr-yr with VTI as an example).  That's a 30% gain.  Respectfully, cashing out the Roth is a horrible idea under most any circumstance beyond paying off a debt obligation interest in excess of 30%/yr.  And we are presuming the OP has had a Roth for at least 5 years, otherwise there are fines/fees to access.

Without knowing the numbers in the personal brokerage, the Roth or the SEPIRA or even how much is needed for this prospective deal, I suspect a qualified financial advisor (I am NOT a CPA or CFA) would suggest the Roth is the last tool to touch, with the personal brokerage being the first to discharge from for the deal needs.  Alex -- for the love of gods and money, and your financial future, don't take action on our ideas here in a forum.  Hire a fiduciary financial advisor and see what they tell you. Heck, you could check out a REIT opportunity like Fundrise [https://fundrise.com/r/244jp7] and look into how they'll roll a tax-exempt Roth or some tax-deferred IRA forms for investing.

I’m ok with diversifying my portfolio. I used to be 100% in the stock market with my retirement funds. That really scared me. I sleep better knowing I’m 50/50 now with the stock market and real estate. If the stock market tanks within a few years of retirement, I can sleep better. My net real estate income is 13k/month now (if nothing breaks or no vacancies) and I got started into RE from taking out 92k from our Roth IRAs which you oppose. I sold some stocks that were high and took those profits to buy RE. I may be missing some compounding interest over the years from our Roths I tapped, but the income I’m generating from RE will sustain me if things go south in the stock market when I’m retired. The stock market historically has big corrections every 8 years. That’s really bad news for people who are too heavy in equities vs being diversified with some RE I’d rather be diversified and have that consistent  RE income coming in during bad times. 6 of my rentals will be paid off before I retire so I should have a net 20k/month from my RE portfolio which I acquired from tapping into our Roth IRAs and a few 401k loans. Could I be making more in retirement from our Roth’s and 401k if I never tapped into them tax free? Sure. But I’ll be able to sleep better knowing I’ll have that 20k/month coming in from RE in good times and bad. So I’m ok tapping into Roth IRAs or taking out 401k loans to help diversify someone’s portfolio in case the stock market ever crashes when they’re retired.
John, I largely agree with your overall strategy.  Diversification is vital to ride out and moderate the ups and downs of various economic cycles - being 100% in anything=dumb.  Eggs all in one basket risks the reality of possibly needing some of those assets at a time their worth may be depressed.  My point is that the Roth, the 401k, a taxable personal brokerage, having CDs and I-bonds, buy/holds, flips, private lending, etc. -- each of these serve different purposes.   We have to do the math to determine what advantages and disadvantages each offers in taxes, opportunity cost, relative asset risk, cash flow and appreciation (to name a few).  Seems like a daunting task until one sits down and takes each apart piecemeal.  Only then can you determine what accounts (or fractions of an account) to sacrifice/risk for a new opportunity.  None of these investment tools should be presented as all/none choices.   Folks should do a cost analysis before dipping into a selected tool for cash to chase another dream.

The opportunity cost of draining a Roth vs a 401k if they are invested in the same portfolio is often far more expensive simply because of lost potential earnings and future taxes.  Add in that Roths do not force RMDs as 401ks do (and those RMDs occur whether the market is up or down).  Unlike the 401k loans, Roth withdrawals cannot be made whole again in the future.  Roth contribution growth is vastly more limited than 401k (assuming one remains at their W2 gig).  For the most part, Roth contributions can only come from earned income, and most passive income doesn't qualify (interest, dividends, AND MOST RENTAL INCOME). 

For you, why was hitting the Roth more attractive than just the 401k loans (I'm assuming there weren't REITs or Bonds in an all-equity portfolio)?  Were there caps on the 401k loans that would be solely insufficient to execute the deals that came along?

Post: Savings Account Recommendation: Interest for cash reserves

Paul VailPosted
  • The Triangle, NC
  • Posts 189
  • Votes 117
Quote from @Alex Forest:

 Thanks Paul. I don't tend to like the idea of keeping 'that' money in the stock market either.  I just checked out the I bonds and they offer a remarkable 9+% right now. That won't be likely long term but that seems very nice for the time being. Thanks for the ally reference, I'll have to look into that and it may be a good place for a relatively stable constant amount of reserves that I'd like to keep either now if I don't instead go for the ibonds or in the future.


 Alex- yep, I'm a fan of having a lot of different tools in one's big bag.  Wealth retention and building is a matter of becoming informed on whatever options are available, and some simple math ideas to displace real or invented ignorance and bias we experience over the years.  The pundits pushing only one way to build wealth (real estate OR equities+bonds) and pretend we can only hold one concept in our heads frustrate me.  Most all of financial management and wealth building concepts are accessible to any 8th grader, once we are made aware they exist -- diversify :)  

The I-bonds adjust interest semi-annually.  Ally changes their rates pretty much every time the Fed makes a move (as I imagine other decent banks do).